If you happened to open an account with Motif Investing you probably received an appreciation letter these days from the management offering free trading and Motif rebalancing for your account on Black Friday.

It is a very nice incentive from the company. Although my account is still miniscule I will take advantage of this offer and buy my next Motif on Friday for free.

 

 

Why I like trading with Motif investing?

I wrote this in my previous post that Motif Investing allows you to create a portfolio of your favorite stocks and then buy the entire portfolio as one piece. It is a great idea for all investors who like to be diversified, but dislike investing in mutual funds.

When you invest in mutual funds you have a few discouraging limits or barriers making such investing mediocre.

One limit is a minimum investment. Many funds need several thousands of dollars of minimum first investment to start with. For example Vanguard mutual funds require in average $3,000 on many of their funds. Some even require $5,000 and you will be able to see funds asking for 10, 50 or even 100 thousand dollars.

If you want to invest in such funds you will spend several years saving money for your first purchase. What do you want to do with a pile of cash waiting in a savings account before you save the required amount of money?

 

 

If you can save for example 150 or 200 dollars a month, saving $3,000 initial amount would take you 20 or 15 months respectively. Having your cash sitting idle elsewhere is something I refuse to accept.

The next barrier is commissions. If you invest with a broker you need to look for non-transaction-fee mutual funds otherwise you will get hit by a large commission. In many occasions it will be around $50 per trade. But I have seen brokers charging outrageous 70 or even 100 dollar level fees.

Of course you can invest directly with the mutual fund company such as Vanguard to avoid commissions, but then you will be stuck with one fund family or end up with several accounts with several different fund companies. For me it is hard to manage.

But the biggest issue I have with mutual funds is the cost of the funds itself. This fee is not visible at first so if you own the fund for some time it may appear to you that it doesn’t cost you anything. It is not true. Every year the fund takes away a substantial fee from your earnings. The funds are required to disclose the fee named as Expense Ratio. You want to have the ratio as low as possible. Index funds or ETFs have expense ratio at 0.2. But mutual funds can be as high as 2.5!

So mutual funds are expensive and their results compared to a good mix of individual stocks are worse than mediocre.

What if you are a dividend growth investor?

Let’s say investing into dividend paying stocks is something you really want. But you only have $1000 to start with. You may be able to find some mutual funds which would track dividend paying stocks and allow you to invest $1000 initial amount only. Or you will find an ETF tracking dividend stocks. But their payouts are terrible!

For example a Dividend Appreciation ETF (VIG) by Vanguard will pay you 2.16% yield at 7.06% growth. As a dividend growth investor I would like to get more at the same growth. At least during my initial portfolio building phase I want a lot higher yield.

Motif Investing is a great solution

With motif investing you can create your own ETFs or mutual funds. You can mix your own cocktail of stocks the way you like it. You will be your own manager of your very own mutual fund. And you can compete with others at the Motif pool of investors by publishing your Motif for others to see how great mutual fund manager you are!

I like that idea.

My Motifs

For example, I created a few Motifs of my own. One is a dividend growth stocks Motif. This motif tracks 30 individual stocks I believe are good candidates for dividend growth stocks (not all stocks however are true DGI) and I would like to own. The current yield of the Motif is 5.3%.

But if your account is small, you cannot buy all 30 stocks. You have to start small. Slowly buying more an more shares. If you are starting with $1000 initial investment at the beginning of your career, you will be able to buy a few shares of 1 company (for example 10 shares of McDonald’s (MCD) at $97.06 a share).

That can be very risky and your portfolio may be very volatile. It is also a reason why so many investors start with mutual funds or ETF’s because they cannot afford buying individual stocks outright. Many investors also get discouraged by buying small amount of shares and their portfolio falls into 20 – 30% loss because of commissions.

Not with Motif Investing anymore. All you need is to open an account, deposit your $1000 initial deposit, create a Motif of stocks you like and buy them all. If you have a 401k account with your company, or 529 education account for your kids, you already have an experience how fractional investing works.

With Motif Investing it will work the exact same way. You will buy fractions of all 30 stocks you like. You will be collecting fractions of dividends right away and you will be greatly diversified.

My second Motif I created is a Monthly dividend income. This Motif contains stocks paying monthly dividends. The current yield is 8.0% and it is a Motif I am planning to purchase this Friday for free!

You too can be a “mutual fund” manager

It is easy. You can start your own Motif or even trade mine if you like the stock selection or you can take my Motif, modify it the way you want it and then buy it. All you need is a 250 dollars initial investment to start your own investor career.

And on top of all those great benefits you can get up to $150 when you start trading at Motif Investing now. Learn more.

Check the how-to videos on Motif Investing website how to create, share, buy, sell, or rebalance Motifs or individual stocks.

Happy Thanksgiving Day to all of you and shop at Motif Investing!