How do I invest in big market trends?

+ is the future of investing 'greener'?

Issue #15. 

Happy Friday to all of you, and welcome to our issue #15! Hope you’ve had a financially prosperous week. In this week’s edition of the Gist, we’ll discuss big market trends & how to invest in those, the push towards ‘green’ investing, and how innovations such as fractional shares and zero trading commissions are helping brand new investors.

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You can also ask us any finance or investment question privately by visiting AskFinny.com.  We will share the most insightful questions and answers with our Gist audience.

So here are the questions for today’s edition: 

  1. What are the big trends shaping our future, and how do I make sure my investments are capturing those?

  2. I’ve heard that pension funds are getting sued for not being ‘green’ enough. Are investors going to focus more on environmental issues in the future?

  3. Should I invest if I have only a thousand dollars saved? Or perhaps I should save more before I start investing?

Let’s give you the summary first.

Summary

  1. There has been a lot buzz in the retail world around cannabis (MJ) and blockchain (BLOK) in the past couple of years, but besides those there are some pretty big trends shaping our future: robotics & artificial intelligence, cyber-security, genomics immunology, emerging markets infrastructure, clean energy, self-driving tech, and emerging global economies. Take a look at the slide below from BlackRock that describes the megatrends and offers some ideas on how to invest in those.

  2. You might have heard that some investors are getting sued for not being green enough, and this will likely continue to be a pressure point in the investing world. As a matter of fact, we’re likely to see an increase in activist pressure around environmental, sustainability, governance, gender, racial and equality issues, so institutional investing in public securities is likely to become ‘greener’ (we use this term very loosely). But that also means that some institutions that have been under heavy public scrutiny will chose to go private (e.g., WMT).

  3. Assuming you have built an emergency fund and you don’t have high-interest debt (e.g., debt above 5% interest rate), you should absolutely consider investing. The barriers to invest are now lower than ever—most brokers offer zero trading commissions and Charles Schwab offers fractional shares, which is super convenient for investing smaller amounts of money. How should you invest? Check out our simple investing guide.

Deep Dive

  1. Here are some popular ETFs addressing big market trends that you may want to take a look at. We’re listing only BlackRock’s megatrend ETFs with net assets above $200M, but other issuers may have equally attractive offerings. Keep in mind, many of these securities are costly, so check out their expense ratios and do your due diligence before investing in those:

    • iShares Exponential Technologies ETF (XT); tracking the Morningstar Exponential Technologies Index;

    • iShares Global Infrastructure ETF (IGF); tracking the S&P Global Infrastructure Index;

    • iShares Global Clean Energy Index Fund (ICLN); tracking the S&P Global Clean Energy Index;

    • iShares MSCI China A Shares (CNYA); tracking the MSCI China A International Index (Chinese equities that trade on the Shanghai or Shenzhen Stock Exchange). 

  2. Mark McVeigh, a 24-year-old environmental scientist from Australia, sued his pension fund for being in breach of their fiduciary duties by failing to mitigate the financial ravages of a warmer planet.

    Australia’s pension industry, the world’s fourth-largest retirement savings pool, is watching the case closely, particularly because many funds must also meet legislated minimum return targets—3.5% above inflation. While investing in renewable-energy projects and pressuring miners to be better corporate citizens is all well and good, this requirement makes it more complicated than simply dumping fossil-fuel emitters from a portfolio.

    The rest of the world is watching the case too—particularly given that investors may not be sufficiently factoring in the impact of climate-change risk on future economic growth.

  3. Let’s say you have only $1,000 to invest. In the past, you would have to worry about trading fees if you wanted to acquire a balanced portfolio, and you’d have to think about how to evenly split a small amount of money across different investment funds.

    Now with zero commissions and fractional shares, this is all history!

    Suppose you choose an aggressive investment allocation for your lazy Schwab portfolio: you can place $540 in US stocks (SCHB), $360 in international stocks (SCHF), and $100 in bonds (SCHZ). All of your money is put to work by leveraging low-cost, diversified index funds.

That’s it for this edition.  What would you like to hear about in the next Gist?  Ask us a question here.

The AskFinny Team