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Nov 30

Motif Investing Review: Personal Case Study

Divide and conquer! 

So after my recent house purchase and rental, I started to take my retirement planning even more seriously and have been looking at different ways to diversify my investments. One of the hardest parts about trying to diversify investment when you’re just starting out is simply not having the funds to buy a range of stocks and bonds that makes sense mathematically. The main problem is broker fees eating into your returns.

 

For example, if you wanted to invest a modest $1,000 in the stock market and spread that investment over say, 20 stocks, fees can quickly add up. You would be wise to not put all your money into just one stock, but even at a low fee brokerage like TradeKing, you would pay 20 times the transaction fee of $4.95.

 

So, 20 x $4.95 = $99

 

Spreading your investment over 20 stocks would cost you a whopping $99, or in other words you lose almost 10% of your investment immediately. Wowza! Despite trying to do the sensible thing (diversify), you start off your investing life with quite a hill to climb just to break even.

This is why I’ve been drawn to Motif Investing.

 

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Here’s the basic idea…

MotifInvesting.com is a site where you buy and sell professionally, custom or personally built collections of stocks called “Motifs”. A motif is basically a list made up of up to 30 different stocks and indexes which you can invest in (minimum $250) for a flat fee of $9.95.

There are Motifs made professionally by the team at MotifInvesting, but also a built by users in motifs built in social network where people build and share motifs as well as discuss trade trends and options. For those not savvy to particular stocks or companies (or more interested in trends), you can search the available motifs by keywords such as “Social Networks” or “Clean Energy”.

Once you build and invest in your motif, you are still free to trade individual stocks in and out of your motif as you would any regular brokerage, but like other online brokers, you will pay a fee of each transaction. This is an important thing to remember when buying motifs. if you go and buy 10 different motifs for mega diversification of your portfolio, you may also one day have to sell 300 different stocks individually, and we discussed before those fees quickly add up.

So Motif is great for a quick instantly diversified portfolio, but beware of collection motifs. A personal portfolio of approximately 100 different stocks, bonds and funds is more than enough to spread the risk of your investment.

 

So basically you get to buy or build your own ETF of 30 of your favorite stocks without fees eating into a modest investment. Let’s look at the math for Motif Investing vs TradeKing.

 

TradeKing: 0 x $4.95 = $99

Motif: 1 x $9.95 = $9.95 :)

 

So with Motif your $1,000 investment has greater diversity (30 vs 20 stocks), but perhaps more importantly, the cost to you has been reduced from nearly a 10% loss from fees to under 1%. Not a bad start at all. :)

 

Sounds good, so I’ve taken the plunge and opened an account.

 

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Getting started.

Getting set up was very easy and shortly after opening my account I received a call from Motif to welcome me and answer any questions I had about their service. Nice start. Logging in and seeing motif for the first time, the site feels more like Pinterest than your traditional online brokerage. There’s a nice blend of community posts, latest trends info and statistical data to not feel overwhelming but still feel professional.

 

Instead of just buying an existing motif, I decided to build my own. Creating my own motif was simple. You start by giving your motif a name and optional description and picture. Adding stocks is easy by entering the company name, stock symbol or searching using keywords. A few clicks later my motif was built and ready to invest in.

 

Tip: Sign up for Motif’s royalty program and if someone wants to buy your custom motif for their own portfolio, you get paid $1. Not a huge payment, I know but hey, any investor knows if you look after the pennies, the dollars take care of themselves!

 

Since the idea of this investment is a stable diversified portfolio, my motif is largely filled with SNP 500 companies. The whole reason I’m doing this is to reduce risk, and so wanted to start the ball rolling with something solid.

 

For anyone who’s interested, here’s my first custom motif.

 

 

 

 


How’s it been so far?

It’s only been a month so it’s early days, but I really like Motif. I’ve tried to get in the mix with the community on Motif and so far it’s been a very different experience of online trading. The feeling of stuffy, dry finance talk is replaced by a relaxed open conversation about investing. There are a few too many people using the “post” function to just try and push their own custom motifs, but overall it’s a great place to talk investment ideas and strategies.

I’ll continue to update you each quarter on how my Motif case study is going and in the meantime, I’d love to hear about anyone else’s experience using Motif in the comments below!

 

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Get a $100 bonus when opening a new motif account by clicking here!

Disclaimer: I have an account at Motif and will also receive a bonus if anyone using this link opens an account.

 

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