Drones
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Pick a beach, park or other open area, and you might get the impression that flying drones seem to have replaced flying kites. While this is partly true, the depth and breadth of the applications of drone technology go far beyond recreation to an advancing and growing market of military and commercial uses.
From agriculture and environmental monitoring, to law enforcement and delivery services, drones are improving and expanding the efficiency and accuracy of research and commercial projects around the world in a myriad of ways.
More and more, companies are realizing this and investing in new drone technologies. According to the Federal Aviation Administration’s 2019 Aerospace Forecast, the FAA expects the commercial drone market to triple by 2023. According to a market report published in September 2020, the global Commercial Drone market size is projected to reach $34 billion by 2026, a considerable jump from the $6 billion it racked up in 2020.
Here’s what investors should know about drone technology and their market potential.
What Are Drones?
Drones, the more common name for Unmanned Aerial Vehicles (UAVs), are unpiloted aircraft or spacecraft. They vary in shape, size, and use. For example, some drones require a human operator, but some do not. Some drones are so small they can fit in your hand, while some are as large as traditional aircraft.
There are three standard types of drones, including Single Rotor Helicopters, Multi-Rotor Drones, and Fixed Wing Drones. Single Rotor Helicopters look like small helicopters, and they are often used to transport heavy objects, survey land, and gather data. Multi-Rotor Drones are small and often used for photography or hobby-flying. Fixed-wing drones look like normal airplanes and run on fuel rather than electricity, allowing them to run for much longer.
While drone applicability is expanding in the modern world in tandem with advancing drone technology, the notion of utilizing unpiloted aircraft isn’t a new one. Drones were first used in the mid-1800s when in 1849, Austria launched a balloon bomb attack on Venice. By WWII, technology had advanced to models like Austrian Jindivik, a pilotless target aircraft.
It’s not surprising that drone technology has been advanced by militaries around the world for many years. This is in part because drones offer a range of military uses, from reconnaissance that doesn’t necessitate putting a pilot’s life at risk to offensive strikes in hard-to-reach areas. Drones also don’t require rest like their human counterparts, just enough fuel or battery power to fulfill their mission.
Drones are also playing an important role in advancing our knowledge of space. NASA’s Dragonfly mission will use a drone to sample and examine sites around Saturn’s icy moon beginning in 2026. This will be the second outer space drone mission, following the launch of a small helicopter scout as part of NASA’s Mars 2020 rover mission, expected to land in February 2021.These advanced outer space missions are not to mention that in 2019, X-37B an astronaut-free spacecraft that has clocked as many as 719 days in continuous low-earth orbit. X-37B is a reusable spacecraft that has taken five missions since 2010.
Somewhat surprisingly, it wasn’t until 2006 that non-military, commercial applications of drones began. Then, suddenly, their uses expanded to functions from pipeline inspections to crop evaluation to security and beyond.
Why Invest in Drones?
In the modern world, the application of drones is exploding. And, it’s playing a role in not only the advancement of science and industry, but also real-world geopolitics.
In the ongoing conflict between Azerbaijan and Armenia over the region of Nagorno-Karabakh, for example, drones are a contentious weapon. In early October 2020, Canada boldly “suspended the sale of advanced drone optics to Turkey over allegations that the technology is being used in the conflict” to support Azerbaijan. At the end of October 2020, Armenia called for more Western nations to do the same.
In Malaysia, the state of Selangor is planning drones to patrol waterways for polluters day and night, a prevalent issue that plagues the country.
In China, the use of agricultural drones has seen a dramatic uptick, improving farming efficiency. Chinese agricultural drones can cover more than 50 to 60 times the amount of farmland that more traditional manual farm work can.
In the U.S. poultry industry, drones and robots are expected to play an increasing role in more efficient production. For example, drones can be used to spot dead birds, or even monitor the gait of birds to detect illness. Likewise, drones have the potential to administer aerosol vaccines. These applications are particularly promising considering that producers can purchase quality drones starting at only $500.
And let’s not forget about the drone delivery of online purchases we’ve all been waiting for.
In September 2020, Amazon.com Inc. received approval from the Federal Aviation Administration to “establish a fleet of drones” and begin testing drone deliveries. It follows companies including Uber Technologies Inc., Wing (of Google’s parent company Alphabet), and UPS. This is a long-awaited step forward after Amazon’s first announcement that it would pursue drones for delivery in 2013.
Behind all these advances (and many more) there are numerous companies developing, manufacturing, and selling this in-demand technology. So, while the hobby-drones that we see at the park are indeed a multi-billion-dollar industry, they are the tip of an iceberg of opportunity for investors with an eye towards the future.
How to Invest in Drones
From military and defense applications, to surveying and data collection, drones are everywhere these days. That can make it challenging for investors who want to get into the space; there are just so many options out there to consider.
However, there are a number of mutual funds and ETFs that give investors access to the drone industry without having to focus on any particular companies. A search on Magnifi suggests that investors have a number of choices in this fast-growing industry.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the November 11, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Psychedelic Medicine
While the term “psychedelic” might conjure up thoughts of tie-dye, flares, and rock music, psychedelics have come a long way— specifically, from recreational use at raging concerts to carefully monitored research and medical settings where their potential for mental health healing is studied closely.
In exciting news for the mental health world in particular, psychedelics are just beginning to make a splash in the prescription drug space.
Case in point: In March 2019, Spravato, a drug produced by the Janssen Pharmaceutical Companies of Johnson & Johnson consisting of esketamine (which is derived from ketamine) was approved by the U.S. Food and Drug Administration (FDA) for treatment-resistant depression. This has been regarded as “the first major advance in the treatment of depression since the late 1980s.”
For the millions suffering from depression, that’s a big deal.
As you might have guessed, this new psychedelic drug is not alone on its path to market.
In August 2017, the FDA granted “breakthrough therapy” status to study MDMA (also known as “ecstasy”) for the treatment of post-traumatic stress disorder. The “breakthrough therapy” designation means that the FDA “will expedite the review of the drug and potential approval.”
MDMA-assisted psychotherapy is currently in Phase 3 trials— the final phase before FDA approval.
Then, in October 2018, COMPASS Pathways, a London-based biotech company, received FDA breakthrough therapy designation for its study of psilocybin (aka “magic mushroom”) therapy in treatment-resistant depression. According to one analyst, U.S. sales of this compound alone could reach $108 million in 2025 (the expected commercial launch year of the drug) and $3.3 billion by 2031.
These treatments have enormous potential for medical use, so it’s no surprise that there are many psychedelic startups working on innovative treatments for mental health disorders. In September 2020, COMPASS Pathways became the first psychedelic medicine company to go public on a major US exchange. But, it won’t be the last.
Here’s why you should consider adding psychedelics to your portfolio.
What Is Psychedelic Medicine?
Psychedelics “are powerful psychoactive substances that alter perception and mood and affect numerous cognitive processes.” They include but are not limited to Lysergic Acid Diethylamide (LSD), Psilocybin or “Magic” Mushrooms, DMT/ Ayahuasca, Mescaline/ Peyote, MDMA (or ecstasy), 25I-NBOMe, better known as N-Bomb, Salvinorin A (or salvia), Phencyclidine (or PCP), Ketamine, and Dextromethorphan (or DXM).
Psychedelics cause hallucinations and other sensory disturbances. In short, they work by “stimulating, suppressing, or modulating the activity of the various neurotransmitters in the brain.” While they stay in the body for a relatively short period of time, they can have long-lasting psychological effects.
Psychedelics came into popular use in the 1960s and 1970s but were eventually made illegal, limiting researchers’ access to study them for medical use. LSD was outlawed in the U.S. in 1966, and MDMA was banned in 1985.
It wasn’t until the 2000s that the FDA and the DEA began to approve psychedelic research again. Since then, psychedelics have made their way one by one to labs where they are proving their ability to treat mental health issues including depression, suicidal thoughts, PTSD and anxiety.
The advancement of psychedelics have everything to do with advances in science. According to Amanda Feilding, founder of the Beckley Foundation, which investigates psychoactive substances and advocates for global drug policy changes, “The combination of advancing neuroscientific knowledge, modern brain-imaging technology and psychedelics provides a unique microscope to the mind, allowing us to map changes in consciousness to changes in neuronal and physiological activity. This opens up a new universe in which we can explore novel pathways to treat many of our most intractable illnesses, and to expand our understanding of consciousness itself.”
The more that scientists understand the brain, the greater the potential for psychedelics.
More and more, the clinical community, regulators and investors alike are open to psychedelic treatments. This is especially true following legalization of medical cannabis, which formally recognized the drug’s therapeutic benefit. Cannabis is now only “fully illegal” in seven states.
Despite their progress, however, psychedelics drugs are still considered Schedule I drugs, which are defined by the DEA as “drugs with no currently accepted medical use and a high potential for abuse.” A schedule change remains a hurdle for all research firms hoping to bring psychedelics to the mainstream.
That said, prescription psychedelic drugs are likely to take a more expedited path to FDA approval for prescription use than more traditional counterparts, in part because humans have been consuming them for decades.
Why Invest in Psychedelics?
The growing momentum for psychedelics is happening in parallel to an escalating mental health crisis worldwide.
More than 250 million people worldwide are suffering from depression. And those numbers are only expected to get worse.
In late June 2020, after the arrival of the coronavirus disease 2019 (COVID-19) and resulting global pandemic, 40% of US adults reported struggling with mental health or substance abuse, according to the Center for Disease Control. In another recent study that assessed 402 adult COVID-19 survivors, 55% presented a clinical score for at least one mental disorder, including anxiety (42%), insomnia (40%), depression (31%), PTSD (28%), and OCD (20%).
Depression is a serious condition that “can dramatically affect a person’s ability to function and live a rewarding life,” according to the World Health Organization. “It is characterized by persistent sadness and a lack of interest or pleasure in previously rewarding or enjoyable activities. It can also disturb sleep and appetite; tiredness and poor concentration are common. Depression is a leading cause of disability around the world and contributes greatly to the global burden of disease.”
Depression is linked to suicide, which is the cause of death for nearly 800,000 people every year. It’s the second leading cause of death in 15-29-year-olds.
While depression and mental health issues are growing, they are hard to treat effectively. Psychedelics are offering the world new hope.
The excitement for the psychedelics market reflects that enthusiasm. According to a September 2020 report by US News, the estimated market size for psychedelics could be as large as $100 billion. In other words, as startups begin to successfully bring new psychedelic prescription therapies to market, there will be plenty of potential customers hoping for mental health help lined up at the door.
How to Invest in Psychedelic Medicine
As a broad and emerging industry, psychedelics are currently difficult for investors to access. There are only a few public companies in the space, such as COMPASS Pathways, but there are a number of associated firms that are set to benefit from the growth of psychedelic medicine. A search on Magnifi suggests that there are ETFs and mutual funds available to interested investors.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the October 29 , 2020 ( publish date ) unless otherwise noted and subject to change. This blog is sponsored by Magnifi. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.
Human Rights
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From climate change to women’s rights to anti-discrimination, human rights issues are more pervasive corporate issues than we might think about as we pour our cereal or brush our teeth in the morning. But, whether we think about them or not, human rights issues exist.
Human rights violations don’t always happen in isolation, but often occur in tandem with other environmental, social and governance (ESG) investing factors. For example, according to an interview in GreenBiz with Lauren Compere of Boston Common Asset Management, beyond environmental degradation, deforestation is strongly correlated with human rights abuses. These issues are more prevalent than one might think in the world of corporate social responsibility programs.
According to a March 2020 report by Rainforest Action Network (RAN), major banks and brands are failing to stop deforestation and protect human rights, despite public commitments to do so. This is in large part because the fast-moving consumer goods that they make, including non-durable goods such as packaged foods, beverages, toiletries, are strongly linked to deforestation.
These brands include big names including Colgate-Palmolive, Ferrero, Kao, Mars, Mondelēz, Nestlé, Nissin Foods, PepsiCo, Procter & Gamble, and Unilever. The banks include Mitsubishi UFJ Financial Group, Bank Negara Indonesia, CIMB, Industrial and Commercial Bank of China, DBS, ABN Amro, and JPMorgan Chase.
The report argues that these brands are complicit in deforestation and human rights abuses in their “sourcing of forest-risk commodities –– including palm oil, pulp, and paper.” (Note that in September 2020, many of these brands collectively launched the Forest Positive Coalition of Action, an initiative to end deforestation.)
How does the RAN report call for change to harmful deforestation and human rights practices?
For one, it commends the follow through of many European and US banks and investors on their commitments not to finance companies that engage in these abuses. Investors have power to influence even the biggest business entities, and socially and environmental advocates are asking investors to use that power.
Here’s what you should know about human rights in the modern world, and why you should consider them when building your portfolio.
What Are Human Rights?
According to the UN, human rights “are rights inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion, or any other status. Human rights include the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, the right to work and education, and many more. Everyone is entitled to these rights, without discrimination.”
The UN’s Guiding Principles on Business and Human Rights, which were unanimously endorsed in 2011, have two primary goals: (1) “to reaffirm that governments have an obligation to protect against human rights abuses by third parties, including businesses” and (2) “to clarify that all companies have a responsibility to respect human rights.” These principles provide actionable steps for companies and governments to meet their obligations in protecting and respecting human rights.
These principles are also important for investors. According to the Columbia Center of Sustainable Development’s Five-Pillar Framework, “a key component of sustainable international investment includes promoting and respecting human rights that might be affected by investments.” The UN’s Guiding Principles offer investors a framework from which to assess the human rights advocacy or abuses of the companies they invest in.
Why Consider Human Rights When Investing?
ESG investing factors include human rights, and human rights investing has the power to make an impact. For example, divestment played an important role in the anti-apartheid movement in South Africa.
Beyond impact, as with other ESG priorities, there is mounting evidence that companies tend to benefit financially when they uphold human rights. So, human rights conscious investments are likely to be more successful.
Business success is linked to good business practices for a variety of reasons. For one, “reputation is now recognized as a major source of business risk,” according to the 2018 report Good Business: The Economic Case for Protecting Human Rights.
But, there are other reasons. Companies that value human rights tend to share a long-term view of success, which they execute over time. Beyond helping to promote worker and stakeholder relations, advocating for human rights also benefits from state-based economic incentives, including public procurement, export credit support, and trade incentives. A commitment to human rights also reduces litigation costs and positions companies in a favorable way as regulatory trends develop.
In May 2020, the Investor Alliance on Human Rights released an Investor Toolkit on Human Rights. The toolkit provides a framework for investors to assess their investments based on human rights criteria.
But, aren’t companies busy with other things, especially under the stresses of a tumultuous economy?
It’s quite the opposite. In the midst of a pandemic, companies are suddenly tasked with, in the words of The PRI, “protecting their employees, their suppliers and business partners, customers and the communities they serve,” and how they choose or choose not to do so will influence how they come out of the crisis.
So, it’s not surprising that in September 2020, BlackRock and Vanguard launched four total new ESG ETFs that screen for human rights issues. These include iShares ESG Screened S&P 500 ETF (XVV), iShares ESG Screened S&P Mid-Cap ETF (XJH), iShares ESG Screened S&P Small-Cap ETF (XJR), and Vanguard ESG U.S. Corporate Bond ETF (VCEB).
If we consider the global supply chain, human rights aren’t something so separate from our cereal or our toothpaste. For savvy, socially conscious investors, understanding whether the companies they invest in enforce or dismiss human rights with their corporate decisions should be a key factor for consideration.
How to Invest in Human Rights
ETFs and mutual funds such as those mentioned above make investing with a clean conscience easier than ever. A search on Magnifi suggests there are a number of different ways for interested investors to support this part of the ESG landscape.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the October 28, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.
Gold
As kids, we buried “secret treasure” in the backyard. We didn’t know then, let alone care, about the state of the economy or the worth of gold.
These days, we know very well what’s in our investment portfolios and we cringe or breath a sigh of relief as we watch it fluctuate from day-to-day and week to week. So, it’s no surprise these days of economic uncertainty, we might find ourselves dreaming of safely buried treasure once again.
If you are, you aren’t alone.
According to a survey by Magnify Money published in July 2020, one in six Americans bought gold or other precious metals in the last three months, and about one in four were seriously considering investing in them. After all, gold tends to hold its value, in part because it has a finite supply. In fact, “gold was one of the highest-performing investments in 2019,” according to a recent article in Forbes.
Interestingly, the COVID-19 pandemic has resulted in a less fluid supply of gold in the marketplace. Around the world, the pandemic has forced mine closures and slowdowns. According to an analyst from CRU Group, in April about 10-15% of gold mines globally were offline, including in South Africa, Peru, Mexico, and Canada.
So, is gold still a good investment? And if so, what’s the best approach? Not surprisingly, there are lots of gold investment options in the modern world, and the most practical ones don’t involve buying and burying it in the backyard.
Why Invest in Gold?
Gold is understood as a “stable store of value.” Although typically gold doesn’t offer a big return on investment, it tends to hold its value during uncertain times. As a result, gold tends to hold its value during times of financial volatility.
In today’s volatile market, that makes it particularly attractive.
The value of gold is influenced by inflation and supply. The dollar value of gold moves opposite of the dollar. This is because as the dollar gains, it requires fewer dollars to purchase the same ounce of gold.
How to invest in gold
There are many ways to invest in gold, including:
Physical Gold: Gold bullion is physical gold in the form of coins or bars. Typically, these are sold at a markup by the seller and come in sizes ranging from one gram (approximately 1/31 of an ounce) to 400 ounces. Bullion coins are typically recognizable based on imprints such as the American Eagle, Canadian Maple Leaf, and South African Krugerrand.
Typically, the value of non-bullion coins is based on their rarity, not the amount of gold in them. This is because in 1933, President Franklin D. Roosevelt signed Executive Order 6102, which required Americans to surrender much of their gold to the government for compensation. The collected gold was melted into bar form, making the remaining coins from that era particularly valuable.
Physical gold tends to be liquid for those needing cash, but often must be sold at a discount. Also, it can be difficult to store it safely. But again, while buying actual treasure is appealing and very possible, isn’t the only way to invest in gold.
Gold Exchange-Traded Notes (ETNs) and ETFs: ETNs are “debt instruments tied to an underlying investment” such as a commodity like gold. Gold ETNs enable investors to invest in gold without having to purchase it in physical form, which is much easier for many investors. Gold-backed ETFs are another option. First launched in 2003, these ETFs are securities designed to track the gold price.
Gold Mining Stocks: These are simply investments in companies that mine for gold. While these are not direct investments in gold, they are an investment in the industry.
In times of volatility, gold can be a popular hedge for investors looking to protect their portfolios from wild swings. For those investors interested in gold-backed ETFs and mutual funds, a search on Magnifi suggests that there are a number of available options.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the October 20, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Emerging Markets
With growing, increasingly affluent populations and innovative technologies, emerging markets offer opportunity for diversification, exposure to various stages of the economic cycle, and attractive valuations.
The top five emerging market economies— Brazil, Russia, India, China and South Africa—are commonly referred to as the BRICS. Formalized in 2010 when these companies represented just 11% of global GDP, these countries have experienced tremendous growth since then, a trend that is expected to continue for the foreseeable future. The International Monetary Fund anticipates that by 2030, the BRICS nations will make up over 50% of global GDP.
While the BRICS countries are enormously different in terms of economies, structures, and cultures, they all have large populations and promising futures. China and India, for example, have become major players in the technology sector. Brazil is the second largest food producer in the world, second only to the U.S. Russia and South Africa are home to rich natural resources. All are home to potential supply chains and new consumer markets.
Here’s what you should know about the world’s top emerging markets and how to invest in them.
What Are the BRICS?
As mentioned, the BRICS countries include Brazil, Russia, India, China and South Africa.
Brazil has a GDP of $1.868 trillion, making it the eighth-largest economy in the world. The country is also a member of Mercosur, a South American free trade area that includes Argentina, Brazil, Paraguay and Uruguay, which is home to three quarters of the total economic activity on the continent. Mercosur has an annual GDP of about US$5 trillion and is home to more than 250 million people.
Russia is rich in natural resources, has strong emerging industries, and a growing middle class. Russian GDP has experienced steady growth since 1998. In 2018, it increased by 1.8%, thanks to solid international growth and rising oil prices. As of 2019, its GDP is $1.64 trillion.
Russia is the dominant partner in the Eurasian Economic Union (EAEU), which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. These countries together boast a GDP of $5 trillion and are home to a population of 183 million. There are talks about free trade agreements with other areas, and when reached, it will no doubt change the supply chain.
India’s GDP in 2019 was $3 trillion. Whereas politics play a role in the uncertainty of investing in some emerging economies, that’s not the case for India. Since gaining its political freedom from Britain in 1946, India established and has since successfully maintained strong parliamentary democracy. The country is the dominant partner in the South East Asian Free Trade Area (SAFTA), which includes Afghanistan, Bangladesh, Bhutan, India, The Maldives, Nepal, Pakistan, and Sri Lanka. The populations in these countries amount to a market of 1.6 billion people.
China has a particularly strong manufacturing sector, and not just for “Made in China” products exported around the world. According to the National Bureau of Statistics, three fourths of China’s 6.6% GDP growth in 2018 was credited to consumption. And, its growing consumer base, with its growing wealth, wants quality.
According to Forbes: “South Africa ranks high worldwide for investor protection and the extent of disclosure.” That fact has not been lost on foreign investors, with FDI into South Africa growing by 446% to 7.1 billion in 2018. China and Russia have both invested heavily in Africa.
In addition to being home to the most developed stock market in Africa, South Africa boasts natural resources including gold, iron, ore, coal, platinum, uranium, chromium, and manganese nickel.
Why Invest in Emerging Markets?
Emerging markets tend to carry a varying amount of political and economic risk, depending on the country. But, on the whole, the sector has lately outperformed more established markets in Europe and North America.
COVID-19 has made this divergence even clearer, with the asset class coming nearly all the way back to pre-pandemic levels as of October 2020. This performance was in part in lockstep with the rest of the world, but since emerging markets stocks tend to fall further in bad times, they have come roaring back even stronger than their first world peers.
Per Lazard: “Following a drawdown of nearly 35% in the first quarter and a sharp 18% recovery in the second quarter, the MSCI Emerging Markets Index rose 9.6% in the third quarter to climb nearly all the way back (96%) to its pre-COVID-19 peak.”
But, as such a large sector that’s spread across so many different countries, investing in the growth of emerging markets can’t be focused on just a few companies. Fortunately, a number of ETFs and mutual funds allow investors to access all of the asset class at one time. A search on Magnifi suggests a number of options for investors interested in the emerging markets.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the October 13, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
China
China, the first country to deal with COVID-19, has also been the first to see some recovery, with economic indicators mostly back to pre-pandemic levels as of October.
But the rest of the world has not been so successful.
The financial disruption in China and around the world has made asset prices more appealing. In March, U.S. stocks plunged to three-year lows. Even as COVID raged, however, Chinese stocks remained strong and are coming back even stronger. According to fund flow data from EPFR, “allocation to Chinese stocks among more than 800 funds reached nearly a quarter of their nearly $2 trillion in assets under management.”
China’s momentum is being driven by its economic recovery, making the country an interesting diversification play in the midst of all of today’s volatility. Here is what investors need to know.
What Is Happening in China’s Economy?
China’s new economy, according to BlackRock, is technology and innovation driven, consumption and service-focused and more open with a growing, more urbanized middle class.
Through 2018, China’s GDP growth averaged 9.5%, which the World Bank described as “the fastest sustained expansion by a major economy in history.” The country’s GDP was US$ 14.140 trillion in 2019 and it’s economy grew by 6.1%. Even with the pandemic, Oxford Economics anticipates a similar 6% GDP forecast for 2020.
Part of this growth is due to increased consumer demand, and a significant shift away from export reliance. In 2012, Chinese consumer spending was $3.2 trillion. This rose to $4.7 trillion in 2017. In December 2019 there was an 8% jump in retail sales and 6.9% growth in industrial production, exceeding analyst’s expectations.
In other words, China is becoming increasingly self-reliant.
That said, it still has its sights set on exports. China has a strong, well-educated workforce that will power the technology and advanced manufacturing sectors, which will be a core part of its economic growth.
China’s Made in China 2025 initiative is a ten-year action plan to bolster manufacturing. Key manufacturing sectors include: New information technology, high-end numerically controlled machine tools and robots, aerospace equipment, ocean engineering equipment and high-end vessels, high-end rail transportation equipment, energy-saving cars and new energy cars, electrical equipment, farming machines, new materials, and bio-medicine and high-end medical equipment.
The plan is focused on (1) improving manufacturing innovation, (2) integrating technology and industry, (3) strengthening the industrial base, (4) fostering Chinese brands, (5) enforcing green manufacturing, (6) promoting breakthroughs in ten key sectors, (7) advancing restructuring of the manufacturing sector, (8) promoting service-oriented manufacturing and manufacturing-related service industries, and (9) internationalizing manufacturing.
But manufacturing is just one component of China’s growing economy.
According to IBIS World, the 10 fastest growing industries in China include: internet services (27.4%), online games at (27.2%), online shopping (22%), optical fiber and cable manufacturing (20.3%), oil and gas drilling support services (8.6%), satellite transmission services (18.5%), alternative-fuel car and automobile manufacturing (17.8%), meat processing (17.3%), energy efficient consultants (17%), and Chinese medicinal herb growing at (16.6%). In other words, the economy is well-diversified.
Why Invest in China?
According to BlackRock, China is an “opportunity too big to ignore.”
Despite the fact that the majority of Chinese companies on the Fortune Global 500 are state-owned, many of its economic leaders are privately owned. For example, COVID-19 related buying benefited Alibaba in the form of a 34% growth rate in its e-commerce business year on year for first quarter of 2020. And Tencent reported a 29% increase in revenue year over year, amounting to $16.2 billion during the second quarter of 2020.
But privately owned companies aren’t the only ones flourishing.
China Life Insurance, for example, has a market capitalization of roughly $100 billion, making it not only the largest insurance company in China, but also one of the largest in the world.
According to Nasdaq, state-owned China Mobile offers “income and price appreciation potential.” The company is huge, with “188,000 5G base stations put into service throughout more than 50 Chinese cities.” And it has an annual dividend yield of 5.95%.
This mixture of publicly and privately owned entities uniquely positions China against economic downturns. For example, rather than directing money to citizens and businesses like the U.S. stimulus, it intervened directly in the labor market by increasing employment in state-owned enterprises (SOEs).
China’s markets are also poised to grow. According to The Financial Times, “the Chinese economy makes up 16% of the world’s GDP and around 14% of the world’s exports, it still only makes up 5% of the world’s equity markets, despite those markets being home to some of the largest companies in the world by market value. The obvious examples are Tencent and Alibaba, companies it is hard to get through the day in China without using.”
Even though China has challenges like the pandemic and US-China trade war, it’s still on a trajectory for long-term growth. That makes it a good investment opportunity now.
How to invest in China
With such a broad economy, investing in China as a theme isn’t as easy as buying shares in a few companies. Rather, China-focused ETFs and mutual funds allow investors to get in on the entire Chinese economy without having to pick and choose sectors. A search on Magnifi suggests that there are a number of different options available to investors today.
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The information and data are as of the October 12, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Data Infrastructure
We shop online, we send emails, we subscribe to newsletters, we stream television shows, we listen to podcasts, we Instagram, we tweet, we share on Facebook, we Google, and in doing so, we create data. We create tons of data.
In fact, 1.7MB of data is created by every person on earth every second of the day. In the last two years alone, 90% of the world’s data has been created according to the Information Overload Research Group (IORG).
Where is all of this data coming from?
Every day, 306.4 billion emails are sent, and 5 million thoughts are Tweeted. One scroll through our inbox might make us feel like the extent of data overload isn’t that unbelievable, after all.
The fact is that we do a lot of online sharing. Companies that want consumer dollars know this, and they aren’t standing idly by. Beyond the giants of the tech industry like Google and Amazon, small- and medium-sized enterprises increasingly want effective data analytics tools to maximize revenue, according to Advance Market Analytics.
Interestingly, according to Forbes, jobs including Data Scientists and Big Data Engineers are in demand now more than ever before. These companies are investing in better data infrastructure to get better data.
All of that data, and all of those needs, make the data infrastructure ecosystem increasingly complex. Here’s what investors should know about this growing industry that’s not expected to slow down anytime soon.
What Is Data Infrastructure?
Before diving into data infrastructure, let’s discuss big data—or, the information that companies everywhere are trying to generate insights from. Big data has four “Vs” or measures of value: volume-based, velocity-based, variety-based, and veracity-based.
Volume-based value means that “the more comprehensive your integrated view of the customer and the more historical data you have on them, the more insight you can extract.”
Velocity-based value means that the faster that “you can process information into your data and analytics platform, the more flexibility you get to find answers to your questions via queries, reports, dashboards, etc.”
Variety-based value means that “the more varied customer data you have – from the CRM system, social media, call-center logs, etc. – the more multifaceted view you develop about your customers.”
Veracity-based value refers to the accuracy and cleanliness of customer data.
Why do these Vs matter, again? They are the end goal of good data infrastructure, which is the way that data is used to provide useful insights. It means having the “right tools for storing, processing and analyzing data.
Let’s start with storage. It seems like almost everything is stored on the cloud these days, but where exactly is that?
The cloud is typically an off-premises data center that is accessed remotely through the internet. Cloud data centers allow clients to manage their data through third-party managed services, using hardware that’s run and serviced offsite by cloud companies in physical locations around the world. In essence, these companies are creating a virtual infrastructure for the systems that used to be housed on-site in every corporation.
With the overwhelming growth in data creation, physical data centers that service these cloud companies are multiplying, and so is investment in them.
Storage, of course, is only one component of data infrastructure. Beyond storage, data infrastructure includes the network that transfers the data, the applications that host the analytics tools and “the backup or archive infrastructure that backs it up after analysis is complete.”
Why Invest in Data Infrastructure?
According to a report by the Motley Fool, “data is the oil of the digital economy.”
Effective data infrastructure means more money and more efficiency, and not just for retailers figuring out how to get an online shopper back to their site to add something to a shopping cart.
Bankers, for example, can use big data to help minimize risk and fraud. Moreover, manufacturers can use it to quickly troubleshoot problems, making better business decisions.
For all sorts of businesses, benefits of using data strategically or prioritizing good data infrastructure include reduced costs, reduced time spent, optimization of product development and allocation, and more informed decision making.
According to an Advance Market Analytics report, the demand for big data as a service is driven by (1) an increasing demand for real time data analytics solutions, (2) the growing use of big data to identify fraud, and (3) a significant data influx for small and medium sized enterprises that want effective data analytics tools to maximize revenue. These are aided by market trends including the (1) the rise of cloud computing and the integration of big data with cloud-based services, (2) a huge influx of data, and (3) more modern business models.
The power of big data is a frontier of sorts. And, beyond the companies looking to improve their own businesses by employing data services, there are a multitude of innovative companies streamlining huge amounts of data into useful information.
For investors, this means that there is more than one way to invest in this growing industry. Fortunately, there are a number of ETFs and mutual funds available for investors interested in supporting big data and the growth of data infrastructure. For instance, a search on Magnifi suggests a number of different options.
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The information and data are as of the October 1, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Diversity
There’s a saying that “teamwork makes the dream work.” In the modern world, a diverse team can be the difference between success and failure. These days, employees, customers, and investors alike know that a talented group of people who advocate for the best ideas really get the job done. Usually, those people don’t all look the same.
Moreover, there are metrics that prove the merits behind the philosophy.
According to the Wall Street Journal, in 2019, the 20 most diverse companies had an average annual stock return of 10% over five years, compared to 4.2% for the 20 least-diverse companies surveyed.
The world in 2020, though, is much different than it was a year ago.
With the disruptions to day-to-day life and business caused by the COVID-19 pandemic, it can be easy for companies to identify goals like inclusion and diversity (I&D) as more “feel-good” than critical to success. Now more than ever, though, the reality is that I&D is crucial to long-term success.
“Commitment to I&D can help drive innovation, overcome business challenges and attract and retain top talent,” according to BlackRock. Even more, I&D “are critical for business recovery, resilience, and reimagination” according to McKinsey.
There’s no denying that a more challenging world means that companies need more effective teams, which require diversity.
Here’s why investors should put their money where the I&D is.
What Is Inclusion and Diversity (I&D)?
Diversity “is any dimension that can be used to differentiate groups and people from one another. In a nutshell, it’s about empowering people by respecting and appreciating what makes them different, in terms of age, gender, ethnicity, religion, disability, sexual orientation, education, and national origin.”
Inclusion “is an organizational effort and practices in which different groups or individuals having different backgrounds are culturally and socially accepted and welcomed, and equally treated.”
And, when you put these two together, it sounds like an ideal place to work.
Why? No company operates in a vacuum— all operate in a diverse and quickly changing world, with global customer bases.
I&D has impacts for employers and employees alike. According to Allianz Global Investors, “Only if people feel included, will they bring their full selves to work and give their best. Only if people feel they can share their different perspectives, will companies fully unlock their potential to innovate and make the best decisions.”
There is more than one Inclusion and Diversity index, but one of the most popular is the index developed by Refinitiv. Using 24 metrics across four key pillars, Refinitiv ranks over 7,000 companies around the world, identifying the top 100 publicly traded companies. The index’s ranking is based on corporate pillars including diversity, people development, inclusion, news, and controversies.
A similar index was launched by Universum in 2019. Universum’s index focuses on recruiting for diversity. According to the index, cultural diversity is more complex than gender, age, and ethnicity. Rather, cultural diversity extends itself to include personality traits, socio-economic backgrounds, nationality, work experience, and education.
Why Invest in Inclusion and Diversity?
Diversity and inclusion efforts foster a dynamic business environment, boosts idea generation, and is an indicator of long-term success, all of which are markers of good investment opportunities.
I&D is proven to have an impact in practice. For example, inclusion and diversity helps companies to reach a global customer base. According to a study by the Harvard Business Review, “A team with a member who shares a client’s ethnicity is 152% likelier than another team to understand that client.” Beyond that, according to the same study, it’s crucial for innovation leaders to encourage employees to share their ideas.
Moreover, investing in I&D can help companies to achieve higher returns.
McKinsey’s Diversity Matters study examined data (including financial results and the composition of top management) of 366 public companies across a range of industries in Canada, Latin America, the United Kingdom, and the United States. The study found that: (1) “Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians” and (2) “Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.”
Measuring diversity and inclusion in practice has its challenges, but also its benefits.
According to Dr. Rohini Anand, Sodexo Corporation’s senior vice president and global chief diversity officer: “For every $1 it has invested in mentoring, it has seen a return of $19.”
The Fluor Corporation measures I&D in employee productivity and engagement, which translates to company performance resulting in “indirect costs or benefits to the company.”
At MGM Mirage, I&D is measured in human resources, purchasing, construction, corporate philanthropy, and sales and marketing. It even includes editorial coverage about its I&D as having advertising value.
As diversity becomes more important than ever before on investment reports, portfolio managers are seeing more and more correlated to positive returns. Investing in companies that value I&D is not only a way to identify companies that have an edge on their competition, it is also a way to embrace and promote this value in the corporate world.
How to Invest in Diversity and Inclusion
Naturally, with a theme as broad as diversity, investing isn’t as simple as picking a few diverse companies and calling it good. For those investors interested in supporting a broad swath of companies that score highly on I&D, a search on Magnifi suggests that there are a number of ETFs and mutual funds to consider.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the September 24, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Adtech
Advertising in 2020 is way more than a billboard on the side of a highway these days. When it comes to catching consumer eyeballs, it’s personal.
As consumers, we know it well. We can’t scroll to a news site, or any site for that matter, without a barrage of ads that may or may not be tailored to our interests. And it’s true— thanks to advertising technology, advertisements are more targeted than ever.
Adtech is a relatively new industry that has become part of the fabric of the modern world, and it’s only just begun.
For consumers these days, the constant ads are the price of free, and so mostly, we accept it. After all, we aren’t paying for Google search, for Facebook, or to watch our favorite show on YouTube.
The internet-based services that have become so ingrained in our daily lives learn about us so that they can most successfully serve us ads and use those dollars to provide their services. This is especially true since the coronavirus pandemic shifted so many “in-person” norms to virtual experiences.
It’s a crazy world we live in, and for all of the unknowns, we can rest assured that advertising isn’t going away anytime soon.
What Is Adtech?
Advertising technology (or adtech) is driven by what’s called programmatic advertising. If that sounds more like an AI algorithm than a sales team, that’s because it is.
Programmatic advertising is “the real-time buying and selling of ad inventory through an automated bidding system. Programmatic advertising enables brands or agencies to purchase ad impressions on publisher sites or apps through a sophisticated ecosystem.”
And while we all gasp at how expensive Super Bowl commercials are every year, we don’t always consider how companies try to get in front of their target audience 365 days per year while consumers watch, click, and scroll throughout the day.
Programmatic advertising includes display ads, video ads, social ads, audio ads, native ads, and digital out-of-home ads. It’s at play whether we Google something random or tune into the season finale of our favorite show.
Consumer ad fatigue has simply led to more creative ways to grab interest. For example, native ads appear to be part of the media they appear on, rather than stand out like a pop-up or a banner ad.
The Economist famously used programmatic advertising to tap into an entirely new audience. In one campaign, it generated 650,000 new prospects with a return on investment (ROI) of 10:1 and increased awareness by almost 65%.
How did it achieve such success? It referenced subscriber, cookie, and content data to identify audience segments (finance, politics, economics, good deeds, careers, technology, and social justice), creating more than 60 ad versions to target potential customers effectively.
No longer was The Economist considered a dry, intellectual journal by most. Instead, it had new relevance. What’s more, it had new readers.
Adtech isn’t limited to the internet. For example, how many people have you heard at least consider ditching cable and just using streaming services? Meet connected TV, which is anticipated to grow to reach 204.1 million users by 2022 according to eMarketer.
As subscribers to services including Netflix, Hulu, Amazon Prime, and Disney Plus have increased, so have over-the-top (OTT) advertising dollars to the tune of $5 billion in 2020. These ads are typically highly personalized according to a viewer’s interest and cannot be skipped, but rather must be viewed to continue consuming content.
Ads on our computers aren’t the only adtech at play. Digital out-of-home advertising includes the high-tech billboards, on-vehicle ads, etc. Where online advertising can feel nagging, outdoor advertising is innovating in a way that appears interesting and grabs attention. According to IBIS World, in 2019 billboard advertising revenue grew by more than $8.6 billion in advertising revenue.
Why Invest in Advertising Technology?
Lots of companies these days don’t necessarily run on our dollars, they run on our eyeballs, and our clicks. According to VentureBeat.com, “all major ad-supported tech companies are ad tech companies. They market advertising technology and use technology to support their advertising businesses.” This includes Facebook, Google, Pinterest, and Reddit.
Adtech is the way of the future, especially as technology evolves and consumers become increasingly glued to screens. In addition to enhanced targeting capabilities, programmatic advertising gives companies real-time insights, enhanced targeting capabilities, greater transparency, and better budget utilization.
Advertising is part of the fabric of our modern culture. Because companies can use platforms to serve us advertisements, we have access to tons of information and entertainment for no cost. As a consumer, it’s hard to ignore.
It’s not just Google searches and websites that are ideal for digital ads. “In-game brand advertising is set to see tremendous growth in the coming years,” says Ajitpal Pannu, CEO of Smaato, an adtech platform. “We are building up a strong foundation to support this new media channel.”
COVID, interestingly, has moved more eyeballs on screens than ever before. And while advertising spending is down across the board as companies move to save money, adtech spending is bound to rebound, making now an ideal time to invest.
How to Invest in Adtech?
Advertising is by nature a very broad industry. Just about every company advertises in some way, and the technologies driving those activities are all over the map. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds to help interested investors access the growing adtech sector without having to invest in many different companies.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the September 14, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Green Initiatives (ESG)
The sky over the Bay Area is covered with a smoke so thick that it is blocking the sun, leaving it orange and ominous. The image (even in a news article) is a wince-worthy reminder that we are in the year 2020, and the world is different.
With a record 900,000 acres of wildfires burning across Oregon, more than 10% of the state’s 4.2 million population have been evacuated, according to the Oregon Office of Emergency Management. That’s a lot of people, and evacuations aren’t anticipated to end there. In total, 12 western states are burning somewhere, with Oregon, California, and Washington most severely impacted.
“There’s certainly been nothing in living memory on this scale,” describes Daniel Swain, a climate scientist at the Institute of the Environment and Sustainability at the University of California in an interview with the New York Times.
Extreme weather is a new reality, and it matters a lot to the future of economies around the world. In January 2020, before the most recent fires, the Bank for International Settlements (an umbrella organization for the world’s central banks) predicted that the disruptive effects of climate change could usher in the next financial crisis.
This report was not a one off. According to the January 2020 Global Risks Report by the World Economic Forum, the top five global risks are climate-change related. Extreme weather, which includes floods, storms, wildfires and warmer temperatures, is putting millions at risk for food and water insecurity, property and infrastructure damage, and displacement.
Now, it’s September and we are looking from near or far at the hazy orange sky above the Bay Area wondering: what’s next?
Where climate change was once a theory that people accepted or not in the same way that they preferred cream or not in their coffee, things are changing fast. This is especially true among millennials, who are making no mistake about where their money is being invested, namely into sustainability-oriented funds.
In what might be considered a ray of hope in a strange world, their environmental investment dollars are starting to add up and smash investing records.
Here’s what environmental investing is and why it has more momentum than ever before.
What Is Green Investing?
In 2019, “estimated net flows into open-end and exchange-traded sustainable funds that are available to U.S. investors totaled $20.6 billion for the year,” according to Morningstar. “That’s nearly 4 times the previous annual record for net flows set in 2018.” This near exponential growth in investor interest is in part attributed to younger investors with a specific interest in the environment.
Perhaps even more impressive, in the first quarter of 2020, sustainable investing totaled $10.5 billion, keeping momentum despite the economic downturn ushered in by the pandemic.
So, where exactly are these dollars going?
It depends. When it comes to Environmental, Social, and Governance (ESG) investments can look much differently from one to the next.
For one, some investors have a specific interest in “climate change innovators.” According to MSCI, these are companies working to innovate and scale new technologies in a way that solves climate problems in new ways. Beyond investing in the next big technology that might lead us to a net-zero carbon world, investors are looking more and more at the environmental policies of the companies that they invest with across the board. These policies include water management strategies that use water responsibly and the prioritization of protecting biodiversity in corporate operations.
The relevance of biodiversity to our day-to-day lives is as close as the latest summer “Save the Bees” campaign. Honeybees are crucial for pollinating much of the global food supply, from apples to almonds. It’s estimated that bees are responsible for one of every three bites of food eaten in the United States. In addition to the use of insecticides used for many commercial crops, the destruction of habitat and decline in biodiversity have severely impacted this important species.
In other words, in today’s world, how businesses do business matters greatly, not only to the environment at large, but also to the long-term value of a company. To address that, companies are putting more effort than ever into describing how they meet sustainability standards in their business operations.
Why Invest in Sustainability?
In a letter to CEOs, Blackrock CEO, Larry Fink describes climate change as “a defining factor in companies’ long-term prospects.” According to Fink, “awareness [of climate change] is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Fink anticipates a “significant capital reallocation” into sustainable strategies as millennials, who are currently pushing for institutions to develop sustainable strategies and who will eventually become the policy makers and CEOs of the world.
In other words, environmentally focused investing is the future.
Not only is it becoming more popular among millennials, it is paying off for investors. According MSCI, “There is a direct, dollar-value payoff for companies to better manage their ESG risks or meet stated sustainability commitments.”
Interestingly, since the arrival of COVID-19, awareness to and demand for ESG products is on the rise. Not only did the pandemic accelerate interest in these products, it gave them an opportunity to demonstrate their resilience, with ESG investments less impacted by the pandemic-driven market drop in the spring.
If you are ready for a certain investment in an uncertain world, environmental investing is a natural choice.
How to Invest in Green Initiatives
The environment, of course, impacts every one of us and touches every industry. Investing in such a broad theme can be challenging for investors. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds that can help investors access this growing and all-encompassing sector.
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The information and data are as of the September 14, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.