Swell Investing Review 2018 – A Robo Advisor With a Socially Responsible Portfolio

Would you want to do good for the world at large, while at the same time doing great for your own investment portfolio? A lot of investors today — notably those of the Millennial generation — would concur. That’s made socially responsible buying a hot trend. And robo advisor platform Swell Purchasing was made to provide help.

Swell Investing (or simply Swell) is a robo advisor that creates themed portfolios of individual stocks. It focuses only on businesses that engage in socially responsible businesses. We are talking renewable energy, healthful living and clean water.

Swell is not the only socially accountable robo advisor on the market nowadays. So let’s see what makes Swell unique… and determine how it stacks up.

What Is Swell Investing?

Los Angeles-based Swell Investing (or only Swell) was founded in 2015 and launched in September 2016. The business intends to democratize the Sustainable, Responsible and Impact Investing (SRI) investment industry, which has traditionally been restricted to large shareholders or dedicated exchange-traded funds (ETFs). The platform provides investors a chance to participate in SRI with as little as $50. Swell is a true startup, but it is backed by its parent company, Pacific Life, which supplied the seed investment in all of Swell’s portfolios.

Each of Swell’s portfolios represents a different aspect of SRI, giving the investor an opportunity not just to participate in socially responsible investing, but also to isolate specific regions of interest. And it allows investors to both choose the portfolios they want to invest in and the desired allocation for each.

How Can Swell Investing Work?

Swell acts as your investment advisor, but your account is really held with Folio Investments, Inc., an SEC-registered broker-dealer and a member of both FINRA and the SIPC.

Like lots of other robo advisors, Swell allows its users to select from pre-designed portfolios that are managed by the platform itself. But unlike traditional robo investing platforms, Swell does not have you complete a questionnaire that decides your portfolio composition. Instead, it gives you the option to choose which portfolios you would like to put money into, as well as the allocation for each.

There’s another way that Swell differs from other robo advisors. While it’s normal for robo advisors to construct portfolios using primarily or entirely exchange-traded funds (ETFs), Swell invests instead in individual stocks, in the case of foreign stocks, American Depositary Receipts (ADRs).

Beyond the fact which you are able to choose which portfolios you’ll purchase, you have limited ability to decide on the stocks held in a certain portfolio. By way of example, if there are certain stocks which you would like to exclude from a portfolio, you are able to remove up to 3 holdings out of it. You can make the changes anytime you select.

There’s one other significant difference: When you invest through Swell, you’re a direct shareholder in each company that you have in your portfolio. This means that investors can vote on shareholder resolutions and attend corporate meetings.

Swell Investing’s Signup process

In order to join with Swell, you must be a U.S. citizen or resident alien and at least 18 years old. You will have to provide the following information:

  • Your title
  • Your address
  • Your Social Security number
  • Your date of birth
  • Your citizenship/residency status
  • Your email
  • Your employment status

Swell will also ask about your present investment assets, your investment time horizon and your risk tolerance. This is done to establish your suitability for investing in Swell, and to fulfill certain SEC reporting demands.

For funding purposes, Swell supports automatic bank linking with over 1,500 banks. But if your lender isn’t on the listing, it may be added with the use of test deposits. Simply checking and savings accounts — not cash market funds — can be linked. In general, it takes four to eight days for your account to be activated and fully invested.

Swell Investing’s Model Portfolio

Once again, Swell functions as your investment adviser, managing your cash, which is held in a brokerage account in your name at Folio Investments, Inc..

The platform employs a “rules-based” investment strategy. Each portfolio is constructed with two major factors — performance and impact — and follows these steps:

  1. Swell begins by screening each company for a commitment to positive effect across multiple areas of its business (environment, societal impact, governance).
  2. Swell investigates each company to determine how it derives revenue, which makes sure it actively delivers impact to the world.
  3. Swell analyzes each organization’s financial health and inventory evaluation.

Swell is currently offering six portfolios, all which represent a unique segment of socially responsible investing and are comprised entirely of stocks and ADRs:

  1. Green Tech — Focused on energy efficiency, building desirable products and making a concerted effort to decrease the pull on the energy infrastructure. This portfolio consists of 53 businesses, such as Trimble Inc. (TRMB), Mitsubishi Electric Corp. (MIELY), and Tesla Motors (TSLA).
  2. Renewable Energy — Focused businesses that are harnessing natural sources (other energy sources) to power the world. Within this portfolio, you will find 64 companies, such as Ecolab, Inc. (ECL), TransDigm Group (TDG) and Eaton Corp. (ETN).
  3. Zero Waste — Focused on businesses which provide solutions for composting, recycling and producing new stuff from recycled materials. This portfolio is made up of 37 companies, including Steel Dynamics, Inc. (STLD), FLIR Systems, Inc. (FLIR) and Parker-Hannifin Corp. (PH).
  4. Clean Water — Focused on companies engaged in conserving water, cleaning it up and streamlining systems. This portfolio includes 44 companies, such as Aqua America, Inc. (WTR), Parker-Hannifin Corp. (PH) and Martin Marietta Materials, Inc. (MLM).
  5. Healthy Living — Focused on companies engaged in food, fitness and new technologies that enable people to live longer, healthier lives. In this portfolio, there are 54 companies, such as Lululemon, Inc. (LULU) Fitbit, Inc. (FIT), Garmin Ltd. (GRMN) and VF Corp. (VFC).
  6. Disease Eradication — Focused pharmaceutical and biotech companies conducting R&D and developing innovative approaches to combatting today’s biggest health challenges. This portfolio holds 68 companies, including Merck & Co., Inc. (MRK), Becton Dickinson & Co. (BDX), and AbbVie, Inc. (ABBV).

Swell keeps 0.25 percent of your portfolio in cash, strictly for the purpose of paying off the advisory fees. The company does this in order to avoid selling stock each month to cover the price of the fee. All money held in your portfolio is within an interest-bearing account, which is also FDIC insured.

Swell has the benefit of investing in individual stocks, giving the investor an opportunity to see just what businesses make up every portfolio, in addition to the person allocation in each stock. This is extremely different from the ETF investments by their competitor Wealthsimple that essentially invests in entire markets based strictly on the indicator of the sector. It enhances the transparency of Swell’s portfolios. In addition, an investor has at least limited ability to make changes inside the composition of every portfolio, which is a major advantage of individual inventory investment.

Swell is perhaps best used as the socially responsible allocation of a well-balanced portfolio. Contrary to other robo advisers, Swell does not produce a diversified portfolio that invests in various market sectors or different asset classes, like bonds and property.

Try out Swell Investing today with as little as $50 and start investing these high growth areas like renewable energy and electric cars.