Sunday, November 23, 2014

My New Strategy - 23 New Postitions at Motif Investing

I came across a brokerage account that is offering up to $150 for new accounts if you deposit $2,000 into your account. The rules are as follows:

 

  1. Open a new Motif account with at least $2,000.
  2. Make a Motif trade within 45 calendar days.
  3. Earn a bonus:
  • 1 motif trade will receive $50
  • 3 motif trades will receive $75
  • 5 motif trades will receive $150
  • New funds must be posted to the account within 30 calendar days and must remain in the account for 45 calendar days.
  • Motif trades cost $9.95 per transaction which includes buying up to 30 stocks.
Why have I decided to open a new brokerage account?
  • I am able to instantly diversify $2,000 into 30 stocks instead of purchasing one stock.
  • The $150.00 bonus is a great offer that ends up being $100.25 after you trade five times. That is still free money that I can use after the 45 days are up.
  • I am able to buy into a ton of companies all at once which I wouldn't be able to anywhere else unless I wanted to pay over $200 in commission fees.
Now let's take a look at the portfolio that I have constructed:
Name
Symbol
Segment
P/E
Dividend
Exxon Mobil Corp.
XOM
Basic Materials
12
2.85
BHP Billiton PLC ADS
BBL
Basic Materials
10.1
4.76
ConocoPhillips
COP
Basic Materials
9.7
3.97
BP PLC ADS
BP
Basic Materials
13.9
5.66
Chevron Corp.
CVX
Basic Materials
10.7
3.61
V.F. Corp.
VFC
Consumer
25.1
1.74
General Mills Inc.
GIS
Consumer
19.3
3.16
Philip Morris International
PM
Consumer
17.3
4.60
Kraft Foods Group Inc.
KRFT
Consumer
14.9
3.72
Wal-Mart Stores Inc.
WMT
Services
17.4
2.27
Time Warner Inc
TWX
Services
17.6
1.59
Yum! Brands Inc.
YUM
Services
23.7
2.16
AFLAC Inc.
AFL
Financial
9.4
2.61
Bank of Nova Scotia
BNS
Financial
11.5
3.79
Toronto-Dominion Bank
TD
Financial
13.4
3.33
AT&T Inc.
T
Technology
10.9
5.22
Verizon
VZ
Technology
10.5
4.38
IBM
IBM
Technology
13.3
2.73
Deere & Co.
DE
Industrial
9.6
2.76
General Electric Co.
GE
Industrial
20.5
3.26
Johnson & Johnson
JNJ
Healthcare
17.9
2.60
Baxter International Inc.
BAX
Healthcare
21
2.87
National Grid PLC ADS
NGG
Utilities
15.3
3.17
AVERAGE
13.67
3.30%

 

What do you think about this strategy and the portfolio of stocks?


15 comments:

  1. Mongrel,

    I have to be honest. I'm not a fan of Motif and/or this strategy. It seems to encourage instant diversification at the expense of valuation, which is, in my view, one of the aspects about index investing that I don't like.

    There are a couple of stocks in your Motif that aren't really great values right now, but you're buying shares anyway. I would much rather concentrate on the best values (which aren't widespread right now), which is one of the most powerful aspects of buying individual stocks in the first place. Otherwise, I'd just prefer to buy an index fund and be done.

    Cheers!

    ReplyDelete
  2. DM,
    I totally agree with you and I could decrease the number of stocks I buy. About half of the stocks I have listed are not fairly priced at this time which is why I wanted to share this with the community before pulling the trigger. You have made a valid point when you said I was sacrificing "instant diversification at the expense of valuation". That is definitely one of the cons I did not think about and will take that in to consideration. I was actually surprised that the overall P/E of my portfolio would be 16.89 which is less than I expected.

    ReplyDelete
  3. DM,
    I decided I could eliminate some of the more expensive stocks in order to get a better overall valuation without affecting the dividend yield. The P/E for this portfolio is now 13.67 according to MOTIF. I understand that I would still be sacrificing a little bit of valuation like you had mentioned but do you think this is a viable strategy going forward? Would you have reconstructed this portfolio differently or are you opposed to the idea of invested at MOTIF altogether?

    ReplyDelete
  4. Mongrel, DM has some interesting points. It deserves a full detailed post on the topic, which I plan to follow up on, but my thoughts in brief. If one feels confident that they can accurately assess value then going on a stock by stock basis rather than a basket, is probably best to maximize total return. In my case, I feel that market timing and value assessement is very challenging. You ask 100 professionals and they will give you different views on valuation. In my case I prefer to pick the best stocks and just consistently buy them. At the end of the day, I am looking to maximize my dividend income, total return and capital return is secondary (but I think will still be good even in this context of accumulation). Also, the intrinsic value of strong capital creators goes up over time, so I'll still be buying at a discount to what these businesses will eventually be worth. Lastly, I'm using time arbitrage in my favor. I have a 20 year + time horizon. I'm banking on these businesses being worth more then than what they are now. Nevertheless, an intriguing topic, one that I want to explore more. A brief para doesnt do it justice. Best.

    ReplyDelete
    Replies
    1. Integrator,
      You have made a solid case for why you choose that investing strategy. I am looking forward to reading anything you write up on this topic. I am sure many bloggers could debate on which strategy is best but at the end of the day I agree that these companies should be worth more in 20 years. So essentially time in the market is very important.

      Delete
  5. Seems like buying stocks that are available at Loyal 3 for free instead of putting into your Motif selections would be a better play?

    ReplyDelete
    Replies
    1. Anonymous,
      Your probably right because I am trying to avoid paying any fees. However it is cool to buy into more than one stock for a $9.95 flat rate. I will have to sit on the sidelines for a bit and decide on what will fit my overall investing strategy going forward.

      Delete
    2. 5 of your 23 picks are available at L3 (over 21% of your selections for Motif). If you are going to invest in Motif, perhaps swap those 5 out for something else?

      Delete
  6. I've thought about using Motif for investing. However, you have to buy all stocks at the same time. I pay a lot of attention to P/E ratio, current yield, dividend growth prospects etc. and all stocks on my wish list never end up in the "BUY" category at the same time.

    Because of my new home purchase I'm injecting a low amount of capital so I opened a Loyal3 account for the same reason that Anonymous above mentions. No fee.

    Thanks,
    Wallet Engineer

    ReplyDelete
    Replies
    1. WE,
      You make a solid point which iis why I also prefer Loyal3. Its getting harder to find good value in the 60 companies they offer. I still like KRFT and UL if I were to purchase anythingon L3 at this point.

      Delete
  7. I personally like the idea of Motif but there are the concerns about getting the best valuations. The thing I really like is that it's a more hands off approach. If youre going to use it as a way to consistently dca into some of the best companies in the world then its very useful. What I like is that you can add a little bit of each company every month. In the long run identifying the excellent companies and investing in them will win out in the long run since winners tend to keep winning. Obviously you wont get the best valuation on every single company but you also dont have to track 30 companies to determine which one is the best value at the time. The decision process is made once so there's less opportunities for you to mess up or second guess yourself. I think its great for those that dont really enjoy or have the time to track and stay up to date on the companies in your motif. Really depends on how active you want to be with your portfolio.

    ReplyDelete
    Replies
    1. PIP,
      That is an interesting observation that you made. I felt like investing a little bit into each company every other month could be an option. I wouldnt have to invest into all of them but whatever companies I felt like adding to at that time. Paying the $9.95 flat rate isnt bad when they allow you to invest like that. I mean I feel like paying $7 to invest in just one company is costly when you consider over 30 companies. Then if you sell thats another $7 each trade. I will have to weight out the pros and cons at this point. Thanks for your observation.

      Delete
  8. Brian,

    Motif is an interesting concept. If you were looking to dollar cost average into quality dividend growth companies, and wanted the ability to quickly build up a portfolio of multiple stocks without resorting to index funds, I think Motif is a good option.

    My question about Motif is how much flexibility you have in choosing the amount of stocks you are buying at once. I could probably choose 5-10 names that are around fair value to dollar cost average into, just don't know if I'd want to pick 20 plus each time I wanted to invest.

    Look forward to hearing about the process if you decide to invest.

    Best regards,
    SFZ

    ReplyDelete
    Replies
    1. SFZ,
      I have been putting a lot of thought to what my next plan of action will be. I have sat on the sidelines for a couple of weeks and narrowed down the list to 10 stocks in multiple sectors. Motif is perfect for me because I don't like to invest in just one stock every month. I would much rather put money into multiple fairly priced stocks in a single month for one low commission. I don't have any plans on investing with index funds because I feel I can continue to get better returns by investing into the companies I believe in. This post made me take a step back and look for a better strategy and I am glad I was able to come up with a better list. I should have a post coming up this week and I look forward to seeing how you did in November.

      Delete



  9. Are you a business man or woman? Are you in a financial mess or do You need funds to start your own business? Need to pay loans Their Debt or pay off your bills or start a nice business? Do you have a low credit score and you will find it hard to get Capital loan from local banks / other financial institutions? You need one Loan or funding for any reason such as: Email: carlosinvestment@hotmail.com

    a) Personal Loan, Business Expansion,
    b) Business Start-up, Education,
    c) Debt Consolidation,
    d) Hard Money Loans

    We offer loan at low interest rate of 2% and with collateral and not Collateral, we offer personal loans, debt consolidation loans, venture capital Capital, business loan, education loan, mortgage or Loans for any reason".

    However, our method offers the possibility to specify the amount of the loan needed and also the duration you can afford it, gives you a real Chance get the funds you need!

    Contact us via E-mail: carlosinvestment@hotmail.com
    Bacon Tasha Elizabeth®

    ReplyDelete