I opened my Motif Investing account in February.
One of my main drivers of opening a Motif Investing account is to avoid the ETF fees by building my own ETF. Plus I could get $150 sign up bonus with the referral link from Financial Samurai’s page. So why not?
My goal was to simulate the overall market performance, so I made five motifs composed a total of 135 stocks trying to represent the whole market and bought the five motifs in appropriate weightings similar to S&P 500.
Yesterday I sold everything in my account.
ETF is a better option for the whole market
I should’ve done my research better, but only after opening my Motif Investing Account did I realize that for my investment amount, ETF is a better option. Fees for investing in an overall market ETF are really not that big. For example, VTI only charges 0.05% management fee as you can find in this Nasdaq page. With my fund of $11,000 the fee will be only $5.5 a year. On the other hand, with the five motifs I built in Motif Investing, even though I don’t directly pay for an annual fee, I’ll still need to periodically rebalance so that it’s still accurately representing the whole market. If I balance once per year, that would cost me $9.95X4=$39.4 per year, much more than the $5.5 fee charged by the ETF. In addition to the unjustified fees, I’ll also have to spend hours adjusting the 100+ stocks in these motifs. Even if you are smart enough to simulate the whole market with just one motif, the $9.95 per year rebalance fee and the time spent on it won’t be of any advantage compared to a conventional ETF like VTI.
Losing both time and money? Nope I will not do it.
My next investment experiment
I’ve been learning about real estate investing and I’ve decided to give it a try.
However, for now I don’t think I can get any loan because of my high credit utilization – I carry balances on my credit cards because I transferred the balances to do my experiment in Motif Investing as I’ve mentioned in this post. Any bank that sees my high credit card balances and the consequent poor credit score will consider me too risky for a loan.
My focus now is to improve my credit as soon as possible. Currently my credit score is not that great looking – in table below are my most recent FICO credit scores for all the three major credit bureaus.
|Update date||Credit Bureau||FICO score|
If you are wondering how I got these credit scores, please find out my post on how to get FICO scores for free. Half a year ago, my FICO scores were more than 730. But I have been deliberately carrying a balance on a few credit cards to take advantage of their 0% Intro APR balance transfer offers, so my current scores are not surprising. My initial plan was to invest the balance in stock market for long term but apparently my interest has shifted toward real estate.
As soon as the funds in my Motif Investing account becomes liquid, I’ll transfer the money back to my bank account to pay off these credit cards. Actually I’m pretty lucky with my short-lived Motif Investing experiment this time – I put in $11,000 as initial investment money in my Motif Investing account in February and now in less than two months it is $11,818.51, thanks to the market rebound in the past couple of months as well as the $150 sign up bonus. So even if considering the 3% balance transfer fee (there’s no interest because I was on their 0% APR promotion period) that I paid for the $11,000 investment fund, I’ve still made a profit of $488.51. That’s a 4.4% return in less than two months. Not bad! Of course I know that’s just pure luck, but I’m still glad.
I am expecting my credit score to improve rapidly after paying off these balances.
However, my Motif Investing journey is not over. Motif Investing is still a fantastic way to invest in a bucket of stocks without having to pay for commission for each. Even though for now in the short term I am not going to invest in Motif Investing I’ll probably try again later.
My next project is real estate investing – I’ll update how that goes in my little blog here.
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