Motif has off-late become a buzz word in stock world and for those of you new to this word , it is a concept of investing based on a particular theme. Literal meaning of Motif is "a distinctive feature or a dominant idea in an artistic composition" . In financial interests , each motif can hold up to 30 stocks or even exchange traded funds reflecting a particular idea or theme of investing .
On face of it, any person with basic financial knowledge would say motif is not such a great idea ; why ? Based on our intuitive conviction we prefer to go diverse , prefer to take minimal risk and as many would say prefer to do less work but earn good rewards ( read : prefer someone else to choose your investment strategy or rather "buy- and-sleep")
So what's pro on motif ??
As I mentioned before it is a "theme" based investing . Let's say there is a newbie 'X' interested to make his/her entry into Wall Street ( not in the literal sense though :P ). X might not know where to begin with, when there is plethora of stocks to choose from . " Where to begin ?" is the primary concern of all individual . That's when , "Motif becomes a savior !! "
For example , I am a first time mother . I know how an Enfamil ( Mead Johnson Nutrition company ) is endearing to a mother who prefers to formula feed her baby , how P&G with its Pampers is going to remain in the market for long , how a Mattel inc. with its Fisher Price brand has managed to keep the kids occupied and safe . These are very few to pinpoint but imagine if I were to invest in all of these individually ( considering the current commission levels ) , this pain point is a growing concern for many individual investors. Solution : I would rather prefer a basket that let's me enjoy the best and also own few others that have the potential to become " the next best ". The crux of theme investing is its based on something that the user's can resonate with .
Another interesting point is , there is a motif for every occasion. Whether you are a tech geek , or spend all your time gaming online or you have a secret love for casinos , or you prefer being invested in the ones that return on an average more than the regular index.If you don't find the one that suits you , there is always an option to create one.If you don't have the money to buy all the great ones you have in mind , motif provides an opportunity to own a part of it . I would rather own a part of Apple , Microsoft , Cisco , Alphabet etc rather than holding on to a single stock and crib about being cash deprived to venture out in many desirable stocks.
More like a "market pot-luck ", we get to savour our favorite stocks. And the beauty is , it is not like a pot-luck for someone in a diet regime , if you like something you have the freedom to indulge more in it. The act of "rebalancing" allows the investor to put his/her prudence into action. So how is motif different from an exchange traded fund : Rebalancing allows the investor to stipulate their investment decisions , and there is a leeway from management fee because you are managing your own motif. Rebalancing also allows us to maintain the motif in-line with our financial goals. For instance there are dividend growth stars, retirement income generators etc.
Of course there is a flip side to everything new that comes by , the concept of diversification or the age old adage of not putting all your eggs in one basket is defied. Adding on to this is the risk that comes along with managing your own portfolio without professional help like in the case of ETF or mutual funds.
Currently a minimum investment of $250 is needed to start a motif investment journey. Tailor-made fund that resonates with individual preferences, prejudices is a new bait ( with a positive connotation) to investors . For prudential investors motif gives the opportunity to explore and put their knowledge to use. For investors with money and looking for regular income without much indulgence there is a way out through motif . For newbies there is some starting point with professional help in the backdrop to start investing. So motif could turn out to be the next in-thing financial instrument to look out for.
Disclaimer: Motif Investors should do their own due diligence before investing. Basic metrics like pricing , volatility , weightage needs to be checked. Past performance , annual returns , performance with respect to index funds , and how the motif is in-alignment to our financial goals needs to be periodically reviewed.
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