Would be interested in what people here think of "Motifs".
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An interesting startup launched on June 4th called
Motif Investing. The idea behind this new online brokerage is that people can buy baskets of up to 30 stocks (Motifs) centered around specific themes for a single charge of only $9.95 (about what sites like E-Trade charge to buy 1 stock).
However, what makes the concept interesting is the customization of these Motifs. Before buying the "Motif" you can alter the stock weightings or completely delete or add stocks for no additional cost -- as long as these changes are made before buying the Motif. Otherwise they charge $4.95 to sell a stock or add to a stock in a Motif you already own. But if you want to sell the entire basket of stocks in the Motif it's just $9.95.
In essence, these Motifs are like ETFs but customizable to your particular preferences and WITHOUT the ongoing fees charged by ETFs. Don't want Bank of America in the Motif? Take it out. Don't like that Apple is such a large weighting in a Tech related Motif? Reduce it's weighting.
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I wrote some more on it here
Motifs: A Lower Cost, Customizable Alternative to ETFs?. Im not a fan of the trendy "themes" but used right looks like an interesting tool.
Comments
If there were long/short motifs or other alternative motifs I'd probably be much more immediately interested.
Thanks for the heads-up, WSR.
Thank you for the note about the "Motifs".
Additional.........for a forward thought as to being able to build one's own "Motif" using etf's. Not available at this time; but the stock only model could be applied to etf's, too.
Regards,
Catch
For example - the CLOUD COMPUTING motif is rated very high interms of popularity. Top 3 holdings are VMware (22.7%), Citrix (12.5%), Salesforce (11.6%). They also provide a volatility and valuation ranking for each motif. This one is ranked in the middle for volatility with a high valuation.
RECESSION RESISTANT motif - moderate low volatility and valuation. Top 5 holdings: American Eagle Outfitters (6.4%), Flowers Foods (6.0%), Illinois Tool Works (5.8%), Intel (5.3%), Raytheon (5.3%). Other holdings here include Johnson & Johnson, Chevron, Molson Coors, General Dynamics, ADP, etc.
Here's how the Recession Resistant motif is built:
*Research*
- Identified US-listed stocks and ADRs of companies with Debt to Equity ratio less than 50% and Dividends to Cash flow ratio less than 75% for the past 5 years
- Screened for companies with more than $1B market capitalization and positive dividend growth over the past 2 years
- Computed the current dividend yield for each company
- Segmented companies by their primary operating industry
*Weight*
- Ranked the companies in descending order of their dividend yield
- Selected the top 20 ranked companies and equal-weighted them
*Rebalanced Annually*
LOTS OF LIKES motif - Walt Disney (14.1%), Nike (11.2%), Google (10.1%), Starbucks (8.0%), Coca-Cola (7.7%), Microsoft (5.9%), etc. This particular motif was built based on the number of 'likes' on Facebook and is weighted accordingly as well.
There's Cyber Security, Cash Flow Kings and Bailout-free Banks motifs.
SEVEN-DEADLY SINS motif: "Even In A Weak Economy, Bad Habits Remain Strong - Even in tough times, consumers continue to partake in things that may not be considered particularly virtuous. From cigarettes to sex, burgers to Botox®—consumer indulgences require products and services from a wide range of publicly traded companies. Some luxuries see reduced demand during tough times. But smokers could keep smoking, drinkers keep drinking, and the lustful keep…lusting. Bad habits are hard to break. And when times are rough, who wants to even try? Nobody can predict the markets, but consumers are only human. And economic conditions may not be able to defeat their appetites for sinful stuff."
Top 5 here are: Beam Inc (4.4%), Altria (4.4%), Reynolds American (4.3%), Diageo (4.2%), Phillips Morris International (4.1%)...and others that made it on the list include Goldman Sachs (Greed), Wynn Resorts, Las Vegas Sands, etc.
Top holdings in the GARP motif include: Apple, CA, America Movil, SABESP ADS, Credicorp, Aeropostale, Grupo Pao de Acucar ADS, Ambev ADS, etc.
There's also a BRICs BUILDING motif (not very popular) and here's how it's invested:
*Research*
- Identified US-listed securities and ADRs of companies from Brazil, Russia, India, China and South Africa
- Filtered out companies that derive more than 65% of their total revenue from foreign operations to create the Idea Index
- Segmented companies by country
*Weight*
- Allocated country segments based on each country's share of the total BRICS GDP
- Determined each company’s domestic revenue as a percent of its total revenue
- Applied a pure-play factor to give greater relative weight to companies that derive a higher percentage of their revenue from the BRICS countries
- Weighted each company within a segment based on its market capitalization adjusted for domestic revenue exposure
*Optimize*
Created the motif by running the Idea Index through our optimization engine to get a subset of stocks with the same risk/return characteristics as the Idea Index
Besides the advantage of tax-liability management, seems like you could also bank a lot of savings on trading commissions, versus owning a number of individual stock positions through a more traditional brokerage -- assuming there's a single motif either already offered, or that you can devise, that works for you. I hope I'm interpreting that right, anyway.
http://socialize.morningstar.com/NewSocialize/forums/p/305712/3254297.aspx#PageIndex=1
Like you mentioned earlier I too am pretty much loaded up but I am putting together a basket that I will open in my soon-to-be baby granddaughter's name. I opened a Roth for my grandson after he was born in a mutual fund which I just may sell and shift over as well.
You could add your own hedges using inverse ETFs.