Motif investing is an intriguing investment platform that combines the roles of online broker and portfolio manager and integrates them with idea generation and thematic modeling. Consumers use the platform to build portfolios around particular motifs, or themes, which are similar to exchange-traded funds. Motif Investing has emerged as an alternative to robo-advisers like Betterment and Wealthfront.
For anyone trying to determine what is the best online trading platform, this Motif Investing review offers a candid look at the platform, its benefits to investors and the associated costs. Here’s what you need to know about investing with Motif.
How Motif Investing Works
Motif provides several fundamental options for consumers investing in the stock market, and you can open an account with just $300. Investors can purchase individual securities and take part in initial public offerings. The other option is to create what is known as a motif.
What Is a Motif?
Motifs are customized portfolios with up to 30 stocks or ETFs based on a specific investment idea. Each motif is weighed according to the percentages of each stock that a person wants to own in these portfolios. Investors can also purchase motifs created by professional investors and community participants.
Many motifs are linked to a specific investment sector or investing trend. For example, there are motifs for high-dividend stocks and recreational cannabis and ETFs linked to global oil production. Motifs can be based on specific sectors, income strategies, global investment trends, investor values, asset allocation or traditional trading strategies.
One of the key benefits of motif generation is that users can receive royalties of $1 every time someone purchases or rebalances his motif.
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Motif Investing Advantages
Using the motif investing strategy offers investors some distinct benefits. Here are the advantages of using Motif Investing:
- Motif Creation: The customization of motifs gives investors the ability to create their own unique portfolios and earn royalties when other users purchase shares. Trading a basket of 30 different stocks is significantly cheaper than purchasing all of these stocks individually through a traditional brokerage. A $9.95 fee to own this basket would cost hundreds of dollars if an investor purchased them all separately.
- Fractional Shares: Investors no longer need to purchase a full share of a stock or ETF. This allows users to take partial ownership of a stock that might be extremely expensive.
- IPOs: Investors can take part in an IPO of stock that will be traded on exchanges like the Nasdaq. In April 2018, for example, Motif provided investors with the ability to invest in the IPO of Royalty Flow, a company engaged in the accumulation of music royalties.
- Security: The company says that all of its customers’ information is fully encrypted and securely stored. Up to $500,000 in assets in each user’s account is protected.
- Tax Harvesting: The platform’s auto-investing options ensure that it minimizes the cost of taxes for its investors each year. The platform will automatically sell shares to harvest tax losses and reduce your annual tax bill.
Motif Investing Disadvantages
Motif might not be the best trading platform for you due to a few drawbacks. Before committing to using this investing tool, check out the disadvantages of using Motif Investing:
- Commissions: Although fees charged for trading are reasonable in Motif, cheaper alternatives like Robinhood or M1 Finance might be more appealing to younger investors. The company also charges a 0.25 percent fee on the account balance each year. Although this fee is in line with competitors like Wealthfront and Betterment, cheaper options might exist.
- Unusual Fees: The firm charges a $95 termination fee for its IRAs and charges users $10 fees for inactivity.
- Reinvestment Policy: The platform lacks a cash dividend reinvestment option, meaning that any money you receive from a stock’s dividend will simply be credited to an account balance until the balance exceeds $250. This forces the user to pay a transaction fee if they want to buy more stock with the dividend and puts long-term investors at a disadvantage when combining this lack of functionality with inactivity fees.
Motif Investing is best for investors who want to own fractional shares of ETFs or stocks. It’s also a good choice for creative investors looking for an alternative to passive investment vehicles.