Posted on Nov 16, 2012

Say you’re addicted to your smartphone and so is everyone else you know. Every company looks to be going mobile, apps are everywhere, and the cloud seems here to stay. If only you could figure out what companies to invest in so you could make money from this trend. But you figure it’s too time-consuming to research stocks and too expensive to open a brokerage account anyway.

Well, a new Silicon Valley startup called Motif Investing has introduced a tantalizing way for the small investor to buy stock: select from baskets of stocks with a common theme–or motif. For example, you could purchase a motif called Mobile Internet Tsunami, a combination of stocks ranging from smartphone power players like Apple and Google to smaller companies like touchpad maker Synaptics Incorporated and Triquint Semiconductor.

With low fees and a fun concept, this approach may be tempting to investors intimidated by high commissions, high minimums, and the hard work of researching individual companies. But should you take the plunge or hold onto your cash? We talked to Motif Investing Co-Founder and CEO Hardeep Walia about Motif’s offerings and to Certified Financial Planner® Sophia Bera from LearnVest Planning Services to help shed some light on this new trend.

How It Works

Motif Investing offers almost 100 different curated collections of stocks and fixed-income investments (such as bonds) on its website, with titles ranging from Discount Nation to Socially Responsible to Biotech Breakthroughs. “People tend to interact with things they know and understand,” says Walia, who formerly helped handle Microsoft’s investment portfolio. “We want to make it super easy to invest.”

Each motif contains up to 30 stocks, and the minimum investment is just $250.Many of the company’s stock collections focus on hot or current topics. For example, Rebuilding After Sandy contains companies likely to figure heavily in the cleanup and construction after the Northeast’s recent devastating storm, including self-storage places and stores like Home Depot and Lowe’s. Fighting Fat features companies involved in battling the national obesity crisis, such as Weight Watchers and diet drug manufacturers. And the Lots of Likes motif focuses on the 20 most “liked” brands on Facebook, including household names such as Procter & Gamble, Starbucks, and Coca-Cola.

• Investors can customize the motifs by using sliders to adjust the weighting of stocks or eliminate them completely from the mix. They can also add stocks of their choice.
• Graphs chart the annual rate of return of motifs against the S&P 500. Investors can also see how their customized motifs would have fared versus the pre-selected motifs.
• The commission fee for buying or selling a motif, whether pre-selected or customized, is a flat $9.95. An investor can also sell an individual stock or add more shares of it for $4.95.

“What they’re figuring out is how to make investing affordable and accessible,” says Bera. “Motif has an interesting concept and it could catch on long-term, but we still have to see how it shakes out.”