Net-Worth Update

 

Asset/Liability Value
LendingClub (Roth) 5,522.90
Taxable Brokerage 6,592.56
Roth IRA 4,077.60
T-IRA 1,829.56
I-bonds 5000
Cash 3,560.81
Motif Investing 2501
NetWorth: 29,084.43

Motif?

A motif is a theme, a subject, some form of commonality.  Some people over at motifinvesting.com figured out how to efficiently let people invest in themes and subjects.  They branded this as a Motif.

A basket of stocks

Motifinvesting.com lets you pick a bunch of stocks and put them together in a basket they call a motif.  The value that they provide to you is the low commission involved in trading that motif – a mere $9.95.  For just $9.95, you can trade a basket of up to 30 stocks.  At most discount brokerages, conducting the same transaction would cost upwards of $150.

Fractional Shares

The second thing that Motifinvesting lets you do is purchase fractional shares.  For example, if a share cost $15, but you only have $10 to invest, you could buy two thirds of a share.  Motifinvesting lets you do this with every single stock that you put in your motif.  Effectively, you get the opportunity to deploy near 100% of your capital.

The downside

Unfortunately, motifinvesting isn’t all that great.  You can’t reinvest dividends (for free).  This means that you don’t want to hold stocks that pay dividends (long term at least).  Its a great place for stocks like Facebook and Google which don’t pay any dividends and reinvest all of their earnings back into the company.  However, its also good for income stocks if you don’t plan on reinvesting the dividends.  You can just have motifinvesting automatically transfer the dividends you earn each month to your checking account.

The Promotion

The main reason I decided to invest in motifinvesting is because of a promotion they are running, which involves a $90 effective bonus for investing $2K with them.  In a nutshell, here are the terms:

  1. You must create and fund an account with $2000.  You have 10 days to do so after opening the account.
  2. You must conduct 5 motif trades, (effectively losing $50 in commissions)
  3. After 45 days, motifinvesting will credit your account with $150

Now, you must be thinking, hey, this isn’t a $90 bonus, its a $100 bonus! After all, $150 – $50 is $100.  Unfortunately, you need to take into account that you will one day sell your motif, and doing so will cost you an additional $10.  As a result, the promotion is ultimately worth $90.

Finding out what to invest in

Opening and funding the account is pretty easy, the hard part is figuring out what to invest in.  Initially, I had an idea to purchase a bunch of preferred stocks and create my own pseudo ETF, but motifinvesting doesn’t allow you to purchase preferred shares.  There seem to be quite a few limitations as to what actual stocks they offer.  However, they seem to offer just about everything that trades on the NYSE.

What I’ll Invest In

I’m currently planning on investing in leveraged California bond funds.  Typically, this would be a bad idea since we are in a rising interest rate environment (when interest rates rise, bonds go down).  However, I don’t actually think interest rates are going to rise very fast, and I think that people are going to be overtly scared of an interest rate hike.  I plan on taking advantage of this excess fear to purchase the leveraged bond funds while they are discounted.  This’ll probably happen the next time the Fed threatens to raise interest rates.

Why Leveraged Municipal Bond Funds?

To be honest, I’m kinda tired of saving a bunch of money to invest – I want to start spending money.  However, I want to start doing this gradually, so I’m going to only spend whatever dividends I get from my investments.  Since municipal bond funds pay dividends each money, I’ll have a nice bit of change to spend on whatever I want each month.  By combining this with my preferred stock ETF, I’ll be earning about ~$46 each month.  That’s more than enough money to screw around with.

However, leveraged bond funds are pretty risky (anything with the word leverage implies risk).  However, with this risk comes a ~5% tax free yield, which is pretty mouthwatering if you think about.

Akash’s Motif

My motif will contain the following stocks:

  • NAC
  • PZC

These two stocks could suffer some massive losses if Fed isn’t actually bluffing about raising interest rates rapidly.  Regardless, I expect my income each month to remain approximately the same.

Next time, on Dragon Ball Z…

I’m planning to have my net-worth go up quite a bit next update.  I’ll be receiving my tax-return of about $3,000 in addition to a few dividends and my regular paycheck.  All in all, I’ll be sitting on about $10K worth of pure cash.  I’m not exactly sure what I want to do with my excess liquidity, but I do have a few ideas I’d like to share next update.

Week 20 Update                                                                 Week 24 Update