Motif Investing, a start-up that a guy like Jack (“costs matter”) Bogle of Vanguard might like, opened its doors for business a couple of days ago. I know I do. A recent post on the Digits blog in the Wall St. Journal had some nice things to say about the concept, too.
Motif Investing is an on-line brokerage that lets one invest in a basket of up to 30 equities for one $9.95 fee. There are no annual fees and no other ongoing costs to your equity investments.
It is a start-up, so there's a lot of 'there's more to come' to their offering but it is, in my opinion, a great start.
How Motif Investing Works
You can buy one of their motifs (a bundle of stocks selected around some specific theme) 'as is' or you can adjust the weightings within that motif. Or you can completely delete or add any stocks you wish within a selected motif. Or, and this I really like, you can basically create your own basket.
The Ingenious Part
Think about it. If you wanted to invest $10,000 in the 30 Dow Industrials, you could do so for less than ten bucks and never have another expense. You could replicate the top 40% holdings of SPDR S&P 500 (SPY) fund for the same fee. You could exactly replicate the top 25 stocks in Dow Jones Select Dividend Index (DVY) fund with respect to weightings and be invested in nearly 50% of DVY for the total ongoing cost of a couple of frothy sweet things from Starbucks.
The possibilities for a do-it-yourself investor with respect to diversification and investing in interesting-but-on-the-margin sectors are obvious. The minimum investment required is so small that a gift of a basket of good equities for a young grandkid is just begging to be made.
During my account sign-up I made a rookie mistake and screwed up some input. So I've already tested their security and systems to a point. What was most impressive, however, was the personal attention I got from a couple of very nice people that take care of idiots like me. If they continue that level of service when they've got a lot more clients, I suspect they will do well.
Safe Place To Put Your Money?
They're funded by venture capital as you might expect and they've got some names on their board and advising them that are impressive. As is the background of the founders and the management team.
They invite ideas and comments on their site and I took advantage of that to chime in on one of their motifs. A basket of 15 individual MLPs would not be in most small investor's interests. That K-1 thing would be a killer for an unsophisticated or unwary investor.
Free Trades all June!
If you decide to check them out, tell them that Cliff sent you and they'll give you free trades for all of June. (OK, you don't have to tell them Cliff sent you - it's free for anyone right now.) I don't have any interest in Motif Investing except now as a customer. But I wish I did.
