Wind Energy

Sustainable Energy (Alternative)

Unlock a World of Investing with a Free Magnifi Account

START INVESTING FOR FREE

Renewable energy has a presence on both the American and the global stages with lots of room for growth. Perhaps unexpectedly, the pandemic did not slow renewable energy down. Instead, the public health crisis that seemed to stop the world in many ways actually accelerated the transition to renewables and away from fossil fuels. 

Part of that growth might be credited to Corporate and Environmental, Social and Governance (ESG) investment funds, which have clearly demonstrated that adopting renewables is good business, according to Duke Energy

2020 was the year that renewable energy generation established itself as the cheapest, at-scale, proven energy option available, exceeding coal-fired energy production, also according to Duke Energy. 

And that was before the Biden administration announced its ambitious goals for renewables and alternative energy. 

Renewable energy is anticipated to keep growing in 2021, especially considering the Biden administration’s stated goals of (1) achieving a 100% clean energy economy and (2) reaching net-zero emissions no later than 2050. To achieve this, the Biden administration has resubmitted the US to the Paris climate agreement as well as implemented executive orders to move the country away from reliance on oil and gas and toward renewables.

These policies include lowering or eliminating existing subsidies on fossil fuels as well as funding renewable sector investments designed to help spur job growth in both the solar and wind industries.

Alternative energy is becoming the norm and, now more than ever, is clearly the future. Here are the alternative energy sources that all investors should consider. 

What Is Sustainable Energy?

Alternative and renewable energy is energy that is generated by natural resources that readily replenish: the warmth of the sun, the blow of the wind, the movement of water, and the heat inside the earth to name a few. These resources do not generate greenhouse emissions. 

During the first five months of 2020 alone, renewable energy provided 25.3% of electricity in the US. That is more than a sliver of the energy pie, and it’s growing. 

The 7 types of renewable energy include solar, wind energy, hydroelectric, ocean, geothermal, biomass, and hydrogen. According to Duke Energy, the leading commercial renewable energy sources (ranked by market share and growth) include: wind, hydropower, solar, geothermal, and other technologies bolstering the renewable transition.  

Wind 

Wind and solar are expected to supply 70% of new power plant capacity built in 2021. Wind energy, unlike some other renewable resources, is available nationwide. It has the potential to be a viable source of renewable electricity in every state by 2050, according to the Wind Vision Report published by the Office of Energy Efficiency and Renewable Energy. 

In the case of wind power, new (gigantic) turbines are providing more promise than ever. G.E.’s latest wind turbines have a rotor with a turning diameter longer than two football fields. Compared to the largest turbines currently in service, they generate about one third more power. Compared to the first machines of their kind installed offshore in Denmark in 1991, they generate 30 times as much power. As wind energy infrastructure improves and becomes more widespread, wind energy will no doubt grow its market share. 

Hydropower

Hydropower uses moving water to generate electricity. Hydropower accounts for 52% of the nation’s renewable electricity generation and 7% of total electricity generation, according to the National Hydropower Association. While hydropower infrastructure tends to be dated (think dams, etc.), its power generation capacity is still very relevant. Even more, hybrid hydropower/solar plants (where floating solar panels are installed on the water of reservoirs, etc. that power dams) are becoming increasingly popular. 

Solar 

Despite the pandemic-induced economic downturn, solar installations increased in 2020. Solar generation is expected to account for 48% of US renewable generation by 2050, which would make it the fastest growing renewable power source, according to the Center for Climate and Energy Solutions. 

No doubt, President Biden’s policies will further expand the industry. His initiatives to spur the industry include a review of Section 201 solar tariffs, countervailing duties, and anti-dumping laws by the International Trade Commission. If these tariffs are reduced or repealed, it could have an enormous impact on the development of solar energy. 

It is also expected that tax credits and low interest financing available in the down economy will make solar energy installation more accessible both commercially and residentially in the year to come. 

Geothermal

Geothermal energy, or heat from the earth, can be extracted by drilling deep wells to warm underground water sources. While geothermal energy lags behind wind and solar, it has enormous potential, with the U.S. leading in geothermal energy production. 

Although geothermal energy might not seem as “front page” as renewables like solar and wind, it is getting investment attention. Breakthrough Energy Ventures, an investment firm that funds technologies that seek to limit carbon emissions (with backers including Jeff Bezos and Bill Gates) notably back geothermal technologies. Companies that have received investment include Dandelion Energy, which installs geothermal-powered heating and cooling systems for residential homes. 

Other Technologies

There are a host of other industries that will support the transition to a more renewable-based economy. These include effective energy storage (capturing and storing energy to use it at another time), fuel cells (which generate power with fuel), increased energy efficiency that reduces the need for energy generation), and electrification. 

There was a time when commercializing renewable energy seemed as far off as a flying car. But, that’s no longer the case. As more industries adopt renewable infrastructure, more companies strive to be green, and more consumers and investors demand both, the alternative energy industry will become increasingly mainstream. 

Unlock a World of Investing
with a Commission-Free Magnifi Account

START INVESTING TODAY

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Impact Investing

Lots of things didn’t play out so well in 2020, but impact investing— including environmental, social, and governance (ESG) and socially responsible investing (SRI)— wasn’t one of them. 

According to Fidelity, in 2020 “stocks at the top of our environmental, social, and governance (ESG) rating scale (A and B)…outperformed those with weaker ratings (D and E) in every month from January to September, apart from April.” That’s a big deal all things considered. 

Impact investing paid off for companies and investors alike in 2020. “Over a relatively short time frame…companies with high sustainability ratings performed better than their peers as markets fell. This bore out our initial hypothesis that companies with good sustainability characteristics have more prudent management and will demonstrate greater resilience in a crisis,” according to a white paper by Fidelity.

The bank’s findings don’t stand alone, rather they are the general consensus after a tumultuous 2020. 

According to Blaine Townsend, director of sustainable investing at wealth management firm Bailard in an interview with CFO Dive, 2021 is the year of ESG capitulation. “A lot of that comes from basic points we’ve argued for 50 years: companies who treat their employees and the environment better and are more transparent with stakeholders might make for better long-term investments.”

He suggests that companies should be proactive about ESG now to position themselves for long-term success. He also underscores that regulatory formalization of ESG reporting from the Securities and Exchange Commission (SEC) is on the horizon. 

Investors should take note, as well. Not only can ESG investing reduce portfolio risk, it can generate competitive returns, according to a report by Refinitiv that reflects consensus in the industry. 

Here’s what investors should know about impact investing in 2021. 

What Are the Top Impact Investing Trends in 2021?

“COVID, rather than dampening the interest in ESG-informed investing [has] actually…accelerated a number of these pre-existing themes,” according to AssetTV’s Jenna Dagenhart in an interview with Julie Moret, Head of ESG, Franklin Templeton Investments. 

According to Moret, there are four basic drivers of the ESG investing: (1) the growing relevancy of sustainability challenges, (2) a demographic shift to “millennials [that] are much more sensitized to environmental and social considerations,” (3) increased regulation and policy related to sustainability issues, and (4) increased pressure on corporations for sustainability disclosures.

According to MSCI, the top five ESG trends to watch in 2021 include (1) climate, (2) social inequity, (3) biodiversity, (4) investment return factors, and (5) increased reporting. Here’s why. 

Climate— The Biden administration rejoined the Paris agreement (which is designed to cut significant greenhouse gas emissions globally) immediately after his inauguration. As a result, corporations are busy setting emissions reduction goals in response to both investor demand and anticipated regulation. 

Social Inequalities— The pandemic’s impact on the most vulnerable people paired with the high-profile nature of the Black Live Matter movement have made social causes visible and paramount. According to Moret, “We’ve seen dislocations in markets, and we’ve seen the real impact on the economy… particularly [in] certain segments of the economies where employees…have been left with very little protection, whether that’s leisure, entertainment, and travel. I think it’s an absolutely reasonable expectation that post-COVID from an investor’s perspective, there’s likely going to be downward pressure on free cash flows.”

Biodiversity— Environmental issues are no longer limited to carbon emissions and climate change. Biodiversity loss presents major economic risks. According to an estimate by the World Economic Forum and PwC, approximately $44 trillion of economic value generation is tied to nature. That amounts to more than half of the global GDP. The COVID-19 pandemic has no doubt highlighted the potential “impact of greater contact between wild animals and human populations triggered by habitat loss,” according to IMPAX Asset Management. Investors can expect biodiversity to gain prominence as a named environmental priority in impact investing. 

ESG Investment Return Factors — According to the MSCI report: “In 2021, we see both hype and skepticism about ESG giving way to acceptance and a more nuanced understanding of when and how ESG has shown pecuniary benefits — and when it hasn’t.” There is a growing interest in correlations between ESG elements and performance, which are likely to be further analyzed and better understood in the year to come.  

More Data and More Reporting Companies are becoming increasingly focused on ESG in order to meet investor demands and attract investment. The government is also taking proactive steps to improve and regulate ESG disclosures, per a July 2020 report released by the U.S. Government Accountability Office (GAO) that evaluated the state of public company disclosures related to ESG issues. This means that investors and companies alike should expect more standardized ESG reporting requirements in the not-so-distant future. 

The COVID-19 pandemic changed the world and led average citizens and companies alike to reprioritize. If anything is clear, it’s that impact investing (whether by the name of ESG or SRI) is the way of the future. Not only is that encouraging for environmental and social change initiatives, it has proven that it will pay off for both investors and companies. 

Unlock a World of Investing

with a Free Magnifi Account

START INVESTING TODAY

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Commodities

Unlock a World of Investing with a Free Magnifi Investment Account

START INVESTING TODAY

Although 2020 was less than a banner year for the commodities sector, the future looks bright. 

“The coronavirus pandemic has left the commodities industry reeling, disrupting supply chains and slashing demand,” according to S&P Global Platts president Martin Fraenkel.

In April 2020, for example the Bloomberg Commodity Index BCOM (which tracks 23 commodity futures markets) traded at an all-time low, according to Dow Jones Market Data. But it managed to rally more than 27% from that low. 

Fundamental economic changes in the energy sector and a weaker dollar are anticipated to boost commodities in the year to come. But, the rally isn’t expected to impact all commodities equally. 

Here’s what investors should know about commodities in 2021. 

What Are Commodities?

Commodities are “raw materials or agricultural products that can be bought and sold.” They generally fall into one of three categories: food, energy, and metals. They include wheat, corn, soybeans, coffee, or other foodstuffs; cattle or other stock animals; cotton; lumber; precious metals such as gold, silver, or copper; domestic and foreign currencies; and coal, oil, and other fossil fuels. 

Commodities are traded on a futures market. There, potential purchasers of commodities can participate in the auction market for the payment of goods which will be delivered on a specified future date.

Because investing in commodities can be complicated for an individual, commodity funds can be a more accessible and attractive alternative. As the name suggests, commodity funds invest in baskets of commodities. Commodity funds are typically themed such that an energy resources fund might invest in oil and natural gas or an agricultural goods fund might invest in a variety of agriculture goods. Commodity funds are generally not diversified across commodity types. 

The three main types of commodity funds, according to BlackRock, include: (1) Index funds, which track an index that includes various commodity assets; (2) Commodity funds, which invest directly in the underlying commodity asset; and (3) Futures-based commodity funds, which invest in commodities through futures contracts.

Investors can also invest in commodities through mutual funds, which typically invest in companies that deal with commodities. 

Why Invest in Commodities?

Commodities are a means of diversifying portfolios in order to protect against loss. The prices of commodities are impacted by supply and demand, exchange rates, inflation, and the general economic outlook. Because of these factors that can cause price fluctuations, commodities can be riskier than stocks and bonds. By the same token, they also have the potential to deliver above average profits.

According to S&P Global Platts, the five commodity themes to watch in 2021 include: (1) energy transition, (2) carbon reduction via carbon pricing, (3) a supercycle 2.0, (4) disruptive technology, and (5) post-pandemic unilateralism. 

Energy “The coronavirus pandemic has accelerated change in the global energy system, from historic declines in GHG emissions, inflections in demand trends and shifting production patterns, to an increased energy transition focus and aspirations towards net-zero emissions,” according to S&P Global Platts’ global director of analytics, Chris Midgley. Investors around the globe are paying attention. “The world’s largest oil traders are rushing to plough billions of dollars into renewable energy projects in the next five years, as they speed up preparations for a dramatic shift in the world’s energy mix,” according to the Financial Times. As the world’s energy sources shift, so will investment dollars. 

Reducing and Valuing Carbon—According to the Commodity Futures Trading Commission, “climate change poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy.” Even more, according to the report, “financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economy-wide price on carbon is in place at a level that reflects the true social cost of those emissions.” Pricing carbon makes polluting expensive, rather than free, in order to discourage polluting. Currently eleven states have active carbon-pricing programs. Pricing carbon federally is the job of Congress rather than regulators, per the report. Although there have been numerous attempts to authorize a federal carbon tax in recent years, none have succeeded. A greater push for clean energy, however, could change this. 

Commodities Supercycle 2.0 A supercycle can be defined as “decades-long, above-trend movements in a wide range of base material prices deriving from a structural change in demand.” As the world comes out of the COVID-19 crisis, it is expected to do so with “an emphasis on a green industrial revolution and a policy focus on social need” driving fundamental economic change. The push for decarbonization, specifically, is linked to an anticipated rally in commodities, from zinc, nickel, copper to iron ore and beyond— in other words, a commodity supercycle. 

Innovative disruption— As the world’s energy structures shift, new technologies—  from 5G to AI to blockchain— that solve problems, improve efficiency, reduce costs, and act as changemakers in the market will emerge. These will lead to significant commodity investment opportunities. 

Unilateralism— Ensuring food security throughout the pandemic has led countries including China to invest in more infrastructure to increase agricultural production. “The return of China as a major force in the global corn and soybean markets may add a further bullish factor to sentiment, as the restocking of the hog population affected by the 2018 swine flu outbreak could increase the country’s corn import quota threefold from 2020’s 7 million mt,” according to S&P Global Platts. As a result of the disruptions caused by the pandemic, countries will become more aware of how they operate both as part of the global supply chain and outside of it.

The world will eventually emerge from the COVID-19 crisis that rocked 2020. And, like any global crisis, it will leave the world forever changed. New solutions and new demands accelerated by the pandemic will drive markets to grow in new ways, adding new dynamics to what was pre-pandemic “business as usual.” The future of the commodities market will no doubt reflect changes across the industries that emerge with innovation and resolve.  

Unlock a World of Investing with a Free Magnifi Investment Account

START INVESTING TODAY

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Alternative Assets

For investors interested in the nontraditional, there are options available and those options have perks. And these days, investors are interested. Alternative investments are a growing trend in investing, in part because of shifting economic trends and market uncertainty.

According to a Connection Capital survey, 87% of private investors are planning to maintain or increase their allocations to alternative assets over the next 12 months. And they are not alone. Oppenheimer said in a July 2020 report that, “asset growth among alternative strategies has been powerful as assets have tripled to $9.5 trillion over the past decade and they’re expected to grow to $14 trillion by 2023.”

On the whole, geo-political risks have traditionally had more impact on bonds, equities, and mainstream commodities like oil rather than alternative investments like fine wines, watches, or digital currencies, according to a report published by Nasdaq. So, in a world where it feels like geopolitical uncertainty outweighs geopolitical stability, it’s no surprise that investors are more regularly looking to alternative investments for diversification and market outperformance. 

Case in point: the alternative investment of cryptocurrencies. Considered a digital asset rather than a real currency, cryptocurrency is breaking records. In the first few days of 2021, for example, Bitcoin topped $39,000 which helped to push the total value of the cryptocurrency market in its entirety to more than $1 trillion. 

Here’s what all investors should know about alternative investments on the heels of 2020. 

What Are Alternative Investments?

Alternative investments are generally those that fall outside of the typical variety of stocks, bonds, mutual funds and ETFs (exchange-traded funds). They range from venture capital and hedge funds, to private equity funds, precious metals, collectibles, art, wine and beyond. 

Private equity involves investing in private companies outside of the public stock market. This type of investing is typically reserved for accredited investors and institutional investment firms. (Accredited investors are high-income earners, with an income exceeding $200,000 individually or a joint income exceeding $300,000 for the last two years. Accredited investors have a net worth in excess of $1 million.) 

Private equity investing involves increased risk, long lock-ups and the potential for higher returns. Typically, investor money is pooled with that from other investors and used to fund private equity instruments such as buyouts. Private equity investments are long-term, with investor money often held in the fund for as long as 10 years. The money becomes available again after a sale of holdings, initial public offering, or merger. 

Venture capital involves supporting new companies as they work to commercialize their innovations. Venture capital involves higher risk, but greater return than more traditional investing. Like with private equity, the funds are “locked until a liquidity event,” such as an acquisition or IPO. Money is collected from limited partner investors in increments as needed and are referred to “capital calls.”  

Another type of alternative investing, hedge funds, typically trade on the public markets but employ short-selling, leverage and other strategies that most investors don’t have access to. Hedge funds are also typically limited to high-net-worth individuals and entities that are designated as accredited investors or qualified purchasers.

Other alternative investments are more out-of-the-box and include farmland, art, wine, real estate, precious metals, cryptocurrency, collectibles, mineral rights, and beyond. 

Why Invest in Alternatives?

Alternative investments “boost returns, generate income, provide diversification from traditional investments and achieve their goals,” according to BlackRock. These investments offer lots of opportunities and advantages, especially as part of a long-term strategy and particularly in a COVID impacted market. 

Because alternative investments don’t correlate with the stock market, they can help to limit volatility. In many cases, alternative investments can even offer a higher return, especially with markets in flux. Higher returns are possible in part because alternative investments have additional tools that traditional securities don’t, such as leverage, derivatives and short selling, according to Oppenheimer. 

Alternative investments offer other benefits including a greater sense of anonymity, flexibility, protection against inflation and market crash, and an opportunity for investors to use and finesse expertise about specific investments (precious metals, for example). 

Alternative assets aren’t for everybody. Many are limited to high-net worth individuals. Others require some level of expertise, or at least interest and willingness to learn. (After all, if you plan to build a collection of fine wines, you should probably enjoy wine.) 

Nevertheless, alternative investments can be an excellent complement to traditional investments in a diversified portfolio.

Unlock a World of Investing with a Free Magnifi Investment Account

START INVESTING TODAY

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Land

Unlock a World of Investing with a Free Magnifi Trading Account

START TRADING FOR FREE



For an open-minded investor, the idea of investing in land might bring to mind a range of dreams: a “sold” sign on a wide-open space near the mountains, an “under new ownership” notice for a busy apartment complex in an urban neighborhood, or a breaking ground on a commercial mixed-use space in an up-and-coming suburb. All are correct and more.

Land is a finite resource with many uses beyond real estate that range from farming to mining for natural resources and beyond. There is no doubt that investing in raw land gives investors options.

Although real estate markets ebb and flow, land tends to appreciate in value over time. This is no surprise given the dynamics of a limited supply, increasing demand, and a growing population. For example, according to the United States Department of Agriculture (USDA), “the United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,160 per acre for 2019, up $60 per acre (1.9 percent) from 2018.” That’s an increase of $1,610 per acre from 2005. 

While buying land offers a broad range of investments from real estate to agriculture, investing in land isn’t a quick-solution or an endeavor to take lightly. Here’s what investors should know and consider.  

What Are Land Investments?

Overall, there are three types of real estate investments: commercial, residential, and vacant or raw land. The uses for raw land can be further broken down into categories including row crop land, livestock-raising land, timberland, mineral production land, vegetable farmland, vineyards, orchards, and recreational land. Land can also be purchased and held until appreciation. 

When it comes to land investment, things aren’t always as they seem on the surface. There are a number of different rights to be aware of, which include:  

1)  Air rights: An investor might own the land, but do they own the airspace above it? Not necessarily. Owning air rights gives the investor the right to use, rent, or develop the space above the land without interference by others. This often comes into play in commercial real estate when zoning requirements determine how many stories tall a developer can build. 

2)  Mineral rights: Mineral rights are “legal rights or ownership to the minerals below the surface of real estate, which can include coal, oil, natural gas, metals, and more.”

3)  Water rights: Water rights “are the legal rights to use water from a local source such as a river, ditch, pond, or lake.” Water rights tend to be different in the East vs the West. In Eastern states, landowners who have a waterway that moves through their property may use water in a reasonable way, not unreasonably detaining or diverting it. In Western states, water rights must be established before using any source of water. In these areas, water rights are typically sold separately from land. 

4)  Zoning: Local governments and municipalities have established rules and regulations that determine how a property may or may not be used. Properties may be zoned as residential, commercial, industrial, agricultural, recreational, historical, or aesthetic. As a developer, it’s crucial to make sure that your plans align with the zoning requirements.  

5)  Ingress and Egress: If an investment property doesn’t have direct road access to the parcel of land on which it sits, formal easements may be required. 

Simply put: when it comes to investing, not all land is created equal and research is required. 

Why Invest in Land?

Land is a dynamic investment with lots of opportunity—it can yield high returns, passive income, and large profit margins. Investors can plan to develop raw land, buy and hold, buy and lease, buy and sell with owner financing, or flip the land as it is into something entirely new. 

It’s possible to generate future income by purchasing raw land and doing minimal maintenance, (especially if you are planning to keep it vacant and let it appreciate). Investing in raw land for purposes of development, however,  “requires more patience and a penchant for long-term strategies.” 

Before investing, investors should calculate your cap rates, or an investment’s yields and potential risks. Regardless of how you plan to utilize land for returns— for farming, real estate, leasing, or other— investors should consider the trends in those markets both locally and nationally. 

Investors should also consider taxes, especially when it comes to reselling land. If an investor owns a piece of land for less than one year before selling, tax rates can be as high as 37 percent, according to the Tax Policy Center.

Of course, for investors looking for a less direct, less expensive, and much less time intensive way to diversify into land investing, ETFs offer a range of opportunities. These include real estate ETFs or Real Estate Investment Trusts (REITS) and agricultural ETFs. 

REITs typically invest in “securities that are related to mortgage financing of real estate, including not only mortgage loans but also mortgage-backed securities and similar derivative investments.” REITs may focus on their property type, such as residential, retail, healthcare, self-storage, industrial, office, hotel, data center, or timber REITs. 

Moreover, REITs allow investors to get involved in real estate with smaller amounts of money than required to buy properties. If you consider that on average a home in the U.S. costs $200,000 and a commercial property can cost much more, it’s easy to understand that building a diverse real estate portfolio would be expensive. REITs, on the other hand, allow investors to buy shares of a grouping of a diverse range of properties with a share costing as low as $100.

Investing in land, particularly buying a plot of land for a specific purpose, is nothing to take lightly. While it can offer big returns, it also poses big challenges and requires extensive planning. ETFs offer another path that might be right for those interested in getting their feet wet. Either way, investing in this finite resource is likely to pay off in the long run.

[/vc_column_text]

Unlock a World of Investing with a Free Magnifi Trading Account

START TRADING FOR FREE

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Municipal Bonds

When you see the latest hospital, school, highway, or airport alongside the road, you might not immediately imagine that it was likely partially financed with municipal bonds. In fact, two out of three infrastructure projects in the U.S. are financed with municipal bonds, according to a report by New York Life Investments.

Municipal bonds have a long history; the first was established in 1812 in New York City to raise money to build a canal. These days, they are still a tool used to help fund large, high profile projects. In 2018, for example, “the Denver International Airport issued $2.5B in bonds to finance capital improvements, the largest airport revenue bond in municipal bond history.” In 2016, “the New York State Thruway Authority issued $850 million in bonds to finance a portion of the new NY Bridge Project.” So, while municipal bonds might sound boring, they are helping communities to accomplish big things. 

Not only do municipal bonds (also called muni bonds) make many new infrastructure projects possible, they can generate passive, tax-free income for investors. 

While municipal bonds were initially hit hard by the COVID-19 pandemic, they have since recovered with robust Federal Reserve support. According to BlackRock, because COVID-19 is likely to drive higher government spending and record deficits which is in turn likely to drive higher taxes for investors, tax-free income vehicles like municipal bonds are likely to be more attractive than ever in the years to come. 

Here’s what investors should know. 

What Are Municipal Bonds?

Municipal bonds are financial vehicles for communities to build schools, fix highways, improve water systems, maintain bridges and tunnels, upgrade hospitals, and more. 

Municipal bonds are a means for investors to loan money that funds local infrastructure and public works programs. In short, when a municipality needs to raise money for an infrastructure project, they often issue bonds. These bonds fund a project over a designated period of time. During that scheduled period of time, investors are paid interest (typically semi-annually) until the bond matures, at which time they receive their initial principal back.

There are two types of municipal bonds, a general obligation (GO) bond and a revenue bond. A GO bond is usually backed by a municipality’s local government and carries an unconditional promise of repayment. GO bonds generally pay investors via a general fund or through a dedicated local tax. Revenue bonds fulfill debt obligations via raised money. For example, a bridge that collects a toll or a sporting facility that raises money via ticket sales. 

Municipal bonds are unique from many other bonds in that they are mostly tax-exempt at the federal level, and in many cases, at the state level as well. They have enjoyed their tax-free status since 1913.  According to the National Association of Counties (NACo), “the tax-exemption of municipal bond interest from federal income tax represents one of the best examples of the federal-state-local partnership.” The tax-exemption applies to earned interest. So, while corporate bonds might offer a higher earned interest rate, because corporate bonds are taxed, their take-home earnings might actually be less than their municipal counterparts. 

Municipal bonds also tend to outperform other vehicles like CDs, although municipal bonds have a slightly higher associated risk. Nonetheless, municipal bonds still have a relatively low default rate (lower than the corporate bond default). Between 1970 to 2011, there were only 71 municipal defaults, compared to 1,784 corporate defaults during the same time period, according to Moody’s analysis

One possible drawback is that municipal bonds tend to be less liquid than even their corporate counterparts, which investors should consider before investing.

Why Invest in Municipal Bonds?

Municipal bonds tend to help buffer portfolios as the stock market fluctuates.  Municipal bonds are unique in that they offer both tax-exempt income and high credit quality. They have particular appeal for income-oriented investors in higher tax brackets who want to reduce federal and state income tax bills. The municipal bond tax exemption makes them attractive enough that investors often choose them over their corporate counterparts. 

Regarded as a conservative investment, municipal bonds tend to fluctuate less than stocks. They typically pay a predictable amount twice per year. They also offer a low chance of default, especially considering that they are usually backed by taxes and fees generated by essential services.

Perhaps even more appealing, municipal bonds allow investors to invest their money locally. These bonds offer investors the opportunity to be a part of building their city’s newest football stadium or their community’s newest school facility, for example. 

Not only that, municipal bonds help to keep infrastructure decision-making power with state and local leaders in partnership with their residents, according to NACo. 

Investors should note that municipal bonds with a shorter duration often offer lower yields than longer duration bonds. Nonetheless, with either type, investors can anticipate getting their initial investment back and then some.  

Municipal bonds are a tangible way for investors to support infrastructure. Not only do they offer a range of benefits for investors, they benefit the communities where projects that they help to fund are built. For those reasons, they should be on every investor’s radar.

Unlock a World of Investing
with a Free Magnifi Trading Account

START TRADING FOR FREE

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Artificial Intelligence

Unlock a World of Investing with a Free Magnifi Investment Account

START INVESTING TODAY

Consider that in 2002, i-Robot released the Roomba, an autonomous robot vacuum that cleans while avoiding obstacles. While that might have seemed like a miracle back then, it’s pretty standard today— selling for under $300 at a variety of major retailers. 

But, while in the near and far past many thought that artificial intelligence (AI) would present itself as robots, today it’s really more about smart computer programs and capabilities that are taking hold across industries.

“AI is happening whether we like it or not. It's a reality. And we can either lay victim to it, or we can invest in it,” according to Howard Brown, CEO of Ring DNA, in an interview with Yahoo Finance

According to Brown, AI is less about robots and more about “what we can do to augment the human experience.”

Today companies across industries are focused on improving their digital operations. According to a recent survey of CIOs from large enterprises around the world, “89% of CIOs said their digital transformation has accelerated in the past 12 months, and 58% said this will speed up in the next year.”

Still, there is a lot of room for AI implementation. According to the same survey, “70% of CIOs said their teams spend too much time doing manual tasks that could be automated, yet only 19% of all repeatable IT processes have been automated.”

Artificial intelligence is showing up everywhere from online chat bots to your local fast-food drive thru. Here’s what investors should know before they miss out. 

What is Artificial Intelligence? 

Artificial intelligence (AI) is a “wide-ranging branch of computer science concerned with building smart machines capable of performing tasks that typically require human intelligence.” 

AI is remarkable because it involves machine learning and deep learning. Machine learning essentially programs a machine to learn through a variety of algorithms. The more involved deep learning feeds data into an Artificial Neural Network (ANN), or “a very compute intensive network of mathematical functions joined together in a format inspired by the neural networks found in the human brain.”

The learning function of AI means that it has a “self-improving nature,” can reduce expenses and offer a predictive advantage; all of which is lending to an increase in the adoption of AI in a myriad of ways. 

While robots can be programmed to learn, so can applications that identify and prevent fraud, personalize shopping, improve medical diagnosis and treatment, predict transportation issues, and much more. 

Why Invest in Artificial Intelligence?

From the advent of self-driving cars to spam filtering to smart voice assistants to detecting water leaks, artificial intelligence is becoming increasingly common, whether we choose to notice it or not.

AI’s power to improve industry processes is driving change in the ways companies do business across industries. According to PriceWaterhouseCoopers in its 2018 report Smart Money: AI Transitions From Fad to Future of Institutional Investing, “…from back office procedures to front office decisions, AI is becoming the preferred tool for gaining a competitive edge.”

Market leaders in AI include Alphabet (the umbrella company for all Google products which includes the Google search engine), Tesla and NVIDIA. Tesla collects data from its on-road autopilot vehicles to advance deep learning and hone outcomes in edge cases. In addition, Tesla is designing its own AI chips. NVIDIA sells about 80% of all GPU (graphics processing unit) chips, a product used for deep learning.

In Japan the government is investing in an AI powered matchmaking program to help change the trajectory of plummeting birth rates. 

The list goes on and it’s growing by the day. 

So, it’s no surprise that markets are anticipating that AI is expected to cause major disruptions in industries including healthcare, customer service and experience, banking, financial services, insurance, logistics, retail, cybersecurity, transportation, marketing, defense, and lifestyle by 2030. 

In the lending industry alone AI is enabling faster loan assessment, quicker response to fraud, reduced costs and time associated with executing strategies and financial reports, improved advisory services, streamlined client access, optimized trading strategies, and increased efficiency overall. 

As AI is increasingly adopted in the most innocuous and transformative ways, there is broad opportunity. 

[/vc_column_text]

Unlock a World of Investing with a Free Magnifi Investment Account

START INVESTING TODAY

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


eSports

Unlock a World of Investing with a Free Magnifi Investing Account

START INVESTING TODAY

The last 12 months have been challenging for the sports industry. Canceled seasons, empty stadiums and ever-changing schedules for many leagues in 2020.

It has become the perfect growth opportunity for eSports, aka video game competitions.

Even before the pandemic, eSports was a growing industry which saw $4.5 billion in investment in 2918, according to Deloitte. That’s a notable increase from $490 million in total investment in 2017. And it’s still just beginning. According to a Newzoo figure on Statista, eSports industry revenue is expected to reach $1.6 billion by 2023.

More traditional “sports” genre varieties of eSports that are growing in popularity include eNascar sim racers (which set a new record in March 2020 to become the highest-rated televised eSports event ever), the FIFAe World Cup, and the NBA 2K League, whose broadcasts on Twitch increased nearly 70% year over year. That’s not to mention the Madden 21 Club Championship which is scheduled to return in 2021 with a prize pool of $750,000.

According to the eSports Industry Report by Pillsbury, year-over-year eSports industry growth is expected to reach 26.7% this year and traditional leagues are taking notice. But e-versions of traditional sports aren’t the only kinds of eSports, which also offer more traditional gaming competitions.

What Are eSports?

As a category, eSports is basically “competitive gaming at a professional level.” To be sure, however, they look a lot different than traditional sports.

The many genres of eSports include Real-Time Strategy, Multi-player Online Battle Arena (MOBA), First-Person Shooter (FPS), and Sports. Across genres, eSports don’t involve physical activity like sports in the traditional sense (although some eSports teams have personal trainers that help players to stay fit). It’s video gaming.

Even so, pro-gaming is serious business, with gamers practicing for 10 hours or more each day. Like more traditional sporting “practice,” activities might include studying previously completed games to determine ways to improve, informal competitions against other teams, and even analyzing opponents’ play styles and strategies. Pro teams even have coaches and managers. 

Typically, professional gamers are paid a base salary by their team or company before bonuses or prize winnings. eSports teams make money through sponsorships, advertising, merchandise, tournament winnings, league revenue sharing, ticket sales, and broadcasting rights. Top tournaments and leagues beyond ones that resemble traditional sports include the Overwatch League, League of Legends Championship Series, Fortnite World Cup, and Dota 2: The International.

A major difference between traditional sports and the eSports industry is that the games played in eSports are owned by their game/developers and publishers. Publishers are considered “the most powerful group in the eSports ecosystem,” according to Pillsbury. Even if a publisher isn’t handling a tournament, it can still generate licensing revenue.

Tournament organizers can also make large sums of money, even if they license from game publishers. The Electronic Sports League (ESL), for example, is one of the world’s largest eSports companies. 

So, who is watching? It’s a young and well-off demographic.

According to Deloitte, “the eSports industry had a global fan base of 380 million in 2018 with 37% representing males ages 21 to 35, and 16% representing females ages 21 to 35.” In the United States, 61% of eSports viewers earn more than $50,000 per year.

Viewers aren’t limited geographically to the U.S. Nearly half a billion people worldwide consume eSports content, and most of those audience members are under the age of 35—one of the most important and profitable demographics for brand awareness. In China, South Korea, and Europe as well as in the U.S. competitive gaming has established mass popularity. Its popularity is also growing in Eastern Europe and South America. That’s much different than the markets for traditional sports (think NFL football) that are predominately tied to domestic audiences.

Why Invest in eSports?

If there’s any indication about the future of eSports, it’s the acknowledgement from the broader sports world that this segment of the industry is here to stay. ESPN, for example, broadcast League of Legends, NBA 2K, and Formula 1 in 2020. Not only did that catch the eyes of its followers, but it also introduced new viewers to the eSports category.

According to Deloitte, “the eSports ecosystem offers a variety of different investment opportunities across a range of subsectors.” These include team organizations, developers, event coordinators, media, eSports viewership platforms and advertising, and consumer products.

Viewership platform Twitch, for example, is owned by Amazon and streams a massive portion of eSports events. In November 2020, Twitch reported a record 1.7 billion hours watched. And Twitch isn’t alone. According to Riot Games, League of Legends Worlds 2020 also set a new record, achieving an average minute audience of 23 million. Other streaming platforms include Huya and Douyu, two of the largest streaming platforms in China.

With more than 2.5 billion gamers around the world, the eSports industry has an “unparalleled potential for growth” especially in a pandemic and post-pandemic world. And, with the diversity of stakeholders involved, there is ample opportunity for investment.

[/vc_column_text]

Unlock a World of Investing with a Free Magnifi Investment Account

START INVESTING TODAY

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Nuclear Power

Unlock a World of Investing with a Free Magnifi Trading Account

START TRADING FOR FREE



Nuclear power is a growing force “intrinsically tied to National Security” according to the U.S. Department of Energy, making it a force in global economics, politics and beyond.

In recent decades, the U.S. has ceded its competitive advantage in nuclear energy to China and Russia— something that politicians and industry leaders alike seem motivated to rectify. That’s a big deal considering that the global market for nuclear power could triple by 2050. Much of this growth is anticipated to come from increased demand from emerging markets.

The opportunity in engaging emerging markets with exported nuclear energy extends beyond financial. Nuclear agreements can translate to long-term strategic relationships, which is no surprise when you consider that the construction, operation and decommissioning of a nuclear facility can take years. 

If the U.S. can take a leading role in developing these markets, it could both help to ensure national security and a leading role in the global energy marketplace.

But, Russia and China are both vying for the same position, increasing their nuclear production and developing relationships around the world. China, for example, has added 21 reactors in the past 5 years, with 19 more in the works. China also recently revealed its first domestically developed nuclear reactor. According to the China National Nuclear Corporation, the reactor can generate 10 billion kilowatt-hours of electricity each year and cut carbon emissions by 8.16 million tons. 

Nuclear power is a highly competitive industry with long-lasting implications. Here’s what investors should know. 

What Is Nuclear Power?

To understand the importance of nuclear power, it’s important to understand the basics of how nuclear energy is generated. According to the U.S. Energy Information Administration:

“Nuclear energy is energy in the core of an atom. Atoms are the tiny particles in the molecules that make up gases, liquids, and solids… An atom has a nucleus (or core) containing protons and neutrons, which is surrounded by electrons. Protons carry a positive electrical charge, and electrons carry a negative electrical charge. Neutrons do not have an electrical charge. Enormous energy is present in the bonds that hold the nucleus together. This nuclear energy can be released when those bonds are broken. The bonds can be broken through nuclear fission, and this energy can be used to produce (generate) electricity.”

Nuclear power plants conduct nuclear fission, which splits atoms apart to release energy. (Uranium is commonly used for this process.) The energy that is released in this process presents itself in the form of heat and radiation. 

Nuclear energy is notably different from chemical burning, which produces carbon output. 

Why Invest in Nuclear Power?

Nuclear power has long found opposition from environmentalists specifically because of the challenges associated with disposing radioactive waste. Even so, it’s anticipated that nuclear energy may play an essential role in a no or low-carbon energy future. 

That’s right, nuclear energy is arguably more sustainable than natural gas and other fossil fuels. 

In recent years, moving energy sources from coal to natural gas has been a key step toward decarbonizing. Switching from coal to nuclear power, however, is more “radically decarbonizing.” In fact, the only greenhouse gases released in the production of nuclear power are those associated with the “construction, mining, fuel processing, maintenance, and decommissioning” of a plant. 

Another perk of nuclear power plants is that they offer a much higher capacity (that is, a greater percentage of time that the power plant spends producing energy) than both renewable energy sources and fossil fuels. 

Consider that in the United States in 2016, “nuclear power plants, which generated almost 20 percent of U.S. electricity, had an average capacity factor of 92.3 percent, meaning they operated at full power on 336 out of 365 days per year” (with many of the days not in operation used for maintenance). This is much different than other power sources including U.S. hydroelectric systems, which delivered power only 38.2 percent of the time (138 days per year); wind turbines, which delivered power only 34.5 percent of the time (127 days per year); and solar electricity, which delivered power only 25.1 percent of the time (92 days per year), according to information provided by the U.S. Energy Information Administration. Coal and natural gas plants generally only generate power about 50 percent of the time. 

In this sense, nuclear energy generation is more reliable and efficient. 

So, do fewer carbon emissions and greater capacity outweigh radioactive waste? It can. 

First it’s worth mentioning that non-nuclear energy, like coal, actually releases some radiation. Secondly, radioactivity decreases over time, unlike the waste products of other energy-production methods. Currently, interim storage facilities are used to manage nuclear waste until its radioactivity is decreased such that it can be disposed of. Storage containers, age, however, and when they do, they can leak toxic materials. 

But, new technology is offering better storage solutions. Specifically, storage of waste in deep geological repositories is more secure and environmentally friendly. In Finland, the world’s first ever deep geological repository for spent fuel is under construction. The repository, named Onkalo, “is a game changer for the long-term sustainability of nuclear energy,” according to Director General Rafael Mariano Grossi. 

The facility is roughly 450 meters below ground level and will collect all of the spent fuel from Finland’s nuclear power reactors for thousands of years. This is remarkable considering that sustainably developing nuclear power is anticipated to be an important step in preventing climate change. 

Investors should know that even in a politically divided America, both “congressional Republicans and Democrats have shown their support for a robust domestic reactor fleet and for a strong civil nuclear export program,” according to EnergySource. As the U.S. ramps up its efforts to meet climate change goals, investors have the assurances of a growing and evolving nuclear energy market. 

[/vc_column_text]

Unlock a World of Investing with a Free Magnifi Trading Account

START TRADING FOR FREE

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]


Insurance Technology

Unlock a World of Investing with a Free Magnifi Trading Account

START TRADING FOR FREE

Insurance companies often face fierce competition with each other for many of the same customers. In the U.S., the car insurance market, for example, is dominated by a handful of major players. The 10 largest companies in the industry control approximately 72% of the market, according to Value Penguin by Lending Tree.

The winners and losers of each year are determined by which companies pick up more market share. In 2019, Progressive notably gained more than a percentage point of the market share in the auto insurance industry.

Insurance, however competitive, is an industry that seems entrenched in archaic processes. 

This might not be the case for long, though – the insurance industry is expected to change dramatically in the next five to ten years, according to McKinsey. The firm expects the industry to shift as customer expectations and technology rapidly evolve.

Insurance technology i.e. insurtech, or the innovative use of technology in the insurance industry, seeks to bring greater value to customers and companies. And it’s not going unnoticed. According to PricewaterhouseCoopers, “insurtech has become a powerful driver of change in the insurance industry.”

In fact, the number one risk facing the global insurance industry is technology modernization, according to PwC. To remain competitive, companies need to keep their tech improving and their processes modernizing. 

What Is Insurance Technology?

Insurtech “is a term used to refer to technology designed to enhance the operations of insurance firms and the insurance industry as a whole.” Insurance technologies include big data, artificial intelligence, consumer wearables, and smartphone apps, which are ushering out the old processes of insurance for new ones. 

These new technologies are extremely valuable to insurance companies; insurtech companies offer pay-per-use and an emphasis on loss prevention and restorative services, according to PwC. 

According to Duck Creek Technologies, there are 8 top technology trends in insurance. 

Predictive analytics: Predictive analytics analyzes data to make predictions about the future. In insurance, technology is most used for: (1) pricing and product optimization; (2) claims prediction and timely resolution; (3) behavioral intelligence and analytics to predict new customer risk and fraud; (4) uncovering agent fraud and policy manipulation; (5) optimizing user experience through dynamic engagement, and (6) big data analysis. 

Artificial Intelligence (AI): In the insurance industry, like in many industries, artificial intelligence is helping companies to personalize experiences and make business processes more accurate and expedited.

Machine learning: Machine learning is the ability of a program to learn through a variety of algorithms. Machine learning is helping to improve and even automate the claims process by utilizing pre-programmed analysis. 

Internet of Things (IoT): Sharing data from smart devices can save customers money on policies. In 2019, 34.8 million homes in the U.S. were considered smart homes. Because smart home features increase safety and decrease energy usage, insurance companies can use them to better assess risk and reduce costs for consumers. 

Data: In the insurance industry, social media is more than a tool for marketing. Not only can social media analytics be used to increase sales, it can also be used to improve loss ratios

Telematics: Do you plug a device that monitors your car’s use and speed to get a better price? Telematics are like a “a wearable device for your car.” Telematics are thought to help both insurance companies and insurance customers by encouraging better driving habits, lowering claims costs for insurance, and making carrier to customer relationships more proactive than reactive. 

Chatbots: Chatbots are a growing phenomenon. Insurance companies can use bots to help customers apply for insurance or file a claim, freeing up employees to help with more complicated needs. For example, Geico offers Kate, a virtual assistant that can quickly help customers with information like the current balance on an auto insurance policy, the date of a next payment, or by providing access to policy documents 24/7. 

Drones: While it might be easier to imagine drones dropping off packages for customers than administering insurance, drones are gaining a role in insurance. For example, how does a virtual visit to assess risk or damage sound in the COVID-19 pandemic? That’s what programs like the Remote Visit application offered by FM Global are doing. Another example, Farmers’ Kespry drone program, was launched in 2017 to review roof damage following weather events, leading to faster assessment turnaround and increased safety for claims reviewers.  

Why Invest in Insurance Technology?

The insurance industry is ripe for innovations of all kinds. 

According to PwC, Global insurance technology investments in 2018 totaled $4.15 billion.   2020 expedited the adoption of technology in the insurance industry. This is no surprise considering that insurtech facilitates things like virtual sales, virtual claims interactions and expense reduction, according to Deloitte.

Despite the pandemic-induced economic uncertainty, “insurtech industry investments in the aggregate appear to be as robust as ever,” according to Deloitte. $2.2 billion in investments in insurtech were recorded in the first half of 2020 alone. 

It’s not just disruptors to the industry to be on the lookout for. Legacy carriers that successfully adopt technology internally will also benefit in the long term. 

According to Sam Friedman, insurance research leader at the Deloitte Center for Financial Services in an interview with Insurance Business America: “I don’t see a behemoth insurtech out there that’s going to essentially end the insurance business as we know it, and take over massive amounts of market share….Where insurtech is having a huge impact is in helping insurers become better at what they do.”

[/vc_column_text]

Unlock a World of Investing with a Free Magnifi Trading Account

START TRADING FOR FREE

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. Try it for yourself today. 

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. 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, custodian, investment advice or related investment services.]