The Risks and Compensations of Motif Investing -

The Risks and Compensations of Motif Investing

Do you want to know what motif investing is? After giving you a rundown of what investing feels like, let’s take things a little bit further. So far, we’ve talked about how compounding can help you build around your principal investment, and how the major types of securities work.

The Risks and Compensations of Motif Investing

Now, we are going to change the rhythm a bit, by tackling one of the most interesting appearances on the stock market exchange scene: motif investing. Note that this type of investing is much more difficult than plain mutual funds, stocks, bonds and compounding, thus requiring some more advanced notions.

So, if you feel like you didn’t quite get the hang of the basics, we strongly encourage you to review our Investing 101 article before proceeding any further. On the other hand, if you’ve mastered the basics, we bid you a warm welcome to our motif investing walkthrough, the one place where we’re going to show you that computer technology is not only for geeks.

Let’s go through the ABC of motif investing.

Motif Investing – Definitions

  • Motif Investing (/məʊˈtiːf/) – a way to invest your money by buying so-called motifs, which are securities baskets, containing up to 30 stocks or EFTs. Usually, motifs are centered around innovative trends such as 3D printing or biotechnology.
  • EFTs – EFT stands for Exchange-Traded Fund. An EFT is defined as being an investment fund which can be traded on the stock exchange, the process being similar to that of  stocks and bonds.
  • Build a Motif – it’s the process through which you construct your portfolio. Usually, motif investments are centered around a theme. A good example would be the Tablet Motif, which contains memory, hardware, display and semiconductor stocks.
  • The weight of stock – it is defined as being the percentile composition of a specific stock in your portfolio. The weight of the stock can be further broken down by geographic area, industry or stock market position.
  • Asset allocation – the art of finding the perfect asset for the client.
  • Time Horizon – the timeframe in which the investor expects to capitalize his or her investment;
  • Risk Tolerance – how much risk is a client willing to take in order to earn a certain profit. However, the term may also apply to certain securities like stocks or mutual funds that have a high probability of not returning any kind of profit.
  • Investment strategies – the best course of action one should take in order to derive profit from their portfolio.
  • Robo-advisor – a fairly new concept, it refers to an online wealth algorithm that is able to help you better manage your portfolio based on multiple stock market variables.
  • Trading on the Margin – this concept refers to using borrowed money in order to acquire various securities.

What is Motif Investing?

After giving you a quick glimpse of what we’re going to talk about for the rest of our motif investing article, let us now go into the specifics.

As we’ve mentioned in the introductory paragraph, motif investing is considered a fairly new addition to the stock exchange market. The core essence of this method of investing is automation. Compared to other forms of investments which require a human advisor, motif investing is a fully autotomized system.

The Wall-Street suits are now replaced by user-friendly robotic advisors called Robo-advisors (not the most inspired name). Just like Google uses crawlers in order to scour the Internet for content, Robo-advisors have their own algorithms which they use in order to analyze the stock market and find the best match for your portfolio’s needs.

As a financial tool, motif investments are broadly considered alternative investment options, just like FOREX or Gold transactions. But how does it compare to traditional mutual funds or another form of composite investment?

The Risks and Compensations of Motif Investing

In comparison to its peers, motif investments are considered low-risk/moderate-gains operations. To this list, we are inclined to add low investment since all motif trading engines require a unique transaction commission. After paying this commission, you are able to manage, sell, buy, and balance your asset basket without any hidden or additional fees.

Another thing worthy of mentioning is that most motif-driven stock engines like Betterment or Wealthfront are mainly centered around the technology market. For example, if you are the kind of investor who thinks that technology is the best gateway to low-risk/steady-gains income, then motif investing is your kind of game.

What should a successful motif investment contain? For example, if you are currently following the development of the mobile devices market, you can buy stocks from big players on the tech market such as SanDisk, Apple, NVIDIA, and even Microsoft.

Note that motif investment is intimately related to the tech market, and does not function outside these boundaries. To put it in layman terms, you may only invest in profitable technological advances but in nothing outside this sphere, making motif investing a little prohibitive.

Although it’s considered a fresh-faced player on the market, motif investment has started to gain popularity, in part thanks to the latest discoveries in terms of computerized algorithms.  To open up a motif investing account is very easy, and might we say, very cheap.

Any motif investing platform out there will require a minimum of $250 in order to start trading. However, if you’re interested in trading on the margin, you will need to open a $2,000-dollar deposit.

Acquiring a motif usually, costs around $10. Should you want to add one or more types of stocks to your already purchased motif, you will be required to an additional fee of $4.95 per stock.

The Pros and Cons of Motif Investing

After presenting the finer outlines of what it means to invest in motifs, we are now going to show you the risks, as well as the compensations attributed to this form of investment. As we’ve said times and times again, motif investing is fairly young in comparison to other stock trading methods.

This doesn’t have to be a negative aspect, but, we have to mention right from the start that motif investing is not as flexible as traditional stock trading is. Another aspect you should take into consideration is that all motif-related operations are exclusively handled by online platforms, which means that you can’t go to a professional in order to manage your operations.

Still, you can always hire a specialist who understands this kind of online transactions and can ease the communication between you and the platform.

Now, as far as pros are concerned, motif investing is a marvelous way to diversify your investing portfolio with little invest. Another great reason to start trading motifs is the low cost of each transaction. As mentioned, a motif cost somewhere around $10 and you also have a chance to add new stocks at $4.95 per each additional stock.

The Risks and Compensations of Motif Investing

In terms of pros , we cannot go any further without mentioning a word about customization. Like any other commodities you trade on the market, online motif trading platforms will give you a choice between opting for a pre-built theme or to construct your basket from scratch. This is useful if you plan on diversifying your portfolio.

Furthermore, the motif investing platform is also a vehicle for buying and trading low-cost EFTs. At $4.95 per EFT trade, financial specialists tend to believe that this is, in fact, the lowest price found on the stock market.

Now, after covering most of the pros of using motif investing, what about the cons? As far as liabilities are concerned, the most obvious cons attributed to using this type of financial vehicle derives from the very nature of the motif.

Motifs are considered low-risk operations, however, they tend to return very little profit at the end of the year. So, our advice to you, as a beginner investor, is to use this procedure as an alternative option to traditional investing methods and not as a primary method. It is indeed safe, but you won’t earn the same profit as in the case of working with mutual funds or with other financial tools.

Another con of working with motif investing is that the assets, which in these case are motifs, tend to have quaint names which, more than often, cause confusion. And the last negative aspect of working with motifs, and probably the most important is entwined with its dividends.

When working with stocks, the profit you win from dividends is automatically reinvested at the end of the year. Unfortunately, dividends derived from motifs are not automatically reinvested, which means that you will need to perform this operation manually.

How to Invest in Motifs – Step-by-Step Guide

Eager to start earning some real money? Then follow our step-by-step guide in order to find out how you can start buying and selling motifs.

  1. Find a suitable motif trading platform. The first step towards creating a lucrative motif trading career is to find a reliable platform. Note that the platform must not only be visually pleasing but must have up to date information on various securities. For a beginner, in our opinion, the best place to start is Opening an account is free of charge, and the online platform charges the usual $10 fee per motif and $4.95 for adding a new stock to your basket.
  2. Open a Motif Trading account. In order to open up your first account, you will be required to supply a couple of personal information. This includes a First Name, Last Name, Address, e-mail address, SSN, and, of course, a credit card number.
  3. Make a trading deposit. In order to start using the motif trading platform, you must make an initial deposit. As we’ve mentioned throughout our article, most online motif trading platforms, Motif included, will require you to deposit at least $250 in your account in order to start trading. To trade on margins, you will need to deposit at least $2,000.
  4. Freedom of choice. After performing all the operations mentioned above, you will be able to start buying your first asset. But even before that, you will need to re-evaluate your perspective on what type of motif investor you will want to be. If you want to play it safe, you can choose a pre-built motif and start investing in it. However, if you want to take the reins yourself, the platform will let you build your motif.
  5. Choose the most relevant motifs. The platform has an added search engine that lets you peruse any type of motifs.Take advantage of this search function in order to view up to date information about a certain stocks and to see if it’s worth your investment.
  6. Profit and enjoy!

The Risks and Compensations of Motif Investing


As you can see, there is still much to tell about this new trading domain. Still, since it is so young, there wasn’t enough to time for those subtleties to emerge. In order to conclude our motif investing articles, we are inclined to make a small recap of all the things we have discussed here.

First of all, compared to traditional stock market operations, motif investment is a fully automated process, relying solely on computer algorithms and artificial intelligence that can analyze millions of variables per second in order to help you manage your assets.

Another thing worth keeping in mind is that you won’t become a billionaire over the night relying solely on motif investments. Although the system has progressed, the profit gained by using motifs is still low compared to trading other commodities.

Commissions are also a great thing when it comes to motif trading platforms. All the fees are transparent, and they only apply when you want to buy additional motifs or add stocks to your already configured basket.

Now, although most experienced investors will tell you that the motif stock market is no more than an overrated children’s toy or teaching material for beginners, mastering it takes skill and, not to mention, a lot of patience.

Furthermore, traversing a bit to the social side, the motif market is probably the best way to figure out which way we’re going in terms of technology. Bear in mind that while most areas of technology like 3D printing, tablets, biotech are lucrative and can become very profitable in due time, there are other fields which are not that profitable.

Like always, it’s entirely up to you to discover which is the best place for your money.

Photo credits: 1, 2, 3

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