A Review of Swell Investing for Millennials

July 19. 2017. 5 mins read
Table of contents

Maybe stop bashing millennials with your obnoxious job ad if you want people to apply” said an article a few days ago on Mashable about a job ad posted in London. It seems that everywhere you turn, someone is either singing the praises of millennials or talking down to them. Nobody wants to say that this whole generation labeling thing is a crock, and the horrible truth is that the world doesn’t give two ishts about you no matter when you were born. Still, we can’t help but make observations about the changing mindsets of young people. What we can tell from up here in our ivory tower, is that millennials actually seem to show a genuine concern for the environment. Now if they could just work harder and stop spending all that money on avocado toast, they might be able to start saving up to invest in their future – not only their future, but the future of the planet as well.

A while back we talked about something called impact investing. This is the notion of investing only in companies that do good. How can we tell which companies are doing good? Well, there’s a company out there called MSCI (NYSE:MSCI) that actually rates companies according to a huge list of criteria which we discussed before. We also looked at an impact investing offering from Motif Investing, a brokerage firm which we’re huge fans of. Now, another fintech has popped up to offer an impact investment product – a company called “Swell Investing”.

A Review of Swell Investing

Founded in 2015, Newport Beach company Swell Investing isn’t exactly a startup but rather a subsidiary of Pacific Life Insurance Company. You couldn’t be blamed for never hearing of Pacific Life, but this venerable institution has been around since 1868 and was founded by the same robber baron and U.S. senator who founded Stanford University. It’s hard to see that sort of pedigree being a big hit with the millennial set, so Swell Investing came about in order to change that. The idea is that they provide “impact investing” portfolios that you can invest in for as little as $500. We decided to take it for a spin and were first presented with a series of questions like the ones seen below:

That first question is always a bit tough but we chose “sustaining fresh water supply” because from what we understand, it’s impossible to make beer without water. At least if we’re sitting there with a major disease watching the planet collapse around us, we can drown our sorrows with a few ice-cold craft beers. So after answering the above questions and a few others, we’re given an affirmative message that says we’re good enough to play in this game:

That is just swell. So now we need to create our “mix” which is the allocation of our investment that goes towards each theme. We were happy to see that we can actually invest across all themes, so we allocated 10% to each theme except water which we gave a 50% weighting. This is what our portfolio looks like:

Now it’s time to actually put some money into this thing, so we raided the office slush fund can and came up with the $500 minimum investment needed to get started. The nicest part was that we could quickly authenticate our bank account and connect it in about the same time it takes to slam a Pliny the Elder. Here are all the bank accounts they support:

You can then follow up with a recurring investment on a monthly or weekly basis with as little as $20. Our verdict is that this thing is so easy to use that even one of our MBAs could invest using this platform. That’s to be expected though, so what we’re interested in now is taking a peak under the bonnet to see WTF we just invested our office slush fund in.

As we saw previously, Swell offers 6 different impact investing themes to invest in, each of which charge .75% which is kind of steep frankly. That’s understandable though, given that the MSCI that tells them which companies are being good doesn’t come cheap. Given that Swell reinvests dividends like a DRIP, that’s also an added perk that needs to be considered since those re-investments incur transaction costs. Here’s a quick synopsis of all the impact investing portfolios on offer from Swell (click the name of each portfolio to see the fact sheet):

  • Renewable Energy68 Holdings – Top stock is Eaton Corporation (NYSE:ETN) which was featured in our recent article on IoT sensors. Other stocks in the top-5 include Tesla (NASDAQ:TSLA) and a utility we’ve owned for a while, Next Era Energy (NYSE:NEE). Other plays in the top-10 are related to solar and wind not surprisingly. 1.65% yield.
  • Green Tech – 54 Holdings – Top holding is a lighting company called Acuity Brands (NYSE:AYI) and others on the the top-10 list are ABB (NYSE:ABB) which is a robot stock we talked about before, a few big controls companies like Rockwell Automation (NYSE:ROK), and strangely enough Autodesk (NASDAQ:ADSK). – 1.05% yield.
  • Disease Eradication61 holdings – This is pretty much a collection of all the usual suspects when it comes to pharma, companies like Gilead Sciences (), Amgen (), and Biogen () which are the top-3 in that respective order. .95% yield.
  • Clean Water46 holdings – Some interesting plays in this lot like Albermale (NYSE:ALB) which is one of the top-3 lithium producers, along with various water infrastructure plays, and 3 stocks that we hold but would never have considered a play on water; Parker-Hannifin (NYSE:PH), Ecolab (NYSE:ECL), and Air Products and Chemicals (NYSE:APD). 1.15% yield
  • Zero Waste39 holdings – Really a mixed lot here with more than half the stocks being in the “industrials” industry. Pollution control companies and recycling companies largely make up the top-10 stocks for this portfolio. 1.36% yield
  • Healthy Living54 holdings – Various sports apparel and accessory companies are in the top-10 like Lululululuemon (NASDAQ:LULU), Garmin (NASDAQ:GRMN), Dicks’ Sporting Goods (NYSE:DKS), Foot Locker (NYSE:FL), and a stock we have owned for a while which is VF Corporation (NYSE:VFC). 1.07% yield

The reason we included the yield above is because they’re reinvesting it automatically which is a key component of long-term performance. All the portfolios have a “risk level” of 4 (whatever that useless metric means) and no stock holding accounted for more than a 5% weighting in any portfolio which is good for diversification. There’s nothing wrong with any of these impact investing portfolios, and we can confirm that Swell Investing is doing exactly what they say which is picking companies that MSCI’s research team says are “good”. Fees are a bit high, but you’re a millennial, so saving the world is the most important thing here. You just need to find some gainful employment that doesn’t involve blogging about travel or fashion and then start saving up your money.


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