If you’ve ever wanted to invest in a variety of stocks but couldn’t afford to own that many individually, now you can. Motif is an online brokerage that allows investors to build stock and bond portfolios based on “motifs”, like home improvement or travel.
The great thing about Motif is that you can invest in a variety of themed stocks, which will add to the diversity of your portfolio while also making you a more active participant in your investment portfolio. Motif is an excellent way to diversify your portfolio at a low cost. It offers an engaging platform designed to get you more involved with the investing process, but in a way that’s appealing to active and passive investors alike.
How Motif Works
Motif is an online brokerage where you can purchase stocks in related groups, called motifs. To open an account, you’ll sign up online and view the available motifs, their performance, price to earnings ratio, and more. Once you’ve chosen a motif, the minimum you can invest is $250. With that investment, you’ll own all the individuals stocks within the motif you choose.
There is an extensive list of motifs to choose from, which you can see here . One motif I’m excited about in particular is the On the Road Motif, which invests in hotel REITs like Hospitality Properties Trust, airlines like Southwest, hotels, online travel portals, vacation rental services and car rentals. I’m familiar with this industry and, according to users, it’s a popular motif to follow and invest in. Its one-year return rate of 45.6% isn’t bad, either.
Once you choose your motif, you can buy it, customize it, or add it to your watchlist to continue to see how it performs. If you want more variety, or other stocks not offered in that motif, go ahead and customize it to suit your investment strategy. Motif does charge a commission fee to own and trade motifs. You’ll pay a total commission of $9.95 to buy a motif, which contains as many as 30 stocks, with no additional fees. Also, with every tweak you make to your motif to customize it, you’ll pay a $4.95 trading fee.
It may seem impossible to own 20-30 stocks for only $250, but that’s because some individual stocks within your motif are purchased in fractional shares. Fractional shares are a portion of the full share, and can be bought and sold just like full share of stocks. In addition, fractional shares are eligible for dividends, just like full shares, but they may not be eligible for voting rights in corporate actions like full shares.
When you decide to sell your investment in a motif, you can sell the entire motif by placing a “Sell All” order and choose to sell all or partial shares in the motif you own. Once the transaction is processed, the net cash will be deposited into your account.
Advantages of Motif
There are several advantages Motif has over other online brokerages, including:
- Low fees – you’re subject to a one-time $9.95 commission when you purchase a motif, but there are no additional management or hidden fees associated with Motif.
- Automatic rebalancing – Motif also offers automatic rebalancing for their premade motifs. This will cost $9.95 for the trading involved, but you can choose to decline this feature.
- Social networking – one of the best features of Motif I’ve found is their extensive and active social network. Motif’s in-house social media network encourages you to read and share your investing ideas with others. If you create your own custom Motif, Motif will pay you royalty payments for everyone who invests with your motif!
One newer feature Motif now offers is Horizon Models. Horizon Models are similar to target-date retirement funds offered by many other brokerages. However, Horizon Models are commission-free, and Motif chooses an asset allocation tailored to a consumer’s time frame and risk tolerance. There are several Horizon Model motifs you can choose from by searching the catalog here.
Disadvantages of Motif
One disadvantage to Motif, common to other brokerages, is that investing in stocks is a risk. If you’re investing your money in stocks, know that you will have to do some due diligence and keep an eye on your stocks. Also, plan for the long term and be prepared to encounter occasional turbulent market years.
Another big disadvantage to me is that dividends gained from your stocks or ETFs are not reinvested. Motif says they are working on getting to reinvesting dividends, but right now this is not an option. For now, if you want to reinvest your dividend gains, you are subject to another $9.95 transaction fee. Depending on how much you invest in a motif that generates dividends, your gains may be sitting in your account for a while before you decide to reinvest and pay another $9.95.
Between the $9.95 transaction fee plus $4.95 trading fee when customizing motifs, fees can add up quickly. Make sure you follow a clear investing strategy to minimize additional fees.
Not Sure if Motif is for You?
One of the best parts of Motif is that it allows you to view and customize any motif in the catalog to see its performance. After signing up with your name and email address, you can create a watchlist of motifs, participate in discussions, and more. If you decide you want to invest in a motif, that’s when you’ll open a trading account.
Personally, I find Motif to be best as a secondary investment account. I already have a primary retirement account, but this gives me another way to diversify my investments and have some fun reviewing different motifs. I only invest in motifs that I know and show strong potential, but it’s also worthwhile to view the motifs out there to see what other people are creating too.
Motif is also great for an investor with less money to invest, as you can have a diversified portfolio for only $250. Most people wouldn’t be able to own that much stock for only $250 and, even if they could, trading fees from other brokerages would be prohibitively expensive. With Motif, you invest $250 for 20-30 stocks, all for the flat fee of $9.95. Not a bad way to diversify!
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If you’re interested in checking out Motif, I’d appreciate if you used my affiliate link to sign up. There’s no cost to sign up, and you only invest once you’ve chosen a motif.