Younger, More Diverse Investors Enter the Chat

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In 2020, we saw a huge influx of new retail, or individual, investors (hi, that’s us 👋) entering the market. Specifically, many people opened taxable, non-retirement investment accounts for the first time. One report found that these investors are younger (under the age of 45) and more racially/ethnically diverse compared to investors already in the market. A critical factor these new investors cited was the increasing ability to start investing without meeting the high minimums traditionally required. The report also points to the importance of educating new investors in topics ranging from risk and reward, to costs and fees, to tax consequences and other key investing concepts … FWIW to the rescue!

It’s great to see these new market entrants. Barriers that once deterred younger, more diverse investors are being removed, opening up opportunities for them to build and expand their wealth. Even better is that the slew of new products and investing methods that have lowered the threshold for entry aren’t just in the broader market. There is similar momentum in socially responsible investing, and there’s never been a better time to jump in as a values-aligned investor. It seems like new ESG-focused funds and products are launching almost every day, giving individual investors more opportunities to move their money to invest in the world they want.

And even if you’re not ready to invest outside of your 401(k) just yet, there’s still great news for you. Barriers are coming down there as well: In March, the US Department of Labor said it would not enforce Trump-era rules limiting the ability of retirement-plan administrators to consider ESG factors in retirement options. So, there could be even more options coming soon to a 401(k) plan near you.

You *can* sit with us

Last year, individual investors accounted for over 100 million online brokerage accounts. Now, the companies they’re invested in are beginning to give this part of the market specialized attention and a seat at the table.

From Qualcomm using Twitter to speak directly with their investors to AMC’s Investor Connect program, innovative companies are connecting with individual investors like never before. They’re even seeking to disrupt how investors are informed and attracted.

Beyond traditional and emerging social media platforms like Twitter and Clubhouse, whole new ones dedicated exclusively for investor-company communication have popped up. Companies like Tesla and Coinbase use the online forum Say to share earnings reports (statements outlining financial performance) and poll their investors on shareholder votes. These moves aren’t just about goodwill — they’re also about corporate self-preservation, as individual investors currently make up a significant 10% of daily trading volume.

And those investors are creating waves with their investment choices. A recent study identified investors' behaviors on a popular investing app impacted the prices of shares around reporting seasons. Insiders call this phenomenon ‘the market moving the market.’

The rising power of the individual investor presents a chance to make your voice heard as you align your portfolio with your values, so keep an eye out for companies engaging in new modes of corporate communication.

Asking for a friend: what is concessionary?

Time to bust some myths. For years, leaders on Wall Street dismissed values-aligned investing like impact investing and ESG as “concessionary.” You see the word concessionary and maybe think of all the treats you’d grab the next time you’re at the movies. But in this case, a concessionary return refers to an investment that sacrifices financial gain in favor of something else.

Some investment professionals suggest that ESG investments are concessionary because they believe they would sacrifice some of the potential return (money earned on your investment) to achieve greater social impact. But, go ahead and get that large popcorn because we are hearing this claim a little less these days.

Today, there are many values-aligned and impact-focused investment opportunities, across asset classes, that don’t require investors to make such sacrifices. In some cases, these funds and investments have outperformed the market. In fact, an expanding body of data reports that ESG investments actually outperform, such as in 2020, when 25 of the 26 ESG equity index funds tracked by Morningstar beat the benchmark for their category.

Is it possible? ESG 🤝 Crypto

A cryptocurrency-themed trivia round would dissolve faster than a popsicle at the beach. Some questions have concrete answers like, “When was the first cryptocurrency created?” Boom — Bitcoin in 2009. But questions like, “Is cryptocurrency a currency or investment?” would leave your team with blank spaces on the answer sheet.

Even though experts haven’t agreed on its asset class and many other issues, an increasingly mainstream consumer base is engaging with cryptocurrency. The average age of current investors is 38 years old, and more than half of “crypto-curious” consumers are women. However, many conscious consumers are finding it hard to square this burgeoning market with their environmental values. While crypto carbon emissions and clean energy usage estimates differ, crypto certainly requires a lot of juice.

So, what does that mean for you as an ESG investor? Can crypto fit into your values-aligned portfolio?

There are entities like the Crypto Climate Accord (CCA) that are looking to make crypto more sustainable. It was recently launched as a private sector-led initiative to enable all of the world’s blockchains to be powered by 100% renewables by 2025. Since studies have shown different energy estimates, CCA is working to transparently measure the use of renewables and make renewable energy accessible and cheap for miners.

In addition to its environmental impact, there remain many questions about possible government oversight and the long-term value of crypto. Nevertheless, some corporations (PayPal, Visa, and Square, among others) collectively invest billions in crypto. Even if you’re not buying crypto itself, you may still have an impact in this space if you’re invested in companies heavily exposed to crypto.

Right now, it seems like there are still more crypto trivia questions than answers. As with all investments, screening the various products to see whether they meet your investment philosophy is key. This is a hot topic, so hit reply to tell us how you’re thinking about crypto.

Before you go -

Our friends over at JUST Capital have a great tool to compare the performance of America’s largest publicly traded companies on how they interact with their workers, communities, customers, shareholders, and the environment. Nvidia, Salesforce, and Microsoft top the list for best companies for workers.