The short version is that is exactly what being a RIA is.
I have no relationship with anyone in this particular chain of companies, although I did work at "big financial corp" a long time ago. It might help to define and provide analogies based on that experience.
So valuedinvesting is a registered investment advisor. The focus of those people is providing advice. They can't buy or sell anything but they can recommend and "help" you do it. Where "help" is in quotes because exactly how much of the work they're legally allowed to do is fuzzy to me and probably fuzzy to them too.
(Edited to add a RIA analogy is they're like an analyst role in tech... or maybe a product manager role. They don't actually write code but they talk to both sides of the fence a lot to theoretically smooth the process along to everyone's best interests, well, theoretically)
The guy who actually buys sells stocks is apparently Motif a broker-dealer. How much advice a broker-dealer can provide without also having to register as a RIA is a pretty fuzzy topic. There are plenty of brokers with in-house team of RIA willing to talk to you. Their primary business is being a broker not being an advisor. It is highly unlikely they'll give you advice that does not help the broker side of the house improve its revenue numbers. I'm not claiming the in-house RIA of any brokers currently under discussion are biased, but historically it has happened in other situations. So I wouldn't personally do business with a RIA linked to a broker. (edited to add, in an otherwise factual post, the preceding was strictly my personal opinion and you will hear good opposite arguments) Its like asking your barber how often you should get a haircut, what do you think he's going to say...
(for what its worth I worked for some time at an outsourcing technology provider for broker-dealers and to a lesser extent we provided some services to RIAs)
Motif is in the SIPC which I won't bother linking to but they basically are insurance like FDIC for retail end users. So if everyone goes bankrupt, SIPC will provide you with what you owned before the bankruptcy. Like a general contractor's bonding insurance.
Motif uses (probably?) Apex as a clearing house. A clearing house is like insurance between brokers analogous to how SIPC is insurance between retail investors and the broker.
If you'd like an analogy, its kind of like I paid my roofer to buy materials and install a roof as per his advice. I could have theoretically contacted the shingle manufacturer or his rep directly, at least in theory, and he may even be a licensed contractor. However I'm doing business with "my favorite roofing contractor" specifically.
I like the idea, but I have to wonder if the 0.6% fee would be enough to make their form of socially responsible investing underperform the benchmarks.
that's a great question. The management fee is slightly higher than online advisors that use broad-index ETFs (Wealthfront, Betterment charge ~.25% to .35%). However to get to an apples-to-apples comparison, you have to include the ETFs expense ratio (which can range from .15% to .45%). When you look at other socially responsible investing options (mostly mutual funds), the 0.6% fee is rather low.
Ahh, I see. So you're investing in stocks therefore there's no added expenses beyond the 0.6%. I definitely agree that 0.6% is lower than a typical managed mutual fund management fee.
The whole site should be https and never load assets that are not -- from the start. Especially since it's an investing site with access to sensitive information.
Started filling everything out, and abandoned IMMEDIATELY when I got to the SSN field.
This form should redirect to SSL AUTOMATICALLY and every time. Seeing it not do so puts some serious concerns out there about your data treatment, how you handle/store PII, and other PCI compliance matters.
I like the idea, but the site design looks kinda fishy, so I probably wouldn't use it. Plus, I have some brand-name trust in places like Motif and Vanguard, which I don't have with Valued Investing. But I like the idea and where you're going with it.
Hire a designer, get an SSL certificate, and let me invest, say, $500, and I'll sign up. ;)
There is a basic problem with socially conscious investing. Let us take the Kantian/golden rule perspective and imagine that every "good" person invested with a social conscious and avoided evil companies. The stock prices of "good" companies would go up, and the dividend yield/return on investment would go down. Then bad people could invest in the evil companies and earn a much higher rate of return, because they would be under-bought, under-valued assets. In other words, socially conscious investing is a way for good people to allow bad people to earn more money.
If you want to be socially aware with your money you can either a) own a normal stock index, but donate a share of the profits from bad companies to charity and/or b) boycott the evil companies as a consumer. Boycotting is the only way to actually hurt the evil company and prevent people from profiting from evil.
You seem to assume that the companies are completely unaffected by their investors and share price. Companies issue securities for their own reasons, not as a way to distribute their earnings to a wide group of people.
That seems to assume the market only exists to squirt out quarterly dividends for existing blue chips and never issue any new stock.
The market as a whole is mostly driven by speculation (greater fool theory) and also hopes of capital appreciation and potential buyout. Who in our centrally controlled economy will be declared "to big to fail" and bailed out by .gov next, and how to profit off it.
Also the higher priced stock will obviously raise more money if they issue new shares, and obviously an intense demand for ... car batteries made out of organic tofu plates and acai berry juice instead of conventional car battery sulfuric acid and lead plates ... will obviously IPO and raise funds if the stock prices of other "alternative battery companies" goes up.
One of the competitors is Motif, which has an advertising message of speculating on one month return. Not annual, not the next quarter, speculation on ONE month. So discussing dividend yields is irrelevant to that class of speculator.
Few investors would give up diversification for potentially good profits on stocks that have been dropping like a stone.
Also look at this from the company's perspective: companies, wanting high evaluations so they can sell off their own stock at a profit, might try to actively push themselves up the "moral index"/"popularity index" - that's a win for the common folk.
You can go short the good company and long equivalent bad company (or a basket of securities containing a bad company) and be more or less hedged until the premium for being a "good" company dissipates (and it very likely would.)
You don't really lose diversification in this scenario, since you'd be able to construct a long/short basket that can have you market neutral with respect to systemic inputs to the valuations of both companies.
Assuming stock based comp means anything to executives, then a shift in market sentiment away from their stock (ie price decline) should help modify behaviour.
The bigger problem with trying to be socially responsible with investments in large public companies is that being large and diverse public companies they'll tend to all participate in activity with negative side effects if you look hard enough.
For better or for worse, this seems to follow the PR spin:
The sample portfolios give you Johnson & Johnson if you're against animal testing, even though despite PETA's best efforts they still do more animal testing than most companies. They give you Ford if you're against the bailouts their CEO lobbied for, though despite the publicity blitz associated with Ford not actually needing them they still took $6bn in government loans in 2009. And if you're against weapons and drone warfare they give you GE, which might have stopped loaning money to a few handgun shops in a public CSR gesture but couldn't really be much more critical to military supply chains, including specialised drone components
I really dislike going through a survey about my investing and ending up on a sign up page asking for all kinds of information about me before I get results.
I looked at the site and liked the design though I agree with the rest of the comments here about SSL etc. One basic question I have is why did you choose Motif as against others such as TradeKing or AmeriTrade or E-Trade. Any particular reason for that?
this just looks like another 'I make $xx,xxx everyday, you can to if you use our service'. Also the whole name, valued investing, which seems close to 'Value Investing' is awfully misleading. Value investing is buying a stock that the market, irrationally prices it far below it's actual intrinsic worth (requires accounting knowledge to sift through Q's and K's, and understanding of the business niche). The value that this site talks about seems like something based off socially conscious ethics which at most is subjective.
99.9% would rather see a green than losing money on a portfolio, regardless of whether I've made a right choice (subjective) by investing in the 'morally right' company. If you want to argue morally bad company, let's start with capitalism and inequality it naturally creates and that by investing you are furthering it.
Also, contributing a measly amount of capital that would barely make an impact at a company where you'd have to amass a vast amount of money to be able to control it.
I am Canadian and do not have a social security number, therefore I am not in your target audience. So, I encourage you to be extra skeptical about my critique.
However, when it comes to investing with someone, my biggest concern is trust. I am a long term investor, so I am not terribly concerned with management fees. Rather, I am looking for trust. Not only trust that you won't steal from me, but trust that you will do a relatively good job of managing my investments.
Unfortunately, this website and the signup process both severely eroded my trust. First, other people have mentioned this, but it has not been fixed so I will reiterate. This entire website needs to be https! Since it isn't https (and you still haven't fixed the link to the signup page), I have concerns over how you store and secure the data that you collect.
Second, I notice that you use Google Analytics and you collect some very personal information that you will no doubt use for marketing purposes. For example, in your risk assessment, you ask what I would do if my portfolio lost ~ 30% of its value over three months. Are you using this information to determine how much risk I can stomach, or are you using it to know when to market to me? Despite this level of information and the questions it creates, I cannot find a privacy policy. Your site has a terms of service, but it is a .pdf and, call me paranoid, but I am extra careful with .pdf documents.
Technically, since your site doesn't have a privacy policy, you're violating Google Analytics' terms of service. Your privacy policy may be included in your terms of service, so I could be completely wrong.
Third, call me paranoid, but in light of these issues, I have some concerns investing with a company that is seemingly run by an MBA student, especially one with an interest in starting 'disruptive companies'. My current advisor and I have been friends for 14 years, he has been in the business for 10 years, and he has no plans to retire until around the time that I will (hopefully) retire myself. I am a long term investor, so I am looking for an advisor who is just as interested in a long term relationship. You might be, but nothing on your website makes me feel confident that you will be doing this in ten years.
Finally, when I read your FAQ page, I noticed that if I want to see my portfolio, I have to log into Motif. Since I could use Motif myself, control my own portfolio, and not have to worry that I'll stop managing my own portfolio, it seems like I might be better served by signing up with Motif.
You have an excellent idea and I like how much work you have already done to execute on it. I think that if you added some more polish, you would have a force to be reckoned with. I especially like your FAQ page and, with the exception of the last sentence (Cerberus is a hell-hound), I found your blog worth a read.
> I am a long term investor, so I am not terribly concerned with management fees.
This is what you should be most concerned with as a long-term investor. Investment fees can easily chew away at a significant portion of your gains over the long-term. The difference between a mutual fund with an expense ratio of 1% and a fund that costs 0.05% is $6661 over 20 years on a $10,000 investment (assuming both return 7% annually). In the end, it's the difference between $31,650 and $38,311.
Obviously the difference grows with the size of your investment.
LOL the median never gets returns above the median, which sounds like a tautology and nobody gets the same return every year except for long term .gov bonds and those aren't indexed for (real) inflation anyway.
The point is you can't get blood from a stone and the median of active mgmt will always return somewhat less than the median of passive mgmt (aka the permanent portfolio theory or related funds). After all that active manager needs to adsorb income to eat whereas the passive manager might merely be a line of source code. However, what active management can provide is a smaller std deviation of returns, at least on average.
So in the real world you won't get 7% every year unless you somehow obtained a .gov bond at that yield (good luck) or something like that. But it'll average 7%. And the std deviation of that will more or less decrease with increasing activity of mgmt aka increasing costs. There are guys who just waste money or go in parasite mode and there are cheap guys who do a great job, I'm talking about on average.
So you're right for the wrong reasons, in that when you're young you want the highest return for compounding reasons so you get the most passive guy possible (possibly just a permanent portfolio psuedoindex fund) and don't sweat fluctuations, but half a decade outta retirement you want the most expensive guy out there so maybe you only get around 6% but its almost certain it'll be between 5.5 and 6.5 not all over the map. There's more to think about like diversification and selecting less risky (aka lower yield) as you get older etc, but this is a good gross summary.
Rather than moving towards active management as you become more conservative, why not just rebalance towards safer investments like bonds, reducing your equity holdings without increasing costs?
Rebalancing your portfolio is active management of the portfolio. Aside from that...
With bonds at this time you can either get a return on capital below the real inflation rate (aka you're better off with metals which track inflation better than bonds or just spending it now to get more than you'll be able to get later) or you get to worry about return of capital with super risky investments. From a harm minimization standpoint you'll fall behind slower with bonds than just putting it in a savings account, so from that point of view its a valid strategy.
Right now we're near a peak, nobodys buying equities but the retail guys who you can always count on to buy high and sell low, so I'm not talking about today but over a longer term. It probably wouldn't be wise to buy in near a market peak.
An interesting observational definition of the start of a recession is there's no really good place to park your money. That's now.
Frustrated that I wasted 10 minutes of my time filling out the form and never got my stock mix recommendations. I provided my data and you (the website) never upheld its promise of giving me a stock mix based on my preferences.
I feel like a cooler impact statement would to start an investment fund where by the fund based on its size targets owning large swaths of shares in companies it deems as evil. Then leverages its position in those companies to shift the direction away from said evil things.
Companies that are public and already not evil are going to be fine. But making evil companies be not evil would be a cool premise.
A serious flaw of this site is the pre-selection of what's "good" and what isn't. People's beliefs aren't that uniform. It's very possible that a value that's positive to the author would be negative to a user or visa-versa.
Every filter should have both "exclude" and "prefer".
36 comments
[ 2.9 ms ] story [ 81.2 ms ] threadso is this site just piggybacking and creating custom portfolio's through motif?
I have no relationship with anyone in this particular chain of companies, although I did work at "big financial corp" a long time ago. It might help to define and provide analogies based on that experience.
So valuedinvesting is a registered investment advisor. The focus of those people is providing advice. They can't buy or sell anything but they can recommend and "help" you do it. Where "help" is in quotes because exactly how much of the work they're legally allowed to do is fuzzy to me and probably fuzzy to them too.
(Edited to add a RIA analogy is they're like an analyst role in tech... or maybe a product manager role. They don't actually write code but they talk to both sides of the fence a lot to theoretically smooth the process along to everyone's best interests, well, theoretically)
http://en.wikipedia.org/wiki/Registered_Investment_Advisor
The guy who actually buys sells stocks is apparently Motif a broker-dealer. How much advice a broker-dealer can provide without also having to register as a RIA is a pretty fuzzy topic. There are plenty of brokers with in-house team of RIA willing to talk to you. Their primary business is being a broker not being an advisor. It is highly unlikely they'll give you advice that does not help the broker side of the house improve its revenue numbers. I'm not claiming the in-house RIA of any brokers currently under discussion are biased, but historically it has happened in other situations. So I wouldn't personally do business with a RIA linked to a broker. (edited to add, in an otherwise factual post, the preceding was strictly my personal opinion and you will hear good opposite arguments) Its like asking your barber how often you should get a haircut, what do you think he's going to say...
(for what its worth I worked for some time at an outsourcing technology provider for broker-dealers and to a lesser extent we provided some services to RIAs)
http://en.wikipedia.org/wiki/Broker-dealer
Motif is in the SIPC which I won't bother linking to but they basically are insurance like FDIC for retail end users. So if everyone goes bankrupt, SIPC will provide you with what you owned before the bankruptcy. Like a general contractor's bonding insurance.
Motif uses (probably?) Apex as a clearing house. A clearing house is like insurance between brokers analogous to how SIPC is insurance between retail investors and the broker.
http://en.wikipedia.org/wiki/Clearing_house_%28finance%29
If you'd like an analogy, its kind of like I paid my roofer to buy materials and install a roof as per his advice. I could have theoretically contacted the shingle manufacturer or his rep directly, at least in theory, and he may even be a licensed contractor. However I'm doing business with "my favorite roofing contractor" specifically.
I wrote a post about historic performance of socially responsible investment (SRI) funds. Academic studies show that SRI funds meet or beat the benchmark in 89% of studies. http://blog.valuedinvesting.com/performance-and-responsible-...
Thanks for the clarification!
Started filling everything out, and abandoned IMMEDIATELY when I got to the SSN field.
This form should redirect to SSL AUTOMATICALLY and every time. Seeing it not do so puts some serious concerns out there about your data treatment, how you handle/store PII, and other PCI compliance matters.
Hire a designer, get an SSL certificate, and let me invest, say, $500, and I'll sign up. ;)
If you want to be socially aware with your money you can either a) own a normal stock index, but donate a share of the profits from bad companies to charity and/or b) boycott the evil companies as a consumer. Boycotting is the only way to actually hurt the evil company and prevent people from profiting from evil.
The market as a whole is mostly driven by speculation (greater fool theory) and also hopes of capital appreciation and potential buyout. Who in our centrally controlled economy will be declared "to big to fail" and bailed out by .gov next, and how to profit off it.
Also the higher priced stock will obviously raise more money if they issue new shares, and obviously an intense demand for ... car batteries made out of organic tofu plates and acai berry juice instead of conventional car battery sulfuric acid and lead plates ... will obviously IPO and raise funds if the stock prices of other "alternative battery companies" goes up.
One of the competitors is Motif, which has an advertising message of speculating on one month return. Not annual, not the next quarter, speculation on ONE month. So discussing dividend yields is irrelevant to that class of speculator.
Also look at this from the company's perspective: companies, wanting high evaluations so they can sell off their own stock at a profit, might try to actively push themselves up the "moral index"/"popularity index" - that's a win for the common folk.
You can go short the good company and long equivalent bad company (or a basket of securities containing a bad company) and be more or less hedged until the premium for being a "good" company dissipates (and it very likely would.)
You don't really lose diversification in this scenario, since you'd be able to construct a long/short basket that can have you market neutral with respect to systemic inputs to the valuations of both companies.
For better or for worse, this seems to follow the PR spin: The sample portfolios give you Johnson & Johnson if you're against animal testing, even though despite PETA's best efforts they still do more animal testing than most companies. They give you Ford if you're against the bailouts their CEO lobbied for, though despite the publicity blitz associated with Ford not actually needing them they still took $6bn in government loans in 2009. And if you're against weapons and drone warfare they give you GE, which might have stopped loaning money to a few handgun shops in a public CSR gesture but couldn't really be much more critical to military supply chains, including specialised drone components
Under Long-Term Growth:
'As an investor it take discipline to hold stocks during a downturn, but we will be there to give you confidence.'
Not giving my money to anyone who misses typos.
99.9% would rather see a green than losing money on a portfolio, regardless of whether I've made a right choice (subjective) by investing in the 'morally right' company. If you want to argue morally bad company, let's start with capitalism and inequality it naturally creates and that by investing you are furthering it.
Also, contributing a measly amount of capital that would barely make an impact at a company where you'd have to amass a vast amount of money to be able to control it.
However, when it comes to investing with someone, my biggest concern is trust. I am a long term investor, so I am not terribly concerned with management fees. Rather, I am looking for trust. Not only trust that you won't steal from me, but trust that you will do a relatively good job of managing my investments.
Unfortunately, this website and the signup process both severely eroded my trust. First, other people have mentioned this, but it has not been fixed so I will reiterate. This entire website needs to be https! Since it isn't https (and you still haven't fixed the link to the signup page), I have concerns over how you store and secure the data that you collect.
Second, I notice that you use Google Analytics and you collect some very personal information that you will no doubt use for marketing purposes. For example, in your risk assessment, you ask what I would do if my portfolio lost ~ 30% of its value over three months. Are you using this information to determine how much risk I can stomach, or are you using it to know when to market to me? Despite this level of information and the questions it creates, I cannot find a privacy policy. Your site has a terms of service, but it is a .pdf and, call me paranoid, but I am extra careful with .pdf documents.
Technically, since your site doesn't have a privacy policy, you're violating Google Analytics' terms of service. Your privacy policy may be included in your terms of service, so I could be completely wrong.
Third, call me paranoid, but in light of these issues, I have some concerns investing with a company that is seemingly run by an MBA student, especially one with an interest in starting 'disruptive companies'. My current advisor and I have been friends for 14 years, he has been in the business for 10 years, and he has no plans to retire until around the time that I will (hopefully) retire myself. I am a long term investor, so I am looking for an advisor who is just as interested in a long term relationship. You might be, but nothing on your website makes me feel confident that you will be doing this in ten years.
Finally, when I read your FAQ page, I noticed that if I want to see my portfolio, I have to log into Motif. Since I could use Motif myself, control my own portfolio, and not have to worry that I'll stop managing my own portfolio, it seems like I might be better served by signing up with Motif.
You have an excellent idea and I like how much work you have already done to execute on it. I think that if you added some more polish, you would have a force to be reckoned with. I especially like your FAQ page and, with the exception of the last sentence (Cerberus is a hell-hound), I found your blog worth a read.
This is what you should be most concerned with as a long-term investor. Investment fees can easily chew away at a significant portion of your gains over the long-term. The difference between a mutual fund with an expense ratio of 1% and a fund that costs 0.05% is $6661 over 20 years on a $10,000 investment (assuming both return 7% annually). In the end, it's the difference between $31,650 and $38,311.
Obviously the difference grows with the size of your investment.
LOL the median never gets returns above the median, which sounds like a tautology and nobody gets the same return every year except for long term .gov bonds and those aren't indexed for (real) inflation anyway.
The point is you can't get blood from a stone and the median of active mgmt will always return somewhat less than the median of passive mgmt (aka the permanent portfolio theory or related funds). After all that active manager needs to adsorb income to eat whereas the passive manager might merely be a line of source code. However, what active management can provide is a smaller std deviation of returns, at least on average.
So in the real world you won't get 7% every year unless you somehow obtained a .gov bond at that yield (good luck) or something like that. But it'll average 7%. And the std deviation of that will more or less decrease with increasing activity of mgmt aka increasing costs. There are guys who just waste money or go in parasite mode and there are cheap guys who do a great job, I'm talking about on average.
So you're right for the wrong reasons, in that when you're young you want the highest return for compounding reasons so you get the most passive guy possible (possibly just a permanent portfolio psuedoindex fund) and don't sweat fluctuations, but half a decade outta retirement you want the most expensive guy out there so maybe you only get around 6% but its almost certain it'll be between 5.5 and 6.5 not all over the map. There's more to think about like diversification and selecting less risky (aka lower yield) as you get older etc, but this is a good gross summary.
With bonds at this time you can either get a return on capital below the real inflation rate (aka you're better off with metals which track inflation better than bonds or just spending it now to get more than you'll be able to get later) or you get to worry about return of capital with super risky investments. From a harm minimization standpoint you'll fall behind slower with bonds than just putting it in a savings account, so from that point of view its a valid strategy.
Right now we're near a peak, nobodys buying equities but the retail guys who you can always count on to buy high and sell low, so I'm not talking about today but over a longer term. It probably wouldn't be wise to buy in near a market peak.
An interesting observational definition of the start of a recession is there's no really good place to park your money. That's now.
http://www.economist.com/news/leaders/21596518-america-shoul...
I feel like a cooler impact statement would to start an investment fund where by the fund based on its size targets owning large swaths of shares in companies it deems as evil. Then leverages its position in those companies to shift the direction away from said evil things.
Companies that are public and already not evil are going to be fine. But making evil companies be not evil would be a cool premise.
Every filter should have both "exclude" and "prefer".