4-star brokerage rating

Swell Investing Review

Swell Investing brokerage firm fees, IRA accounts, pros and cons. Is Swell Investing good? Swell Investing's socially responsible ETFs, account costs, minimums, investments, and problems 2020.

Swell Investing is no longer in business. See Broker Ratings for more ideas for a brokerage firm.

Synopsis of Swell Investing

A new investment company has arrived on the financial scene with a social mission. Swell Investing offers portfolios of stocks that create positive change for the world. Called impact investing, this method of trading attempts to make a profit while owning companies that pass certain socially-conscious criteria. But can Swell Investing clients really turn a profit over the long term while trading these types of stocks? Let’s take a look at review of Swell Investing.

Safety of Swell Investing

Swell Investing is a subsidiary of Pacific Life Insurance Company, who had over $143 billion in assets, and over $9 billion of revenue. Pacific Life has been in business since 1868, which is much longer than many of America’s on-line discount brokers.

Folio Investments is responsible for providing Swell Investing’s brokerage services. Both Folio and Swell are registered with the Securities and Exchange Commission, the primary securities regulator in the United States. Swell Investing’s profile page shows zero disclosures since its license was granted in 2016, while Folio Investments has 6 disclosures. It has been doing business since 2000. Technically, Swell Investing is an investment advisor, while Folio Investments is the broker-dealer.

Folio Investments is also a member of FINRA, the brokerage industry watchdog, and SIPC, the major insurer of U.S. brokerage accounts. Thus, each brokerage account at Swell Investing is protected up to $500,000, of which $250,000 may be for free cash balances.

Swell Investing Review

Swell Investing Investment Method

Swell Investing offers a selection of portfolios for its customers to trade. Technically, these baskets of stocks aren’t mutual funds or ETF’s. They are separately managed accounts (SMA’s). These financial vehicles are slightly different in that investors legally own the companies in the portfolio. With mutual and exchange-traded funds, you own a company, which in turn owns the securities in the fund.

One nice advantage of Swell Investing’s SMA’s is that the broker allows its clients to remove up to three individual equities from a portfolio. It’s never possible to do this with a mutual fund or ETF.

Swell Investing Review

Swell Investing Fees and Commissions at Swell Investing

Every portfolio at Swell Investing costs 0.75% with a $500 minimum. Market declines that bring an account’s value below $500 aren’t considered a violation of this policy. The SEC’s transaction fee for sales is also passed onto the trader. This fee is a very small $0.0000218 per dollar of sales.

There are no commissions at Swell Investing, either for the purchase or sale of an SMA, or for any equity trades that are made within an SMA. There is no annual fee, nor is there any charge to close an account.

Swell Investing Portfolios

Each portfolio focuses on a particular theme. Currently available investments include Renewable Energy, Green Tech, Disease Eradication, Clean Water, Zero Waste, and Healthy Living. Both U.S. companies and America Depositary Receipts appear in these portfolios. All of them were established on September 30, 2016.

The Healthy Living portfolio invests in companies that sell products and services that promote active and healthy lifestyles. There are 54 holdings in the portfolio. These companies include organizations that sell fitness equipment and technology, supplements, organic foods, athletic apparel, and fitness facilities. Some of the stocks are well-known companies, such as Foot Locker, Hain Celestial Group, Unilever, Lululemon, and Dick’s Sporting Goods. Some of the less-well-known holdings include NuVasive, Smith & Nephew, and Brookdale Senior Living.

The fund’s factsheet notes that US consumers spend a lot of money every year on trying to be healthy. For example, organic food companies generated a total of $43.3 billion in revenue in 2015. So it would seem that this fund would have a bright future. However, since inception, the Healthy Living portfolio has underperformed its benchmark, the Russell 3000, by more than 6%.

The basket of Healthy Living equities has a an average P/E ratio of 29, and a beta of 1.01. The average EPS growth is 12.85, and the debt/capital ratio is 31.39.

The Clean Water portfolio is expects global demand for potable water to outstrip supply in the coming decades. If so, there could be plenty of growth and financial opportunity in this economic segment. The SMA invests in companies that conserve water and clean it. Businesses that build water infrastructure are also candidates for investment.

Unlike the Healthy Living portfolio, the Clean Water investment has outperformed the Russell 3000 by almost 5%. In less than a year, it has gone up a very impressive 19.15%.

There are more than 40 stocks in the fund. Unlike the Healthy Living SMA, most of the companies are unknown. Agilent Technologies, Xylem, Trimble, Albemarle Corporation, Analog Devices, Entegris, and Chicago Bridge & Iron Company are some of the names on the list. Most of them are mid-cap companies.

The basket of clean water stocks have an average P/E ratio of 24.14 and EPS growth of 14.02. The debt/capital ratio is a rather high 42.12, while the dividend yield is 1.15%.

They also offer a handy Guide to Impact Investing that explains a lot about their investing method.

Swell Investing Review

A third investment opportunity that Swell offers is a Disease Eradication SMA. It invests in companies that are in the business of trying to cure health problems like tuberculosis, malaria, and cancer. Both pharmaceutical and biotech firms are candidates for purchase. Many of these enterprises are actively engaged in research and development on important medicines and technologies.

The factsheet for Disease Eradication notes that outbreaks and diseases have increased since 1980. With new viruses like Zika becoming a greater concern, the demand for better medical solutions should grow. Noncommunicable diseases also kill over 40 million people every year.

The world’s health problems are being targeted by the companies in the Disease Eradication portfolio. These corporations include household names such as Biogen, Eli Lilly and Company, Gilead Sciences, Merck & Company, Bristol-Myers Squibb, and Amgen. Almost half of the portfolio is composed of large-cap stocks. Swell Investing cautions that the Disease Eradication fund is a long-term investment due to the possibility of short-term volatility.

The average EPS growth rate of the portfolio is 17.7%. The P/E ratio is 23.3, and the dividend yield is just 95 basis points. The debt/capital ratio is a somewhat high 35.34.

Of the six investment themes Swell Investing offers, the best performer thus far has been Green Tech, returning 31.52% since its September 2016 launch. The worst performer is Healthy Living with a 7.53% gain.

Swell Investing Review

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Other Investment Services

Swell Investing does not offer trading in forex, futures, options, or even individual stocks. Also missing are ETF’s and mutual funds. The broker only offers its small selection of SMA’s, so there’s not a lot available here.

Investment advice and portfolio management won’t be found here, either. If you need to contact the company, you first send an e-mail, and the investment company will try to resolve the issue electronically. If a phone call is needed, Swell Investing will call you.

The investment firm only offers individual taxable accounts. Retirement accounts are not available, nor are joint accounts or business accounts.

Swell Investing Comparison To Other Firms

Motif Investing offers baskets of stocks and ETF’s that have various themes. These include both socially-conscious and non-socially-conscious investment objectives. A portfolio can have up to 30 equities, and the broker charges just $9.95 per trade. Besides individual accounts, the company offers joint and trust accounts, along with a host of IRA’s, including Roth and Rollover versions.

Motif Investing also offers an account called Impact Portfolios. This service is similar to Swell Investing. An Impact Portfolio invests in companies that have passed tests on sustainability, fair labor, and corporate behavior. There is a $9.95 fee per month for an account, and $1,000 is required to start. Like Swell Investing, the Impact Portfolios provide direct stock ownership.

One nice feature that Motif Investing offers its Impact Portfolios clients is a 100% money-back guarantee. If the chosen portfolio underperforms its base portfolio by more than 100 basis points after one year, the company will refund all subscription fees.

Swell Investing’s 0.75% annual fee is a higher than some of the robo packages available today. Industry leader, M1 Finance, charges nothing.

Swell Investing Review Summary

As you see in this review Swell Investing offers a unique financial service. Despite its focus on impact investing, each one of its portfolios has returned a profit so far. Investors with a small amount of money will do especially well here, with the company’s low account minimum and asset-based fee.

Swell Investing reviewed by Brokerage-Review.com Rating: 4