As somebody who avoids stock picking and frequent trading, it’s hard to get excited about the latest research tools and bells and whistles offered by online brokers like E*Trade or TDAmeritrade. Quite frankly, as long as I’m investing in a few low-cost index funds, I won’t ever need them.
But what if the idea of indexing isn’t exciting enough for you? Maybe you get that day trading and hunting for the next Apple isn’t wise, but you want more control over your investments than putting your money in the entire market.
Coincidentally, there’s a new online broker that may deserve your attention.
Motif Investing (affiliate – see footnote) launched earlier in 2012 with the backing of some experienced players in online investing. For a $9.95, Motif lets you buy a bucket containing up to 30 stocks that share a common theme like digital payments or green energy.
You can choose from prepackaged themes like the “seven deadly sins”, which contains liquor, gambling, and tobacco stocks, or create your own. There are social features, too, allowing you to share your investing ideas with people in your circles.
My take on Motif
At first blush, Motif seems like an apt compromise between the admittedly boring route of index funds and the tedious, expensive, and potentially dangerous game of trying to build your portfolio from individual stocks.
Although Motif makes it easier to invest in industries or ideas that appeal to you without the cost and risk of trading individual stocks, I don’t see it as a substitute for the diversification of a portfolio of mutual funds or an index fund. In other words, having a few bucks of 30 stocks isn’t truly diversified portfolio if it only focuses on a couple industries and doesn’t include foreign stocks or bonds.
Savvy investors know that keeping costs low is as important as seeking bigger returns. Motif’s costs seem fair. Trading a motif costs $9.95, and you can add additional shares of an individual stock in that bucket for $4.95. There are no management fees or annual fees. The minimum to open an account is $1,000. Motif offers no-fee IRAs, as well.
Certainly, this pricing model will save you money over trying to buy 30 stocks yourself at $5-10 a trade elsewhere. If, however, your goal is to regularly invest small amounts ($500 or less) on an automatic investing plan, you’ll pay less buying a low-cost mutual fund directly from the fund company where fees are extracted annually as a percentage of your balance, but there is no cost to buy more shares.
Motif is running a promotion for new investors. If you invest at least $2,000 and make five trades before Nov. 30, 2012, they’ll pay a $150 cash bonus. Three trades will earn $75 and one trade earns $50.
What do you think? Is Motif Investing a good idea? Would you use it? Where do you think this kind of theme-based investing fits into an investors strategy? Let us know in comment.
Disclaimer: The links to Motif in this article are affiliate links, meaning if you decide to open an account with them, this site gets a few bucks, which helps keep all the content on Money Under 30 free. If you choose to support our site in this way, thank you!