In this case, you would have been well rewarded for your intuition. The adjustments produce, on a back-dated basis, a return of 37.1% for the last year vs. a return of 10.3% for the motif as originally constituted.
Up to this point in the article, I've been pretty upbeat on the entire concept. But of course, there's no such thing as a silver bullet, anywhere.
First, if ever the term "past returns do not guarantee future results" was relevant, it's here. Specifically, I think you can back-test your way into spectacular returns. However such returns are dangerous because they often rely on the performance of too few stocks, one-time industry events or perhaps even an accounting rule change that are largely unknown and unlikely to be repeated.
Second, as Dr. Ian Malcolm (Jeff Goldblum) said to John Hammond (Richard Attenborough) regarding the latter's advances in biotech that made "Jurassic Park" a reality, "Your scientists were so preoccupied with whether they could that they didn't stop to think if they should."
I feel that motifs put a lot of power in the hands of individual investors. Maybe too much. Although Motif Investing does not yet acknowledge the role of advisers, I feel it's an important part of the equation in all long-term wealth planning -- motifs included, if not motifs especially.
Third and finally, there's an entire social media aspect of Motif Investments I did not go into. I would posit this is value-adding, but makes the product much more appealing to 20- and 30-year-olds. My question is whether Baby Boomers, who stand to gain the most from the emergence of this exciting new investment product, will migrate to it.
Motif Investments launched in early June, and I suspect it has little investor capital under management or administration. Only time will tell how popular it becomes, but regardless, you owe it to yourself to take a closer look at this new investment technique.
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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.