March 13, 2017

Thematic Investing


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In How to Invest in Stocks, Bill Pike noted that the first step in investing is easy; you just need to set up an online trading account. He referenced Ameritrade, Scottrade, and Fidelity. These are all good brokerage platforms of offering a variety of different services. A relatively new brokerage platform worth exploring is Motif Investing, which was launched in June 2012.   Motif is backed by large institutional investors such as Goldman Sachs, and the company’s board members include Arthur Levitt, the former chairman of the Securities and Exchange Commission (SEC).

As we discussed in Why Stocks Go Up and Down, thematic investors seek to identify and exploit major trends (or themes) in a particular industry that will likely drive earnings growth and stock prices. For instance, within healthcare themes might include Obamacare, Biotech Breakthroughs, or Genomic Medicine. Motif Investing’s theme for Obamacare includes hospitals, pharmacy benefit managers (PBMs), generic drug companies, electronic medical record companies, and insurance exchanges; all of which should benefit from the implementation of the Affordable Care Act (ACA).

Other popular motifs include Cloud Computing, Modern Warfare, and Wearable Tech. You can buy a motif as is. Alternatively, you can add securities, delete securities, or change the prescribed weight of each security. Then, you can purchase the theme that can include as many as 30 securities for a total commission of $9.95…not a bad way to gain exposure to a particular theme. There is no management fee and the minimum account size is $250. Their site – and the accompanying iPhone app – allows you to search for motifs, view the prescribed holdings, and evaluate the absolute and relative performance before investing.

Investors are not limited to existing motifs. You have the option of creating your own from scratch and offering it to other users through the social components of the site. What’s more, you receive a $1 royalty for each person who purchases your motif!

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