Motif Investing is a company that gives investors a low-cost way of creating their own portfolios or motifs - disrupting the traditional broker model. The company has JP Morgan (JPM) and Goldman Sachs (GS) as backers and cracked CNBC’s 2014 Disruptor 50, coming in at number 4.
Motif allows investors to create their own fund by selecting up to 30 stocks or ETFs based around a theme or an idea. Some of the Motifs available include “Caffeine Fix“ (coffee stocks), "Modern Warfare” which focuses on companies that make smart bombs and drones and “7 Deadly Sins" which includes fast-food companies, cigarette makers and gun manufacturers. The most recent is “Fighting Ebola.” The basket contains stocks that rallied heavily from the spread of the virus such as hazmat-suit maker Lakeland Industries (LAKE) and other drug makers (some money earned from the Motif will be donated to Doctors Without Borders).
Hardeep Walia, the CEO of Motif Investing and a former Microsoft (MSFT) executive says Caffeine Fix is doing quite well (see chart below). “It’s up 40 points for the year. That’s compared to 17 points for the S&P 500 (^GSPC) index. It's those kinds of motifs -- that are ideas that you’ve probably thought about, but it takes time," says Walia. "It’s expensive to invest in this; we try to make it super easy,” he explains. Walia says it took the brain trust in his company a year to build 120 pre-made Motifs after the firm launched in 2013. In the same time period, his customers built 75,000.
The main difference between a motif and an ETF is price. If you built a 30-stock portfolio on your own, each trade could cost around $10, totaling $300. But Motif Investing charges you a flat price of $9.95 for the entire basket. The company also allows investors to dollar invest -- they can plug in as little as $250 or as much as a million dollars.
Motif Investing also has a royalty fee system in place. Walia says once an investor creates a custom motif, they can share it on their social media and get paid if someone else buys their motif.
Walia says the beauty of Motif Investing is that folks are actually making money on quirky ideas. “If you go to our site, you’ll see people making 50-60 percent returns on their motifs, a lot of them are actually professional money managers and they’re doing this for fun. Even an average investor can do well. It’s all about finding something you care about.”
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