Motif Investing provides investors with a new way to invest that is set to disrupt the business of brokerages and mutual funds. Instead of having to choose between investing in index funds or individual stocks, Motif allows investors to invest in well-balanced baskets of up to 30 stocks or exchange-traded funds based around a single trading strategy. The San Francisco company was launched in 2010 and has received over $60 million in backing from JPMorgan Chase and Goldman Sachs.
Motif Investing makes thematic investing, investing in a diversified range of stocks within an industry or trading strategy, simple. Say for instance an investor feels there is a shift from home ownership to renting and that companies involved in the rental market will benefit. Normally an investor would then do some research and purchase stocks from a selection of companies in that sector. With Motif Investing, there is already a basket of carefully researched and balanced stocks and ETFs based on that idea. Instead of paying fees for every trade, Motif Investing charges only $9.95 to trade up to 30 stocks within a motif.
There are motifs for all kind of investment strategies, ranging from motifs based on values, such as green investing or companies that support the Republican or Democrat parties, to motifs centered on a specific sectors, such as healthcare, social media, technology or real estate. And if you can't find a motif that fits your trading strategy, you can make your own.
There is a $9.95 fee for buying or selling motifs. This also includes additional buys of the entire motif you own. Buying or selling individual stocks within a motif costs $4.95 per stock or ETF. The same $4.95 fee applies to buying or selling stocks outside of a motif you own.
There are also fees for wire transfers ($25), transferring your securities to another brokerage ($65), broker-assisted trades ($45), and closing your IRA account ($95). Retuned checks and stopping payment on a check incur a $25 penalty fee.
Motif charges a 4.0% to 6.50% interest on your margin account, depending on the size of your margin balance. The higher the balance the lower the margin rate.
You can open an account with Motif Investing for as little as $250. The minimum amount goes up to $2,000, when you trade on margin. When starting your account you will need to choose between opening an individual account, a joint account, an IRA, or a trust account.
Motif provides a flexible, inexpensive and easy way to invest in well-balanced baskets of stocks around a common value, idea, or sector. The $9.95 fee for buying or selling up to 30 stocks is a steal when you compare it to the approximately $300 you would have to pay to buy or sell 30 individual stocks.
On the other hand, Motif Investing does not allow for trading of mutual funds or options and does not provide the option of automatic dividend reinvestment. Plus there is also the tax drawback of owning individual shares as opposed to having an individual ETF.
Motifs represent a middle ground between buying individual stocks and just spreading your chips in an index fund. This allows experienced and beginner investors to invest in broader themes and minimize risk while keeping control over their investment strategy and over timing with regards to buying and selling.
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