Space Industry

Space

A new space age is upon us. For the first time in human history, tech startups and private companies, spearheaded by some of the wealthiest entrepreneurs in the world, are sending humans into space. 

The investing opportunities the space industry offers are massive. From space tourism to satellite broadband, mining to national security, in the coming decades an entire space economy will be created.

What is the Space Industry? 

The space industry is composed of companies that manufacture components that will go into the Earth’s orbit and beyond, as well as the services associated with space travel. There are three major categories in the space industry: spacecrafts, ground support equipment, and the launch industry.

Spacecrafts are vehicles, manned and unmanned, used in space. These vehicles support a variety of applications, such as exploration, communications, navigation, and transportation. The industry includes satellites, space probes, cargo transporters, rovers, and software.

Ground support refers to the equipment used to service spacecraft. It includes manufacturing of control stations, mobile terminals, VSATs, gateways, and specialized equipment manufacturers.

The launch industry focuses on the process by which spacecraft are launched from our planet into space. It includes equipment, machinery, and launching vehicles, as well as the services that go along with it.

Why Invest in the Space Industry?

The space industry is growing rapidly. Morgan Stanley estimates that the global space industry could generate revenue of more than $1 trillion or more in 2040, up from $350 billion, currently. Bank of America’s forecasts are even more ambitious, estimating a $1.4 trillion-dollar market by 2030.

These impressive growth estimates are a direct result of the changes in the economics of space travel. According to NASA, launch costs that had held steady over the 30 year period between 1970 and 2000 have fallen by a factor of seven. It now costs just $432 to send one pound into low earth orbit in 2020, compared to an estimated $38,734 in the early 1980s. 

Costs have plummeted due to the creation of equipment and vehicles that are more reliable, adaptable, and efficient. Many of the rockets that are launched today are reusable and the size of satellites have shrunk dramatically. 

The rapid decline in the cost of satellites will soon bring a surge in the number of orbiters collecting data. That data can then be used by businesses for everything from predicting the weather to facilitating insurance claims

Another potential opportunity is mining in space. NASA recently awarded contracts to four companies to extract tiny amounts of lunar regolith (loose unconsolidated rock and dust) by 2024. This could open up the potential for both moon mining, and asteroid mining, with work already being conducted on NASA’s Psyche Spacecraft to study an asteroid with an estimated mineral value measured in the quadrillions of dollars. 

As a result, commercial space ventures are drawing record levels of funding as investors rush to tap into the market. Total venture capital investment in the space industry increased by 95% to $8.7 billion from 2020 to 2021. This increase of investment is an indication that private capital markets understand the potential of the space industry.

How to Invest in the Space Industry

Selecting individual stocks in the space industry can be challenging. That’s because most of the public names offering exposure to the industry have limited exposure as a percentage of future revenue, and those laser-focused on conquering the industry are private. This is why the best solution is gaining exposure to the sector through space-focused ETFs. A simple search on Magnifi indicates numerous ways for investors to access these funds with low fees.

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The information and data are as of the October 14, 2021 (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.


Technology

Why should you invest in Technology?

The history of technology is the story of humankind. It covers the expanse of
humanity’s efforts to control its environment for its benefit by creating tools.
Tools/technology are things constructed to aid humans to solve problems and improve their lives.

One of the earliest applications of technology was the invention of the wheel. This basic, simple tool revolutionized the lives of humans, making it easier to go from one place to the other.

Fast forward to today and technology (which is simply applied science) of all sorts has infiltrated every aspect of our lives and is the major force for economic growth.

What Is the Technology Sector?

The technology (tech) sector includes companies involved with the research, development and distribution of technologically-based goods and services.  The technology industry today is incredibly broad, covering all sorts of scientific disciplines. 

The tech sector is categorized into three major industry groups:  software and services, technology hardware and equipment, and semiconductors and semiconductor equipment. These three industry groups are further divided into industries and sub-industries.

Another way investors categorize the tech sector is by determining who the intended user of the product or service being offered is: consumer or a business? Consumer goods could mean anything from mobile devices, wearable technology, household appliances and electronics. While businesses rely heavily on technology to create enterprise software, streamline their systems, host their databases, store their information, etc. Modern businesses could not exist without technology.

Why Invest in Technology?

The world has undergone a technology revolution every 40 to 60 years since the industrial revolution began in 1760, from steam power and railways, to steel and electricity to cars, roads and aviation.

Each of these technological advancements brought sweeping economic change. They spawned new business models and created waves of new entrepreneurs. They also displaced old industries, triggered speculative financial bubbles and sometimes even brought social and political upheaval.

Today, the impact of the information and communications technology revolution is arguably the greatest ever. That has led to one undeniable truth: technology bears a far greater influence on our daily lives and investment portfolios than it ever has.

It’s near impossible to design a well-balanced investment portfolio without including tech stocks, as it is by far the largest sector of the U.S. stock market.  But there is no reason to avoid it. There is no sector of the modern American economy that technology does not touch and that does not rely upon the tech sector to improve its quality, productivity, and profitability.

Many tech stocks have higher valuations than companies in other sectors. But for good reason. More than anything else, tech companies are associated with innovation and invention. Investors expect big money to be spent on research and development and they also expect to be rewarded by a steady stream of growth, fueled by a pipeline of innovative new products, services, and features.

Of course, there are risks. The tech sector is highly competitive, so any tech firm is at risk of having its product or service replaced by one from a competitor that is better.

However, tech stocks also promise significantly higher than average growth when compared to other equities. 

This has been the prevailing trend for decades now. Throughout much of this century’s historic bull market, tech stocks have been leading the way, with the biggest tech stocks outperforming the S&P 500 index over the past 10 years.

How to Participate in Tech Investing

First, invest in what you like. Technology is an intriguing topic to many people, which makes investing in tech stocks interesting. Successful investing involves detailed research. When you enjoy the topic of your research, you’re more likely to do the legwork required to make educated investing decisions.

Second, keep in mind that the tech sector is massive and broad. It covers a wide range of companies in different stages of development. So there is plenty of room for diversification within the tech sector (you can read our articles on AdTech, Biotech, Fintech, Nanotechnology, or Insurance Technology).

If you’re a novice investor or you simply don’t have the time to do the research it takes to pick stocks individually, you may want to look toward technology-focused index funds, exchange-traded funds (ETFs), and mutual funds.  A simple search on Magnifi indicates numerous ways for investors to access tech funds with low fees.

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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, 2021 (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.


Fixed Income

Fixed Income Investments

What Is Fixed Income Investing?

Fixed income investing is a strategy that focuses on capital preservation and consistent income. This income may come in the form of interest payments or dividends.

Fixed income investments typically include: certificates of deposit (CDs), government and corporate bonds, money market funds and fixed-rate annuities. Bonds can be bought individually or through exchange traded funds and mutual funds.

These investments are among the safest. Therefore, their return is relatively low. However, many people – such as those in retirement – use a fixed income investment strategy as a way to preserve their capital over the long-term.

Assets, like bonds, have reliable payouts on a fixed schedule. So you can count on them to serve as an extra income source. 

What Are the Differences Between Fixed Income and Equity Investing?

Equity (stock) and fixed income investing each have their respective risk-and-return profiles. Many investors will often choose an optimal mix of both strategies in order to achieve the desired risk-and-return combination for their portfolios. The classic portfolio is a 60/40 portfolio, with 60% allocated to stocks and 40% to bonds.

Equity investing offers higher returns than fixed income investing and appeals to people looking to grow their portfolio. However, higher returns are accompanied by higher risks. Risk takes shape in two forms: systematic and idiosyncratic risk. 

Systematic risk refers to market volatility in various economic conditions. Systematic risk cannot be avoided through diversification.

Idiosyncratic risk refers to the risks that depend on the operations of an individual company. Idiosyncratic risk can be minimized through diversification of your portfolio.

Fixed-income investing typically has lower risks than equity investing and appeals to people looking to preserve their capital, while making income. Of course, like any investment, there are pros and cons to a fixed income strategy:

Pros to fixed income investing

  • Capital preservation is all about ensuring you don’t lose the money you invest (known as the principal). In other words, if you invest $10,000 into a bond, you will still have $10,000 when the bond matures, plus interest.
  • Fixed income investing provides a reliable additional source of income. With interest rates on these investments somewhat higher than the majority of standard savings accounts, you get more ‘bang for your buck.’
  • With fixed income investing, there are less worries about all the many factors that may affect a stock. Just sit back and enjoy the arranged schedule of fixed income coming in.

Cons to fixed income investing

  • Inflation Risk: if your bond pays 2% interest and the inflation rate is 3%, your money is losing purchasing power.
  • Interest rates may rise. Bond prices do move in the opposite direction of interest rates because of the effect the new rates have on old bonds. So, if you are forced to sell your bonds before maturity, you could end up losing money because bonds with lower yields than current market rates are less attractive to investors.
  • Default Risk. Individual bonds are always at risk of default, especially those from corporations. It can happen if the company faces financial problems and can’t repay its debts. That’s why bond funds, owning hundreds of different types of bonds, are a way to mitigate this risk.

Why Choose Fixed Income Investing

Fixed income investments are popular because they offer a certainty that investors don’t get with stocks. Investors know that they’ll receive regular interest payments at a set rate and over a set period of time while their capital is preserved.

By comparison, stock investors get no such guarantee of a pay-out but can make a higher rate of return which is why many investors saving for retirement create a 60/40 portfolio, consisting of 60% equities and 40% bonds. The strategy behind the 60/40 portfolio is to provide growth through equities while reducing volatility on the fixed income side.

How to Invest in Fixed Income

Individual investors can buy a single bond or other fixed income security. However, doing so does not offer diversification. Also, sometimes there are high minimum investment requirements, high transaction costs, and a lack of liquidity in the bond market make it tough to follow this path. Which is why it is recommended that fixed income investors use exchange traded funds (ETFs) and mutual funds. A simple search on Magnifi indicates numerous ways for investors to access tech funds with low fees. 

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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, 2021 (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.


Socially Responsible Investing (SRI)

What is Socially Responsible Investing (SRI)?

One of the biggest changes ever in the investment landscape has been the move in recent years to Socially Responsible Investing (SRI). While the concept may have begun in our country as an activity associated with religious societies – the Quakers not participating the slave trade – it has evolved immensely since. It is now a mainstream practice being embraced by both individuals and corporations.

Gone are the days when investors solely focused on factors such as diversification, investment income, rate of return, inflation, taxes and risks.  Nowadays, socially responsible investors are going one step further. They are also choosing to factor in whether a particular investment positively impacts society.

In other words, socially responsible investment works the same way as any style of investing. But in addition to the financial returns from an investment, it also considers the investments’ impact on environmental, ethical or social change

It enables you – the investor – to grow your money while doing good. And it allows you to invest in social causes you care about. 

Why Choose Socially Responsible Investing?

Who wouldn’t want a great way to boost their assets while also making a difference? That’s what SRI does.

Socially responsible investments seek to maximize the welfare of people and their environment while earning a return on one’s investment that is consistent with your individual goals.  In simple terms, the twin goals of socially responsible investing are: social impact and financial gain. 

Some question whether a do-good investment strategy can perform as well as standard investing strategies. The answer is yes. 

A 2020 research analysis from the asset management firm Arabesque Partners found that 80% of the reviewed studies demonstrated that sustainability practices have a positive influence on investment performance.

Several other studies have shown that SRI mutual funds can not only match traditional mutual funds in performance, but they can sometimes perform better. There is also evidence that SRI funds may be less volatile than traditional funds.

Even today, there are some that have doubts about socially responsible investing. Opponents have argued that by narrowing the field of investment options (such as avoiding weapons makers, gambling and tobacco stocks), the end result is a narrowing of investment returns. 

But now, there is a growing body of evidence (in addition to the aforementioned studies) that shows the opposite is true: SRI not only makes you feel good, but it’s also good for your portfolio.

What’s the Difference Between SRI and ESG Investing?

While at first glance, both SRI and ESG (Environmental, Social and Corporate Governance) investing look at a company’s broader impact, there are some distinct differences between the two.

First off, SRI investing is not as well defined as ESG investing. SRI is more subjective and based on an individual’s view of the world – political views, what is right and wrong, and what is ethical, etc. 

In contrast, ESG investments are measured by and scored on specific environmental, social and governance metrics. More specifically, ESG investing looks at specific factors, such as a company’s best practices when it comes to pollution or women’s rights

SRI, on the other hand, takes these factors into account and blends them with an investor’s personal values.

Bottom line: SRI involves screening investments to exclude businesses that conflict with the investor’s values. While ESG investing focuses on companies making an active effort to either limit their negative societal impact or deliver benefits to society (or both).

How to Participate in Socially Responsible Investing?

You have a number of options available to you if you want to invest in good causes. You can make socially responsible investments via individual stocks. However, the better (and safer) bet is to do so through socially conscious mutual funds and exchange-traded funds (ETFs).  A simple search on Magnifi indicates numerous ways for investors to access SRI funds with low fees.

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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 May 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.


Energy

Energy is vital for the well-being of the global population and a necessity for economic and social progress. It is also essential to our daily lives. We’re reliant on energy to power our cars and trucks, heat and cool our homes and offices, wash our clothes, manufacture goods, etc.

As the global population continues to grow, so will the demand for energy. Which is why investing in the energy sector could be an important move for your portfolio in years to come.

What is the Energy Market?

The energy market is composed of a large group of companies that produce or supply energy. It includes drillers, refiners, producers, companies providing equipment & services, and exploration companies in the oil & gas sector. The sector also includes integrated power utility companies such as renewable energy.

Investing in non-renewable energy provides exposure to natural gas, petroleum, and coal. Uses included heating and electricity generation, fuel for transportation, feedstocks for chemicals/plastics/synthetic materials. The major advantages of non-renewable energy are its reliability and ease of extraction, given that it is not weather-dependent, and can be accessed through drilling (onshore and offshore), mining, and fracking (hydraulic fracturing). Currently, about 85 percent of the world’s energy comes from nonrenewable fossil fuels—oil, natural gas, coal.

Renewable energy offers exposure to solar, wind, biofuels, geothermal, and hydropower. In the United States, renewable energy sources currently provide for 12% of total U.S. energy consumption and about 20% of electricity generation. These percentages are expected to grow significantly as public and private sectors shift away from fossil fuels.

Why Invest In Energy?

Presently there are 7.9 billion people inhabiting the world and it’s projected that number will reach 9 billion by 2037. Which is why it’s no surprise that in 2018 the U.S. Energy Information Administration (EIA) released a report that projected that global energy consumption will grow by nearly 50% by 2050.
The EIA also predicts that the share of renewables in the U.S. electricity generation mix will increase from 21% in 2020 to 42% in 2050. Solar and wind generation are responsible for most of that growth. Solar power is forecast to account for almost 80% of the increase in the US’s renewable electricity generation through 2050. And according to Global Market Insights, the global wind energy market should grow by more than 69% from 2021-2027.

You might think that because of these impressive growth forecasts for renewable energy that the non-renewable energy market will begin to shrink but that’s not the case. The transition away from non-renewable energy will not happen overnight, and will be measured in decades, not years. This is attributed to technological advancements that make oil and natural gas cost-competitive to extract, a lack of infrastructure to support complete green energy deployment, and the fact that a significant portion of end-use demand for oil has limited alternatives. The EIA is forecasting oil prices to be 25% higher by 2030 and 86% higher by 2040. They also predict that the natural gas share of the U.S. electricity generation mix will remain at about one-third of total generation from 2020 to 2050.

How To Participate In Energy Investing?

Picking individual stocks in the energy sector can be tempting with the potential for high returns for early investors. However, diversification is the superior strategy, as not all energy stocks will be winners. Therefore, the best solution is gaining exposure to the sector through energy-focused ETFs and mutual funds. A simple search on Magnifi indicates numerous ways for investors to access tech funds with low fees.

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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. 

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.


Growth of Capital

Capital Appreciation

What is Capital Appreciation?

Capital appreciation refers to the increase in the price or value of assets since their date of purchase.  Put simply, it is the difference between the purchase price (cost basis) and market price (current price) of an investment.

For example, an investor buys 100 shares of a stock at $50, for the cost of $5,000.  If that stock rises in price to $75, he/she would have a 50% return ($2,500 profit) from capital appreciation. 

In addition to stocks, the capital appreciation investment strategy is used in a variety of assets, such as exchange traded funds (ETFs), mutual funds, commodities, real estate, and collectibles.  When such assets are sold, the profit is called a capital gain.

Why Investors Utilize a Capital Appreciation Strategy?

When successful, a capital appreciation strategy allows investors to benefit from above-average market returns.  For example, since 2006, one of the best performing capital appreciation mutual funds had an average annualized return of 14.52% compared to the 10.89% return of the S&P 500.  At first glance that might not seem like a big difference but if you invested $100,000 in the capital appreciation fund, it would be worth $764,223, versus $471,396 if you invested the S&P 500.

Capital Appreciation vs. Income Investing

The objective for the capital appreciation strategy is to invest in assets with the expectation they will increase in value. This strategy has a high growth objective and therefore assumes a higher level of risk.  

Due to this increased risk, younger investors often adopt the capital appreciation strategy.  Younger investors have jobs and earn salaries to pay for their day-to-day expenses.  Therefore, they can tolerate more investment risk in hopes of producing outsized returns.

Older investors, especially those that are retired, tend to shy away from the capital appreciation strategy and instead focus on income investing.  That’s because retirees are more risk averse.  They no longer receive paychecks from their employers and are reliant on the capital they’ve saved throughout the years to generate income.  

Income investing is an investment strategy that is centered on building a portfolio that generates a regular, dependable stream of income, which is paid out as a result of owning an asset.  This income can be in the form of dividends, bond yields, rent, and interest payments.

However, it’s important to note capital appreciation and income investing aren’t exclusive to younger and older investors.  People of all ages diversify their portfolios to incorporate both strategies.  For example, there are growth stocks that pay dividends and the value of rental properties appreciates over time. Therefore, when choosing between these strategies, investors must decide what their risk tolerance is, what their investment goals are, and what their time horizon is. 

PROS and CONS for Capital Appreciation Investing

PROS

  • Capital appreciation investments funds have historically beat the S&P-500 
  • A long-term approach benefits from deferred tax liabilities, with an investor only taxed when they realize the gain

CONS

  • Investments are generally higher risk with a weighting towards growth, which can lead to higher volatility
  • There is no guarantee of returns compared to income-generating investments, which is why a longer time horizon is important

How To Invest In Capital Appreciation 

The key to outperformance using a capital appreciation strategy is rigorous analysis, research, and diversification. Therefore, a great way to benefit from capital appreciation strategies from stocks is through the use of ETFs or mutual funds focused on this approach. For other assets, it’s recommended to seek out advice from trusted and experienced advisors.  A simple search on Magnifi indicates numerous ways for investors to access capital appreciation strategies.

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The information and data are as of the September 7, 2021 (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.


Growth Investing

What is Growth Investing?

We’ve all heard of the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) as examples of hyper-growth stocks, but opportunities in growth extend well beyond just technology.

Growth investing is a strategy that focuses on stocks that are growing their earnings and revenue at a higher rate than their respective sector and the overall market. This growth is expected to continue for the foreseeable future but there are no guarantees.

These companies are often at the forefront of emerging trends, are working to solve a significant issue, or have simply developed a better “mousetrap.” Take for instance Home Depot, which opened in 1978 and has grown into one of the largest companies in the world by offering customers a wide variety of merchandise at lower prices and with a highly trained staff. Or Netflix, which in 2007 launched a streaming service, thus ending the need for physical video/DVD rental companies.

History has shown us that the most successful growth stocks are younger companies boasting meaningful increases in quarterly/annual earnings per share, with new products/services that change our everyday lives. When it comes to identifying the best growth stocks, it’s best to focus on those companies with quarterly earnings per share growth of at least 20%, though this can be more difficult to find consistently in the large-cap space.

For investors, growth investing opportunities span across all industries. However, the most favorable have typically been Medical/Biotech, Consumer/Retail, Leisure/Entertainment, and Technology/Computer/Software. The true leaders can command triple-digit earnings multiples and offer quadruple-digit returns for those fortunate to uncover the winners early, with investing in the growth arena being a never-ending treasure hunt. This is why many investors choose to invest in growth stocks through exchange-traded funds (ETFs). ETFs make it easier for investors to have exposure to baskets of growth stocks based on particular industries and the market capitalization of the companies (small-cap, mid-cap, and large-cap).

Why Invest in Growth?

Growth stocks are attractive to investors because they offer the potential for outsized returns. For example, from 2010 – 2020, growth stocks rallied 372% compared to the S&P 500’s 297% gain. Over a larger time-frame from 1926 to 2017, Large-Cap Growth has returned 9.7% annualized, which is exceptional given that 1930-1950 was a lost decade for the market, as was 1972-1982, with minimal upside progress and violent secular bear markets.

Rather than looking for profits in the form of dividends from large, mature, less volatile companies, growth investors are searching for profits through capital appreciation. Capital appreciation is the rise in the asset’s (in the case a stock) price. Most growth stocks don’t pay dividends because they are still unprofitable or they reinvest their profits in order to develop newer and better technologies.

This is why growth stocks tend to outperform in bull markets. Investors have abundant confidence during bull markets and are willing to take on more risk investing in smaller emerging companies. However in bear markets, growth stocks tend to underperform as investors are more likely to be risk averse and often invest in more stable assets such as blue chip stocks, bonds, or gold.

Growth Investing vs. Value Investing

Value investing is an investment strategy based on fundamental analysis. While growth investors look for stocks with significant earnings and revenue growth, value investors instead search for stocks that have fallen out of favor and are undervalued in the marketplace. The expectation is that the prices of value stocks will appreciate when other investors recognize their true value.

Value investing is considered less risky than growth investing. That’s because value stocks are often larger, much more established, less volatile, and provide a source of income through dividends, regardless of capital appreciation.

Value stocks tend to outperform growth stocks during bear markets. For example, during the dot com bubble in the late 1990s, growth stocks significantly outperformed value stocks. However, when the recession hit in 2001, value stocks outperformed growth stocks.

Therefore, long-term investors often utilize both strategies, growth and value, to create a balanced portfolio. This allows them to realize returns throughout periods of economic expansion and contraction.

How to Invest in Growth

Though opportunities are abundant in the growth arena, only the most lucrative companies will survive, and competition is cutthroat. Given the difficulty in picking the winners, the best solution is investing through Growth-focused ETFs and mutual funds, which offer the following:

  • Diversification: protecting one’s self from a couple of disastrous ideas, and improving the odds of latching onto a massive winner.
  • Market-leading returns: with growth fund managers focused on capital appreciation and spending heavily on state-of-the-art research, and they can latch onto emerging trends and technologies early.
  • Fund management: skilled experts identify the best opportunities, and employ the best time-tested strategies to enter and exit positions. This takes the emotion out of the equation, which is what causes most individual investors to consistently underperform the market, even if they do uncover great companies

For those interested in Growth Investing, and potentially participating in the next major story like the massive FAANG outperformance in the past decade, a simple search on Magnifi displays numerous ways for investors to gain access to growth with low fees.

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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 August 12, 2021 (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.


Innovation

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What is Innovation?

The desire to innovate is a basic human characteristic, defined as the creation, development, and implementation of a new product, process, or service, with the goal of improving efficiency and effectiveness. From the compass that dates back to 12th century China to the steam engine that fueled the Industrial Revolution and the discovery of electricity and the invention of transistors, innovation has improved our lives exponentially.

More recently, innovation has come in the form of the internet, artificial intelligence (AI), clean energy transportation, and autonomous vehicles. Since its humble beginnings in the ‘90s, the internet has grown to 4.6 billion users, with over 5 billion mobile phone owners and more than 2 billion of these users shopping online each year. AI technologies are transforming how our society communicates and operates by way of virtual assistants, manufacturing robots, social media monitoring, and proactive healthcare management. Meanwhile, battery-run electric vehicle sales are estimated to hit 29% of all cars sold by 2030, paving the way to a cleaner future globally. And autonomous vehicles, also known as self-driving cars, will reduce traffic and parking congestion, decrease accidents caused by human error, and curtail pollution.

Innovative technologies will disrupt major industries, leaving many of the former players obsolete. With modern-day Edisons’ like Elon Musk, Sergey Brin, and Marc Benioff continuing to sprout up and the American Dream is still alive and well, innovation is here to stay and will only accelerate as the years go by.

For investors, the opportunities to participate span across many industries, with quadruple-digit returns often waiting for those able to hunt down the leading-edge companies in the groups experiencing the most significant innovation. For those that neither have the time or expertise to analyze a multitude of companies, exchange traded funds (ETFs) are excellent ways in which to invest in these innovative industries.

Why Invest in Innovation?

People are often resistant to change, but with multiple secular trends changing the landscape of our world rapidly, investing in innovation is essential to staying ahead of the curve. This is evidenced by the average tenure of S&P-500 companies sliding from 33 years in 1964 to 24 years in 2016, with expectations of being just 12 years before the end of this decade. While antiquated companies whose stocks have provided quadruple-digit returns in the past might be familiar to investors and easy to understand, they typically lag the performance of their more innovative peers, with the best-returning stocks being those 15 years or less out from their IPO date. So, while easy to understand and familiar technologies might be suitable for everyday life, they’re inferior in the ever-changing investment landscape. This means that if investors want to place themselves in the right proverbial fishing holes for market-beating returns, keeping a close eye on new trends and innovative technology is imperative.

What Are the Top Innovation Trends?

When it comes to the top innovation trends, there are dozens of opportunities. We’ve compiled a list of what looks to be some of the most relevant opportunities and areas investors should be focused on. Each of these trends have a variety of ETFs for investors to participate in:

Artificial Intelligence (AI) has arrived in a big way though many people are unaware how it affects their everyday lives. Current applications include online shopping & advertising, vehicles, and even our smart appliances, with more advanced applications being cybersecurity, and healthcare with improved diagnostic pathology. The global AI market is projected to reach $191.60 billion by 2025, growing at a CAGR of 36.68% over the forecast period.

Autonomous Vehicles are currently at an early stage but it is an emerging trend, with many companies battling it out to take over market share. A significant benefit of these self-driving vehicles is the elimination of human error. Government data has estimated that driver behavior and error are factors in 94% of crashes. Increased levels of autonomy would reduce human error, making the roads safer for everyone. The other major benefit is reduced congestion and an expected decrease in pollution & emissions.

Blockchain is one of the least understood but one of the most significant innovations. It is a system of recording information in a way that makes it near impossible to hack or cheat the system. A blockchain is essentially a chain of data blocks with contained information that is recorded, made public, and cannot be altered. Annual spending on blockchain solutions is expected to come in above $15 billion by 2023. If adopted, disruption opportunities are widespread, with one target being the banking industry by disintermediating services that banks provide.

Genetics is expected to be a major area of innovation in the next decade, with genetics being a branch of biology that deals with the heredity and variation of organisms. Gene editing has been called the most significant innovation of the decade by some sources, given that it allows scientists to change the DNA of organisms, including plants and animals. In humans, this offers the ability to treat inherited diseases, with the first application being in eye surgery to treat inherited blindness. Other significant opportunities include agriculture, with the ability to increase yields and quality and plant drought resistance for crops.

Industrial Robotics is another innovation that has arrived quicker than most expected, providing a massive boost to productivity for corporations. Unlike humans, robots don’t need incentives to perform at their full potential, don’t need sleep, and can keep up a consistent pace 24/7. While opinions are divided on robotics given that it displaces jobs at many plants and warehouses, the two major benefits they do offer outside of cost savings for corporations are safety and precision. In mining, it’s much safer to send robots one mile below the surface to carry out tasks, and in healthcare, precision is everything when it comes to surgery. In a world where investors demand higher profits and margins, the opportunities across dozens of industries will continue to grow.

Virtual and Augmented Reality is one of the newest avenues of innovation, with VR offering a complete immersion experience using a headset and AR being an interactive experience of a real-world setting with the objects being enhanced through the use of a smartphone, like the Pokemon Go craze in 2016. The most obvious application is gaming, but many other industries are adopting AR, including manufacturing, mining, education, and travel. In the latter case, consumers now have access to a 360-degree tour of hotels, restaurants, and tourist spots to give them an idea of what to expect. Some estimates project a 40% compound annual growth rate looking out to 2028 for AR alone, with the potential for this market to reach a size of more than $300 billion.

How to Invest in Innovation?

Given that there are hundreds of innovative companies out there and the success rate is concentrated to only a tiny portion of the group, it is essential for investors to diversify their holdings. This is especially true given that the path to success is quite bumpy for even the largest and most successful companies, with the best evidence of this being the turbulent climb to the top and bifurcated returns of the Internet and Communications stocks of the ‘90s. The solution to this issue is investing through Innovation-focused ETFs and mutual funds, allowing one to participate in the upside of innovation, without taking on the significant risk of picking the laggard or company with a fatal flaw in an emerging industry. A search on Magnifi indicates numerous ways for investors to access Innovation with low fees.

Unlock a World of Investing with a Magnifi Account

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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 July 23, 202 (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.


Volatility

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Volatility

The value of the stock market goes up and down, meaning that those invested in stocks and funds gain and lose money over time without taking any action. This movement is a feature, not a bug — the stock market is designed to continuously shift and change.

This up-and-down fluctuation in the value of the market, and of individual stocks and funds within the market, is called volatility.

What Is Volatility?

Volatility is a measure of how much the price of a stock or the value of the market changes over a specific period. That is to say, it’s an indication of how big, erratic, and rapid the up-and-down swings are.

The statistical measure typically used to assess volatility is standard deviation, which indicates how far the highs and lows stray from the average price. A stock or fund whose value is cratering and/or skyrocketing is very volatile, while one that shifts only a little does not have much volatility.

Volatility is a term that has negative connotations; many people use it to indicate a downward swing or crash in the market. However, volatility makes no judgement. The concept also includes upswings, which can help investors make money.

The idea to take away is that the greater the volatility, the riskier the investment. More than anything, volatility is an indication of short-term uncertainty.

How To Assess Volatility

You can assess the volatility of an individual stock or fund by looking at a metric called beta, which measures its historical volatility in relation to the S&P 500 index. If the beta is greater than one, the stock or fund has historically been more volatile than the S&P 500. A beta less than one indicates that the stock or fund has historically been more stable than the S&P 500. And a negative beta — an unusual occurrence — shows that the stock or fund has typically moved opposite the S&P 500.

You can assess the market as a whole by looking at the Chicago Board Options Exchange Volatility Index (VIX), which measures how much volatility is expected in the market in the next 30 days. The specific number the VIX lands on doesn’t really matter; its movement is more significant — if the VIX jumps upward, that usually means that a lot of volatility is on the way. This is why its other names are “Fear Gauge” and “Fear Index.”

Implied Volatility vs. Historical Volatility

Traders might look at two different types of volatility when judging what is likely to happen. Implied (or projected) volatility is a prediction of how volatile the market will be over a certain period. This metric is calculated using the prices of options. Since this is a prediction, it isn’t set in stone; the market may move differently than an assessment of implied volatility suggests it will.

Historical (or statistical or realized) volatility is a measure of how volatile a stock has been in the past during a particular period. It usually measures volatility by looking at the change in the closing price from one date to another, usually 10 to 180 trading days apart.

How Much Market Volatility Is Normal?

It is common and expected for markets to be volatile on a regular basis. During any given year, investors typically expect returns to deviate some 15% from average. Periodically — say once every five years — you’re likely to face more volatility, perhaps around 30%.

The amount of volatility that’s normal in a market is related to the general trend of the market at that time. The market can be either “bullish” (trending upward) or “bearish” (trending downward). Bullish markets are typically fairly stable, while bearish markets often have high volatility, with unpredictable swings that end up moving the market downward.

How to Handle Market Volatility

To be a savvy investor, you must learn to be comfortable with volatility. A cardinal rule of investing is to resist selling a stock or fund as soon as the price plunges. In fact, that old saying “buy low, sell high” should be your guiding principle — when the price takes a hit, it’s a better time to invest than to sell.

Historically when the market falls a lot, it comes back stronger — generating large gains once it recovers. Knowing this can help you avoid the mistake of selling when you shouldn’t. Also keep the following advice in mind:

  • Stick to a long-term plan: If you need the funds you’re investing in the near term, then you shouldn’t be in the market in the first place. The stock market is best left to those who can let their money weather the volatility and see eventual gains over years of investing.
  • Buy low: Purchasing stocks and funds that have had a strong track record during downturns is like buying good products at a discount. If you do so with the long term in mind, you may well eventually see a large return from the decision.
  • Keep some liquidity in your finances: You can remain sanguine about market volatility if you don’t need to pull your money out right away. You should have enough cash on hand in an emergency fund or other savings account so that you can safely leave your portfolio alone, even when prices are dipping downwards.
  • Rebalance your portfolio: Since volatility can result in changes to the relative values of the investments in your portfolio, it’s a good idea to rebalance periodically to make sure your asset allocation remains where you want it.
  • Get out of the market if you’re about to retire: Investors who are close to retirement will find too much risk in the naturally volatile stock market. They should put up to two years’ living expenses in non-market assets such as bonds, cash, home equity lines of credit, and cash values in life insurance.

How ETFs and Mutual Funds Can Protect You Against Volatility

One way to volatility-proof your investments is to choose some well-diversified ETFs or mutual funds, which can offer some downside protection and reduce your risk. Since these funds bundle multiple stocks — sometimes as many as 1,000 — they are likely to be somewhat insulated from the risk presented by volatility.

While both ETFs and mutual funds can help diversify your portfolio and reduce your risk, ETFs may be a better option for responding to volatility because of the speed of transaction they enable. It can take several days to make changes to a traditional mutual fund, while ETFs are traded like stocks and can transact much more quickly. This means you can take advantage of dips in the market by quickly investing more in your ETFs, or, if you’re so inclined, sell your shares quickly at a high point.

How Volatility Can Benefit Investors

While some investors may think they can use volatility to their advantage by waiting for stocks and funds to dip down before buying, then immediately selling at the next high point, it has proven difficult for such active management to beat the returns of a well-balanced mutual fund or ETF that tracks the market. Many investors therefore swear by a buy-and-hold strategy, which requires keeping investments long term so they rise gradually with the market.

Using a buy-and-hold strategy allows investors to double down on their investments in solid companies or ETFs when the market is at a low point due to volatility, setting themselves up for larger cumulative gains over time.

Those who do wish to use volatility to their advantage in a more active way have the potential to make big profits fast. However, you need to be very comfortable with risk and use some strategies to mitigate it. When investing during a volatile market with the intention of trading in the near term to make a profit, consider your position size and stop-loss placement. Doing smaller trades and using a wider stop-loss than usual can reduce your risk. Another good strategy is to seek out trending stocks or funds that have shown strong growth but haven’t accelerated faster than the broader market..

Takeaways About Volatility

  • Volatility is how much the price of a stock or fund moves away from the average price, either up or down or both, in a given period of time.
  • Volatility is a normal part of the stock market; investors can expect 15% movement away from the market’s average in any given year, and will see greater fluctuation periodically.
  • Investors can weather volatility by sticking to a long-term plan, using a buy-and-hold strategy, and maintaining enough liquidity in their finances.
  • Investors can benefit from volatility by buying on downswings and then holding onto their assets over time as the market gradually climbs.
  • Those who want to use volatility to make big gains need to be very comfortable with risk and use strategies to reduce it.

Unlock a World of Investing with a Magnifi Account

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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 July 13, 2021 (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.


International Bonds

With the globalization of business and investing, companies around the world can tap investors outside their domestic markets for financing. One way of doing so is by issuing international bonds.

Investors are eager to buy these bonds to diversify their portfolios with international exposure, allowing them to smooth out their potential risk from economic ups and downs at home.

What Is an International Bond?

An international bond is a bond issued by an entity that is not domiciled in the same country as the investor. For example, a U.S. investor may buy a bond issued by a German company in Euros. For the Germany company this is a domestic bond, and for the U.S. investor, it is an international bond. These bonds are usually corporate bonds and are commonly found in U.S. mutual funds.

As with all bonds, international bonds pay interest at regular intervals and pay the bondholder the principal amount at maturity.

Why Invest in International Bonds?

Investors benefit from portfolio diversification by adding international bonds to their portfolios. International bonds provide exposure to other countries and their economic conditions. A U.S. investor whose portfolio includes bonds issued in Asian countries will benefit when Asian economies are doing well, even if the U.S. economy is suffering.

A portfolio that includes international bonds from a range of countries and regions will be relatively insulated against economic downturns in any particular part of the globe.

Types of International Bonds

Domestic Bonds
A company or government entity in a given country can issue, underwrite, and trade these bonds to foreign investors. The bonds use the currency and follow the regulations of the issuer’s country. For example, a bond issued by a German company in Euros and subject to EU regulations is a domestic bond. When a U.S. investor buys the bond, it is an international bond for that investor.

Eurobonds
A company or government entity issues a Eurobond in the currency of one country — not the issuer’s domestic currency — and trades it in another country that is not the issuer’s country. As per the name, the issuers of these bonds are usually European companies, though the bonds can trade in non-European countries. For example, a bond issued by a German company in Japan denominated in U.S. dollars is a Eurobond, or more specifically a Eurodollar bond, indicating the type of currency.

Foreign Bonds
People sometimes use the terms international bonds and foreign bonds interchangeably, but these are different. Foreign bonds are issued in a domestic market in domestic currency by a foreign issuer, following domestic regulations. For example, a bond issued by a German company in the U.S. and valued in U.S. dollars is a foreign bond. There are a range of silly names for foreign bonds to indicate the country and currency in which they are issued, for example a Samurai bond is issued in Japanese yen, a Yankee bond is issued in U.S. dollars, and a Bulldog bond is issued in British pounds sterling.

Risk in International Bonds

While international bonds help investors diversify their portfolios, they can complicate things simultaneously. The bonds may be subject to different regulations and taxation requirements than the investor is used to.

And as they are denominated and pay interest in a foreign currency, their value fluctuates with the economic conditions in the issuer’s country, and with the exchange rates between the investor’s and issuer’s countries. That means that these bonds are subject to currency risk, or exchange-rate risk.

Currency risk is the potential for change in the relative price of two currencies in relation to each other. These fluctuations can introduce instability in profits and losses, requiring various strategies to hedge risk.

How to Invest in International Bonds

There are two ways to invest in international bonds: You can buy the bonds directly or you can invest in a mutual fund or exchange-traded fund (ETF) that focuses on international bonds.

The latter option can be a good idea for all but sophisticated investors, as it can be complicated to directly buy bonds issued in another country. Mutual funds and ETFs also have the benefit of lots of diversification, as there are many bonds bundled into each fund.

One thing to keep in mind when investing is that currency exchange is unpredictable, so you shouldn’t make the mistake of thinking you can guess how things will go. Don’t buy into a foreign bond fund to beat the market; only do it to gain more diversification. It’s wise to keep your allocation in those funds to a quarter at most.

Fees are another thing to think about. If you buy a mutual fund or ETF, you’ll need to pay a management fee, or expense ratio. Look for a fund with an expense ratio below — ideally well below — 0.50%. You may be able to invest in bond funds and ETFs without fees using a commission-free investing app like M1 Finance, Fidelity, TD Ameritrade, Robinhood, or Vanguard.

Key Takeaways About International Bonds

International bonds are a good way for investors to diversify their portfolios with foreign assets and gain exposure to international markets.
International bonds come with high currency risk, which means that changes in the relative values of the currency in which the bond is issued and the investor’s currency could make for some unpleasant surprises.
The simplest way to invest in international bonds is via bond funds for ETFs that focus on international bonds. These funds allow investors to diversify their portfolios greatly and usually have low or no fees.

Unlock a World of Investing with a Magnifi Investment Account

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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 July 13, 2021 (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.