The average investor has long been held captive by the financial establishment. For decades, brokers, financial analysts, money managers, and economists were held in the highest of regard. They maintained their vice grip on financial and market data, perpetuating the myth that only through them could investors obtain the best returns. And of course, they would gladly provide access to and information on markets, for a fee. That’s the American Way.
The Internet has changed the individual’s relationship to financial markets, like it has in so many other industries. We now have more direct and unmediated access to markets than ever before. This includes electronic order entry, low cost software for research and trading system development, virtually instant price executions, access to bid and offer data as well as size and price quotes, and legislation that has attempted to level the playing field. These are all examples of “disruptive technology” in the finance sector. They take the middleman out of the picture, finally connecting investors and traders directly with one another rather than through the old boys network of brokers and financiers.
No Brokers = More Money to Invest
The playing field is being leveled, to an extent. No, the situation is not yet ideal; money talks, politics remain supreme, payoffs abound, insider information persists, and large traders still get the edge. However, the small trader and the average investor have more opportunities to succeed now than ever before. And how is that?
We respectfully submit that a new category of investment vehicle, the Motif, can provide this advantage. Among the disruptions to the financial industry, it is the most threatening to the establishment. The Motif takes your commission dollars away from the brokers, it takes your investment dollars away from the fund managers, and it puts all of that cash into your own investment ideas, right where it belongs.
A Motif is a Concept in Investment Form
Through brilliant thought and execution the folks at Motif Investing bring us a fabulous new idea which The Chimps believe every investor needs to learn. Simply stated, a Motif, as its name implies, is a theme. This theme is the basis for a collection of stocks.
Motifs come in all different shapes and sizes. Motif Investing has a selection of pre-designed motifs, for example their highly popular Drug Patent Cliff, a basket of generic drug manufacturer stocks designed to maximally profit from the expiry of patents on popular medications held by big pharma. From their own description:
Big Pharma is headed for a big change. And generics are getting ready to grab their share. Branded drugs with sales of $86 billion would lose patent protection during 2013 to 2017. Some of the most lucrative targets for generics in 2013 include Eli Lilly’s Cymbalta, Biogen Idec’s Avonex and Merck KGaA’s Rebif. These drugs generated global sales worth $10 billion in 2012.
This motif, this pure and focused concept offered by no ETF to date, has brought investors a healthy one-year return of over 56%. Motif Investing offers a range of innovative stock baskets, with focuses ranging from momentum plays to rapid prototyping/3D printing innovators.
Your Concept, Your Motif
These already innovative conceptually focused investments may not even be the most exciting part of Motif. Motif has put the power completely in the hands of the individual investor. Don’t think Akorn deserves a 5% weighting in their Patent Cliff motif? Change it! Add another generic manufacturer that’s not already in the mix! As the kids say, you do you.
And when we say you do you, we REALLY mean it. Do you have an idea that’s not already in motif form? MAKE IT. It could be as simple as “companies my kids are buying toys from” or as complicated as “mid cap specialty retailers with low debt and substantial growth in BRICS countries”. If you have the idea, and you can find the symbols, you can put them into your own motif. Then you, and anyone else with an account at Motif Investing can buy that motif.
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An Applied Example
Consider the following situation:
Through your research you believe that precious metals will go higher, therefore, you want to buy a certain subset of precious metals stocks. Assume that you have only $25,000 to invest. Assume further that you have settled on spreading your risk over 8 different stocks. The average price of these stocks is $30.
If you are to buy shares of each of the 8 different stocks your total cost would be $3000 for 100 shares of each, putting your total investment at $24,000. Problem solved? Not exactly. For one thing, let’s say you’ve got a $10 commission per trade. So purchase and sale are at $160 minimum, assuming a buy-and-hold strategy and thus barring any kind of dollar cost averaging, intermediate purchases and sales, etc. And then you’ve got that $840 that never quite found a place, what a shame!
Would there be another alternative? Yes, you could scrap the research, forget about the 8 carefully-selected stocks, and buy an ETF that represents the metals sector. Problem? You don’t like the metal stocks that were chosen for that fund. There might be another ETF that matches your goals more closely, but exactly how close can you expect to get? Then you’ve STILL got the cost of purchase and sale, as well as the ETF fee structure that only penalizes you for profit. Sure, it’s not terribly expensive, but is cheap worth it when you can’t fully realize your investment strategy?
How about another solution: take those 8 stocks and put them into your own custom motif. Simply go back to your original plan and decide how large a component each of your original 8 should be. No longer are you bound by the idea of trading even lots and worrying about minimum and maximum stock price. Mix up the strategy by including related companies, processors, real estate plays, retailers, or manufacturers. At this point, you’ve got a lot more offered than just your original 8 stocks; you’ve added important weighting and diversification to your strategy.
Congratulations, you’ve just created your own motif. Now buy as little of it as $250 worth or as much as you like, and pay just $9.95. A year or two down the road when you decide you want to change the weighting or add or remove components, it’s the same low fee to make the adjustment.
Two Chimps & Motif
The Chimps have created their own motifs, and we want to encourage you to do the same! For an example, check out Boom Zoom (a motif created by Chimp Elliott). This motif is focused on the preferences and needs of retirees during the ongoing generational change. The fund’s holdings and performance are below, as shown by the Motif website:
The blue line shows the Boom Zoom motif from inception in early Sept. 2014, and the green line shows the S&P performance during the same period.
A list of the motif’s holdings can be seen below:
Please note in evaluating the Boom Zoom motif, that Chimp Elliott is not an economist, nor for that matter is he a financial analyst. He is purely a technical monkey who understands trends and indicators, and uses these important tools developed by Chimp Jacob to his advantage. If we can do it, so can you!
Design Awesome Motifs, Get Paid
Wait a second. What? Motif is turning the idea of the broker on its head COMPLETELY. You as an individual can earn money for the investment products you design.
If you’ve got an amazing idea for a new motif, why shouldn’t you be rewarded for that? That’s what Motif thinks. If other investors on Motif buy or customize the motifs you design, you get money. There’s a very strong social component to the Motif community, so you’ll have the chance to discuss your ideas, refine them, and present them in their best light to other thinking investors.
Take back the power and start investing with motif today!
Chimps Jake & Elliott
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