The investing landscape has changed tremendously over the past few years — mostly in ways that directly benefit individual investors.
- Transparency is increasing
- Fees are decreasing
- Brokers are being phased out in favor of Registered Investment Advisors
- Assets are moving from expensive, actively managed mutual funds to low cost, passively managed exchange traded funds (ETFs)
It’s this last piece that is going to serve as the focal point for this post. In fact, assets invested in U.S. ETFs just exceeded $1 trillion.
ETFs growing like weeds, investors struggle to keep up
If ETFs have evolutionized (it’s not really a revolution) our investment choices, information and commentary on how to use ETFs haven’t quite kept pace. Investors struggle to understand exactly what an ETF’s strategy is and how it’s managed.
Heck, professionals are drowning in trying to make sense of all the new ETF offerings.
A new platform, called Motif Investing, may be changing all this…
Motif Investing: DIY ETF creation
Motif Investing is a platform to invest in ideas. The site has more than 50 motifs: groups of stocks orbiting certain investable themes. We don’t lack of investment ideas — we struggle how to act upon those ideas. We struggle finding the right vehicle to use to play them out.
Top motifs right now include Healthy and Tasty, a collection of stocks that riff on the healthy and tasty theme in grocery (Whole Foods) , restaurant (Chipotle Mexican Grill), and nutritional products (Herbalife).
For less than $10, an investor can purchase an entire motif of approximately 30 stocks.
In a way, Motif Investing allows you to learn, create, and share these portfolios in your social circles — perhaps a better and more flexible model than investing via ETFs.
Here’s how to get started investing on Motif
1) Sign up: You’ll have to sign up on Motif before you do anything else (though you can explore the Motifs without an account). You can start by going to Motif Investing and logging in via your Facebook account and then giving an email address and password.
2) Verify email: You’ll have to double-opt in, so don’t forget to click on the confirmation email you’ll receive from Motif.
3) Open a brokerage account: Motif Investing has their own brokerage arm associated with the website. So, next step, you’re going to want to fill out a brokerage application (sorry, only US investors at this point).
4) Fund your account: To start investing, you’ll need to fund your account with real money. You can get started investing with $1000.
5) Dive into the Motif Catalog: This is the meat and potatoes part of the site. Constructed in-house at Motif, there are over 50 different Motifs on all kinds of investment themes. You can search by different attributes (popularity, current events, industry) or arrange them by recent performance (not necessarily a good way to invest, per se).
6) Connect and network with other users: The platform is social so you can begin requesting connections (someone has to allow you to follow them — privacy is respected) from other users. Once granted, you can follow your connections’ activities, their ratings of different motifs, and other social activities.
This is Hardeep Walia’s profile, founder and CEO of Motif Investing. You can see that you need to request friending and then in the center of the screen, you can see your followers’ activity stream.
7) Drill down, customize interesting motifs: Once you identify a motif that tickles your fancy (maybe a friend liked it or you found it via a search/browsing), you can drill down into that portfolio to see its composition.
So, on this motif (Healthy and Tasty), the idea is to capture this counter-culture trend towards eating and living healthier. The portfolio is a collection of stocks that riff on the healthy and tasty theme in grocery (Whole Foods) , restaurant (Chipotle Mexican Grill), and nutritional products (Herbalife).
Motif users can see how others rank the individual motif (the spectrum between bull and bear). Perhaps, a user likes the theme but doesn’t like the inclusion of a specific stock. You can click on the ‘Customize Motif’ button in the upper right of the screen to take it out, add additional stocks, or rejigger the allocations within the motif. You can even see how many users tweaked the motif or invested in it, as is.
Eventually, Motif will enable users to create their own Motifs but the customization feature is the closest one can come to that right now.
8 ) Buy the Motif: Once you’ve identified the Motif(s) you’re interested in investing in, consulted your social network (if you like), and customized the portfolio, you’re ready to invest. Click the ‘Buy Motif’ button and with one click and $9.95 in commissions, you’ve just purchased a themed portfolio of around 30 stocks.
9) Rinse and repeat: You can use the same process to invest in multiple Motifs. You can also periodically check in our your portfolios and ensure everything is going as planned. If there are any outlying performers, Motif does allow you to sell individual stocks out from your portfolio for tax loss selling, for instance.
Video interview with Valley Girl/Mashable