Motif Investing Lets You Build Your Own ‘ETF’

When Hardeep Walia launched Motif Investing in June of 2012, his goal was to make it easy for investors to compile a portfolio of stocks based on inspiring ideas.

Motif Investing, at its website, is a trading platform where baskets of up to 30 stocks or ETFs that reflect an idea or theme can be traded. For example, the Home Improvement motif contains Lowe’s (LOW), Home Depot (HD) and Lumber Liquidators (LL) in the portfolio. Motif Investing themes include sports, energy and utilities, health care, technology and real estate.

While Motif portfolios can resemble ETFs, there are differences. Like ETF or mutual-fund investors, Motif investors can buy into a ready-made basket of stocks. But when a user buys a motif, he owns the underlying shares of each security. And unlike ETF or mutual-fund investors, Motif users can adjust and trade the stocks within the portfolio however and whenever they like.

Motif is also different from an ETF in that users can create their own stock portfolios. That’s what a sixth-grade class did with notable success in a competition between the school’s math classes.

The two sixth-grade math classes at Oak Grove Lutheran School in Fargo, N.D., were encouraged to select stocks they knew and liked. They designed their own stock portfolios using the Motif platform.

Ross Almlie, investment adviser at Jamieson Capital Advisors and a Motif Investing user, shared some basics on investing and Motif with the students.

“Of all platforms that let you play in the sandbox, test out and invent a portfolio, Motif was the best available for this project,” Almlie told IBD. “It was straightforward to the kids, with a small learning curve to how the site worked.”

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Motif Investing set it up so students could use the platform without having to invest real money. The winning class had a 21.6% gain from Sept. 16, 2013, to Feb. 28, 2014. They also beat the S&P 500 by more than two times in that period. The portfolio included Facebook (FB), Amazon (AMZN), Netflix (NFLX), Starbucks (SBUX), Under Armour (UA), Google (GOOGL) and Priceline (PCLN).

The class won bigger bragging rights when their portfolio outdid nine top collegiate investing clubs in a separate competition that Motif Investing sponsored. In that contest, which ran from Nov. 1, 2013, to Feb. 28, 2014, the winning team — McIntire Investment Institute at the University of Virginia — had a gain of 18.5%. It underperformed the sixth graders at Oak Grove by 14%. The class also outperformed investment clubs from Berkeley and Cornell University.

“The students picked companies that benefited from great earnings stories during the time,” said Almlie. About 200 of his clients at Jamieson Capital Advisors also use the Motif Investing platform.

“Motif is more transparent and user-friendly than other discount-brokerage platforms and less expensive for my clients,” he said.

Low Fees

Any investor who registers on the Motif website can build a basket of up to 30 stocks or ETFs, and buy the bundle for a single $9.95 fee, with no management fees. The minimum investment is $250. Investors can add and delete individual stocks and change weightings for a $4.95 commission per stock. If a portfolio is rebalanced, there is a $9.95 fee.

“You can’t do that with an ETF,” Walia, Motif’s chief executive, told IBD. “With an ETF, it’s all or nothing. With Motif, if you don’t like what you see, you can change it.”

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Motif Investing has about 137 ready-made, professionally built portfolios and about 35,000 user-created motifs. It also offers the IBD Top 25 motif from Investor’s Business Daily as a platform for trading. The motif is top-ranked companies based on a combination of fundamental and technical factors, and typically represents the best-performing stocks in the market as weighted by IBD.

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