# Motif Investing (An ETF Alternative)



## liquidfinance (Jan 28, 2011)

Now whilst at work earlier today I was listening to Bloomberg Radio and came across this. 

Before you read any further you need to have a US address to have an account. I do not, but I like the concept and thought I would share. 

https://www.motifinvesting.com/

Basically you can buy a portfolio of up to 30 Stocks for $9.95 commission with a minimum investment of $250 
You can buy/ sell the individual stocks within the "motif" for $4.95 or sell the lot for $9.95

There are no expense ratios and you own the underlying shares. 

To me this seems like a great idea and would be perfect for the couch potato.

I wonder if any Canadian companies will begin to offer similar or if indeed this company will open up to International investors.


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## andrewf (Mar 1, 2010)

This seems to be all about investment themes and performance chasing.


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## GoldStone (Mar 6, 2011)

liquidfinance said:


> Basically you can buy a portfolio of up to 30 Stocks for $9.95 commission with a minimum investment of $250


Canadian ShareOwner offers a similar service. Buy up to 40 stocks in a single order for $40.

http://www.investments.shareowner.com/csii/csii_fees.html

The "motif" idea won't play well in Canada. TSX Composite lacks the depth and the bread of the US market. How many different ways can you slice 200 companies, dominated by finance, resources and materials?


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## fatcat (Nov 11, 2009)

I heard Arthur Leavitt mention this on bloomberg the other day.
I see that Goldman Sachs are backing it.
I think this has a real future.
I wish it was available to Canadians.


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## andrewf (Mar 1, 2010)

It is. Open an IB account and buy shares in each motif. It doesn't change the fact that it promotes performance chasing and 'story' investing.


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## fatcat (Nov 11, 2009)

andrewf said:


> It is. Open an IB account and buy shares in each motif. It doesn't change the fact that it promotes performance chasing and 'story' investing.


expand a bit more on what you mean especially by story investing ?


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## andrewf (Mar 1, 2010)

Electric cars... buy 30 lithium miners!


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## fatcat (Nov 11, 2009)

andrewf said:


> Electric cars... buy 30 lithium miners!


my understanding is that in your example you would buy 3 or 4 car companies that you felt were doing a good job with electric vehicles, another 2 or 3 that supplied parts, others that produced lithium and others that made batteries and so on .. you end up with a basket of companies that all are connected to electric vehicle production ... i don't see it as anything like a major part of your portfolio but since they require 250 to put a basket togther, it strikes me as a great way to back something you think is overlooked or on the way up 

what are your specific problems with the idea ? or, put another way, why is it a bad idea ?


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## richard (Jun 20, 2013)

It's far from a couch potato approach. You need to keep up with what's happening and decide if you still want to invest. And what if the profits from the trend end up going to companies that aren't in your picks? Anyways if you wanted to buy those specific stocks it sounds like a cheap way.


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## andrewf (Mar 1, 2010)

Investing in 'stories' means not investing based on fundamentals. This is how people got in trouble with tech stocks in 2000, or the Kevin O'Leary mantra of buy "Brazilindiachina", which has offered appalling investment returns. An example is the 'cleantech' motif. You're investing in the story of 'cleantech', rather than in companies on the basis of fundamentals.


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## fatcat (Nov 11, 2009)

andrewf said:


> Investing in 'stories' means not investing based on fundamentals. This is how people got in trouble with tech stocks in 2000, or the Kevin O'Leary mantra of buy "Brazilindiachina", which has offered appalling investment returns. An example is the 'cleantech' motif. You're investing in the story of 'cleantech', rather than in companies on the basis of fundamentals.


fair enough ... but nothing would prevent from doing the diligence to include companies that met your investment criteria ... correct ?


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## andrewf (Mar 1, 2010)

Isn't the idea of motif investing that you don't have to put in that work? You pick a story and invest in it based on gut feel?


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## GoldStone (Mar 6, 2011)

andrewf said:


> Investing in 'stories' means not investing based on fundamentals. This is how people got in trouble...


Do you check fundamentals when you buy VTI or VEA or VCE? If not, why not?

IMO, motif investing has its place in a core & explore strategy. Build a sound core portfolio of broad market ETFs. Add specialized ETFs or motifs to spice things up. 90 core / 10 explore. Seems pretty reasonable to me.


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## andrewf (Mar 1, 2010)

Cap weighted is essentially a neutral strategy. Deviating from cap weight means going overweight some and underweight others. I think there are cases to be made for doing this, such as to exploit the size or value factors. Hearing a lot about social media companies in the news and so buying the social media 'motif' is just as bad as all the gimmicky sector ETFs that get rolled out with each hot sector. It's encouraging performance chasing. Everyone starts talking about about a theme that's been recently outperforming, people hear about it on the news and buy the motif. Isn't that the idea behind these?


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## GoldStone (Mar 6, 2011)

You can find all kinds of motifs on that site. Not all of them are about sexy stories.

Here's one you might like:

https://www.motifinvesting.com/motifs/ivy-league#/overview

Here's another:

https://www.motifinvesting.com/motifs/index-fans#/overview

They also have a bunch of quantitative motifs based on screens. Value screens, momentum screens, dividend screens, etc.

I think it's a neat technology. Sure, you can easily shoot yourself in the foot if you don't know how to build a solid portfolio. You can say the same about mutual funds and ETFs.


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## andrewf (Mar 1, 2010)

I don't really see the point of using it to buy ETFs. Is the idea that they handle rebalancing for you? You lose certain advantages, such as optimal asset location for tax efficiency. One that might make sense would be a "10 lowest CAPE country ETFs", since there is no ETF that does this, they are all the same asset class (same optimal location for tax efficiency), and there is potentially a fairly high turnover in that strategy.

I'll grant that it's innovative. I'm just unconvinced that it will be a net benefit to investors.


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## GoldStone (Mar 6, 2011)

andrewf said:


> I don't really see the point of using it to buy ETFs.


Why not? Asset allocation ETFs (ETFs of ETFs) are dime a dozen. Motifs of ETFs are the same idea.

$250 minimum to start. $9.95 to buy an entire motif. They handle fractional shares. Not a bad solution for beginners. Not sure if they handle rebalancing.


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## fatcat (Nov 11, 2009)

andrewf said:


> Everyone starts talking about about a theme that's been recently outperforming, people hear about it on the news and buy the motif. Isn't that the idea behind these?


no, the idea is to *come up* with a theme that outperforms, not to buy in too late to somebody else's theme


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## andrewf (Mar 1, 2010)

So if you're using your own theme, why do you need this service? The lower transaction costs?

And by "the idea behind these", I mean the people behind the service. They make money by frequent switching between strategies, so undoubtedly they'll continually push the latest hot theme with recent performance figures. Indeed, that's what you see on their homepage.


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## 72camaross (Apr 26, 2010)

Is there a Canadian version of the Motif Investment or as a Canadian can we use this service some how?


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## GoldStone (Mar 6, 2011)

No and No.


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