Ready for a start-up online brokerage site with a twist? It’s called Motif Investing. As a motif is a “dominant theme or central idea”, here you can invest in a group of up to 30 individual stocks that fit into a theme like “Housing Recovery” or “Lots of Likes” (companies that have the most Likes on Facebook). You can buy the entire basket of stocks with just one $9.95 commission, with no ongoing management fees. The minimum motif investment amount is $250.
My initial impression was that it felt a bit too trendy and gimmicky to recommend as a long-term investment. Indeed, I don’t really care how many Facebook Likes a company has, and I doubt I would buy stocks based on my love of pets or my political views. It’s just not my style.
But if you take a step back, since they let you customize the basket, anyone could essentially make their own ETF/mutual fund with zero expense ratio. You can’t track a broad index like the S&P 500 this way, but if you do have a basket of stocks that you buy regularly, this would be a cost-efficient way of doing it. You can also set the relative weighting of each of the stocks in the motif.
Personally, I might try creating a basket of dividends stocks that hopefully will provide a long-term stream of growing income. For example, take the SPDR S&P Dividend ETF (SDY) that holds 60 highest-yielding stocks of the S&P 1500 that have raised their dividends every year for the past 25 years. It’s a nice idea, but it leaves out some good companies and the 0.35% expense ratio eats up 10% of the original yield of the underlying companies. Why not hold them directly and keep the 0.35% as extra return for yourself? Right now, as it seems like you have to customize an existing motif, I think the “Dogs of the Dow” or “Bullet-Proof Balance Sheets” motifs are the closest.
In many ways, this is similar to the unlimited plan at Folio Investing, but Motif Investing has the potential to be a lot cheaper ($10 per motif trade with no minimum trade requirement vs. $29 every month for Folio) and is closer to a ETF in that they do real-time market trades. Motif also uses dollar-based trades, using fractional shares to keep everything organized. You can still do regular real-time trades of individual stocks for $4.95 per trade. No maintenance fees, no inactivity fees. Currently there is no automatic dividend reinvestment, you have to reinvest the cash yourself.
Right now, Motif Investing is offering up to a $150 cash bonus when you open a new brokerage account with $2,000+ and make 5 trades. If you make 1 trade, you’ll get $50. 3 trades will get $75.