ETFs and impact investing? 🥸
Kim and Kanye weren't meant for each other. What about ETFs and impact investing?
A Dysfunctional Marriage? 💍
Before we spill the tea ☕️ an ETF, what is it? An Exchanged Traded Fund is a basket of shares or assets you can invest in. Simple right? Good! There is more ETF knowledge to gobble up, so we recommend you read THIS if you want to tell granny 👵 about ETFs at the next family reunion.
ETFs are growing a LOT 📈
Young investors play a big part in the recent growth. BetaShares, an Aussie 🇦🇺 provider of ETFs, proclaimed that 65% of new ETF investors were Millennials & Gen Zers in a 2021 article.
Why are young people suckers for ETFs?
They scream ooh la la 💦 Most of us don't have 100k to invest, we start small and build our portfolios over time ⌚️ But with little money traditional investing can present big problems.
It's hard to diversify a portfolio
🤯 brokerage fees
Individual stock risk
Lack of access to overseas markets 🌏
Some ETFs may claim to solve these problems, a very sexy draw for new investors 😏 But we are getting off topic! This newsletter is about ETFs and impact investing.
The 💡 moment for ETF providers
Young investors love ETFs. Young investors also want to make an impact. Some ETF providers saw this as a golden opportunity 💰 leading to the conception of sustainable ETFs 🐣
Similar to the number of Kim K's relationships 😬 there were over 534 ETFs and mutual funds related to sustainable investment principles at the end of 2021, according to fund-tracker Morningstar.
But are these ETFs any good? 🤔
Gulp. It's complicated 🤪 ETFs that adhere to sustainable investing undergo a screening process when selecting their basket of shares, and not all follow the same screening process.
Why? There are 3 different approaches to sustainable investing.
Firstly, we have ESG investing. BUZZ WORD 🐝
Environmental
Social
Governance
Refers to a framework used to evaluate a company's risks and identify an opportunity outside the financial accounting framework. The goal here is moneyyy 🤑 and these ESG focused ETFs see it as a way to ⬆ returns for investors. Leading to some questionable ETFs under impact investing screens.
iShares ESG Aware MSCI USA ETF has Tesla in their portfolio. You'll know why this is not great if you read our last newsletter. BUT under their 'sustainable screens' Tesla holds up 🚗
Next up, SRI - Socially Responsible Investing. Keeping it short, this approach uses screening and exclusion to avoid negative social or environmental exposures. So tobacco, firearms, gambling, and alcohol, among other companies, are usually no good 🙅♂️
FINALLY 🙄 We have the cream of the crop, Impact investing ✨ where the focus is on financial returns AND measurable social and/or environmental impact. Us folks here at Inaam ∞ settle for nothing less than impact investing when curating custom portfolios for our users 🤟
It can be confusing! ESG, SRI and Impact investing are widely used interchangeably in the ETF world 🌏 but they differ.
Even with the knowledge, is it easy to distinguish what approach an ETF is using? **** no 😵 Unfortunately, it involves researching what screening an ETF uses and what they stand for.
Should ETFs and impact investing get a divorce? 💔
It appears there was never much of a relationship to start with. ESG and SRI approaches make up the bulk of sustainable ETFs. There is no doubt that impact ETFs exist, but in the jargon filled land of sustainable ETFs, it can be a challenge to work out what you are really investing in.
Of course, you could totally not stress about this because when you #inaamyourmoney, we are aiming to create customisable portfolios from listed impact stocks, curated just for you by asking you what you hate and love about the world and the things you want to change.
Invest with a positive impact at Inaam 🚀
We are building an app with embedded investment literacy and a true learn by doing approach. An app the shows you how to invest your money, tells you exactly where your money is being invested and exactly what impact it is going to have.
You can now sign up to our App Waitlist HERE 🤓
Sorry you haven’t heard from us in a while, we’ve been busy and drumroll - we have some good news: we’re officially a CAR (Corporate Authorized Representative of Cache Invest) this is the first formal and regulatory step for us to be able to officially provide Inaam to you! (Please read disclaimer below)
What this means is we need to make sure all our content follows best practice and doesn’t mislead you, our customers in any way!
Unfortunately this takes some time and involves a couple layers of approvals.
We wanted to get it right and not rush it so we decided to take the time we needed to give you content we are proud of and content in line with best practice guidelines!
So here we are one step closer to making Inaam a reality, we hope you enjoyed this week's edition of Opening Bell! See you soon! 👋
Onwards and Upwards! Arj + Al 🚀
The information in this newsletter is prepared by Inaam (ACN 653 593 018] AR [001297689]), who is an authorised representative of Cache Investment Management Pty Ltd (ACN 624 306 430 AFSL 514 360) (Cache). All information is general information only and does not take into account your personal circumstances, financial situation or needs. Before making a financial decision, you should read the relevant Product Disclosure Statement and Target Market Determination and consider whether the product is right for you and whether you should obtain advice from a professional financial adviser.
