This review of Motif Investing will introduce to our readers a platform that we use for diversification and which we believe all retail investors will benefit from using. Motif Investing is a brokerage firm that allows you to purchase up to 30 stocks for only $9.95. This collection of stocks is referred to as a “motif” and the platform tracks performance, allows re-balances, and allows you to share your created motifs with other users. Essentially, it’s a tool for you to create your own “mini-ETFs” in real-time.
Investing in disruptive technologies is exciting, and this very same excitement opens the door for scams, poorly operated companies, pump and dump schemes, etc. As we warned in a recent article, the advent of new investing platforms such as Kickstarter create an environment where investors can easily lose money. So what about Motif Investing? While it sounds like a great idea, let’s take a closer look to make sure the platform is legitimate.
Founded in 2010 by an ex-Microsoft Director, San Mateo based company Motif Investing has taken in just over $126 million so far from notable firms such as Norwest Venture Partners, Ignition Partners, Goldman Sachs, Foundation Capital, JP Morgan Chase, and Balderton Capital. While Motif Investing has built a very innovative platform on which you can create your own “mini-ETFs”, the company is a startup, so that suggests a degree of caution. We don’t give any brokerage firm (especially a startup) our money to invest, unless we have some assurance that they won’t just go bankrupt and lose all our capital. Motif Investing addressed this concern by becoming a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
The Value Proposition
We always talk about diversification when it comes to thematic investing but such diversification comes with costs. For example, let’s say I want to invest $5,000 in 3D Printing stocks. I’m not an expert in 3D printing or finance, so rather than try to stock pick, I want to buy all 3D printing pure play stocks. This means I would have to buy 3D System (NYSE:DDD), Stratasys (NASDAQ:SSYS), ExOne (NASDAQ:XONE), Voxeljet (NYSE:VJET), and Materialise (NASDAQ:MTLS). At $10 a trade, this would cost me $50 to buy all 5 stocks. Using the Motif platform, I can buy all 5 stocks for just $9.95 for a savings of $40 and even choose the weightings of each. The same savings would apply when I went to sell the stocks. I can also buy or sell any single stock in or out of my motif for just $4.95.
Pros and Cons
Astute 3D printing investors would ask why we didn’t include Arcam (STO:ARCM) in the above 3D printing example. This is because the Motif platform does not allow you to trade stocks on foreign exchanges which is a limitation you will have to live with. While Arcam does have an ADR on the pink sheet market (OTCMKTS:AMAVF), Motif won’t let you buy OTC stocks or pink sheet stocks. This is a huge “pro” in our opinion since OTC stocks will lose your money in a vast majority of cases. That’s about the only limitation we found on the platform. We use it ourselves and think you would benefit from doing so as well.
We’re in the process of setting up a number of Nanalyze Motifs so that our readers can invest alongside us in themes such as fuel cell stocks, 3D printing stocks, synthetic biology stocks, solar stocks, etc . In the meantime, you can join the Motif Investing platform for free, play around with building some of your own motifs. After you create your own motif, post it in the comments below so we can take a look! You’ll get a cash kickback if other investors buy your motif.
You can open a Motif Investing account for free with no deposit required so you can create your own baskets of stocks and also take a look at our many Nanalyze "motifs" which cover various disruptive technology investing themes.