Every day, global trends are reshaping society and the business landscape.

Todays infographic from McKinsey Global Institute (MGI) presents a snapshot of 10 insights into how the world is changing, based on its research work from 2019.

How did we get here, and where are we going?

Globalization is making the world shrink every day, as humans and trade become increasingly connected. However, there are signs that point to a new phase of globalization that is leading to different outcomes than prior years.

Global exports are fundamentally shifting. Although manufactured goods are traded at higher volumes, certain services have grown up to three times faster.

The compound annual growth rate (CAGR, 2007-2017) for different sectors are as follows:

This has a profound impact on the mix of industries and countries involved in this shift away from goods and towards services. Asia is coming of age in this phase of the global economy.

Trade with and within Asia is rising, and shows no signs of slowing down. The regions economic might is growing rapidly, and with higher disposable incomes, consumption is growing too.

In China, there is a new dynamic at play.

Compared to other developed nations, Chinas economy is relatively closed. The country is re-balancing its focus towards domestic consumption and relying less on other countries for trade, technology, and capital.

At the same time, the rest of the world is increasingly exposed and tied to China for the same thingsand such unequal engagement has a ripple effect on everything from financial markets to flows of technology and innovation.

New technologies like artificial intelligence are sparking new opportunities, but they also raise questions about the future of work across geographies and gender.

As the costs of devices and data plummet, Indias digital adoption is surgingit closely competes with China for the highest digital population across everything from smartphone ownership to social media users.

As mass adoption of digital technologies continues, it is poised to add significant economic value to the Indian economy.

Companies worldwide are also integrating new technologieschanging the nature of work itself.

By 2030, talent and investment in the U.S. will be concentrated in a few regionswith 60% of job growth coming from just 25 hubs.

These are just some examples of places which see double-digit potential net job growth by 2030. However, all regions will face unique challenges in the next decade.

Globally, women and men are at similar risk of losing their jobs to automation by 2030.

*FTE: full time equivalent. Based on midpoint automation scenario.

While everyone needs to adapt in the age of automation, women face more barriers. They spend up to 1.1 trillion hours on unpaid care work, nearly three times that of men (400 billion hours).

Women are also often in lower-paid roles or male-dominated professions. Additionally, many women have less access to digital technology, and limited flexibility to pursue education. These factors make it harder for women to catch up and bridge the gap left behind by automation.

Its clear that while technology generates opportunities, it also creates new social challenges. Low- and middle-income households face stagnating incomes, higher debt, and rising basic costs.

The U.S. labor share of income has been dropping for yearsbut of this decline has occurred since 2000.

According to McKinsey Global Institute, boom-bust commodity cycles and rising depreciation are the main factors behind this trend, more so than commonly-cited automation or globalization.

Stagnating incomes mean less purchasing power, while the cost of basics are sharply rising.

The global inequality gap has narrowed, but within developed economies, it has actually increased.

Technology and globalization have made many discretionary goods cheaper. However, basic costs such as education, housing, and healthcare have ballooned compared to the rate of inflation over the past decade.

With wages stagnating, the higher costs for basics have eaten into disposable incomes in many mature economies.

Global trends drastically influence how companies compete with one another, transforming corporate dynamics worldwide.

In just two decades, the distribution of economic profits has been growing increasingly wider. The top 10% of companies (>$1 billion in revenue) brings in an ever-larger share of total profits, while the losses of the bottom 10% share deepen.

*In 2016 dollars. Considers corporations with $1 billion average sales (inflation-adjusted). Sample sizes: 2,450 companies (19961997) and 5,750 companies (20142016).

In essence, the bottom 10% destroy as much value as the top 10% createand it has only intensified in 20 years.

Latin America best exemplifies this corporate trend of companies thriving versus surviving.

Compared to similar economies, Latin American countries lack mid-size companies with over $50M in revenue. The Latin American average for firms per $1T GDP is 65 firms, while 100 firms is the benchmark average.

While Asias share of the largest firms is widely distributed across countries, Latin American enterprises are lagging behind.

CEOs and leaders will need to adapt to the new age of disruptionand quickly. To become a 21st century company, they must ask 10 crucial questions about how they operate in an increasingly complex world:

As the 10 insights suggest, global trends are profoundly altering the course of our future. Their impact varies greatly depending on demographics and region.

Everyonebusiness leaders, policy makers, and individuals worldwidewill need to adapt to the realities of a world in transformation.

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How Technological Breakthroughs are Shaping the Future of Investing - Visual Capitalist

NEW YORK--(BUSINESS WIRE)--Star Mountain Capital, LLC ("Star Mountain"), a specialized investment manager focused exclusively on the large and underserved U.S. lower middle-market, is pleased to announce that it has been named one of the 2019 Best Places to Work by Pensions & Investments.

We are honored to be recognized by what I believe to be one of the investment industrys most prestigious publications, said Brett Hickey, Founder & CEO of Star Mountain. With over $1 billion in assets under management and 30 full-time team members, we look forward to continuing to deliver results for all of our aligned stakeholders.

Since 2010, Star Mountain has made over 60 direct investments in U.S. small and medium-sized businesses and over 20 primary/secondary fund investments within its Collaborative Ecosystem, exclusively focused on the U.S. lower middle-market. Star Mountain specializes in bringing large market resources to the established small and medium-sized U.S businesses it invests in.

Star Mountains focus and dedication has been productive for job creation and economic development. Star Mountain is dedicated to this large market of underserved businesses with its specialized business model established to address the challenges and opportunities of these companies. As part of its commitment, Star Mountain has trademarked Investing in the Growth Engine of America.

Star Mountains distinctive business has helped generate positive income and overall financial returns for investors and this has helped it attract sophisticated global high net worth and institutional investors.

One hundred percent of our employees receive a share of the profits we generate from investment returns. Everyone is passionate about their careers and aligned to succeed as the firm continues to grow, said Chris Gimbert, Chief Financial Officer of Star Mountain.

Star Mountain prides itself on providing a year-round Internship program to local students, veterans, athletes and other talented individuals. Star Mountain also believes it is important to promote from within and recognizes those that demonstrate passion, perseverance, determination and grit.

ABOUT STAR MOUNTAIN

Investing in the Growth Engine of America Star Mountain Capital is a specialized asset management firm focused on investing in the large and underserved U.S. lower middle-market of companies with typically over $10 million of annual revenues. Star Mountains distinctive business includes a custom-built media and technology platform and brings large market resources to smaller businesses as a value-added lender and investment partner.

As part of its ESG program (Environmental, Social and Governance), Star Mountains Charitable Foundation, a not-for-profit 501(c)3 focuses on improving lives through economic development, including job creation, health & wellness and cancer research. Notable missions include helping match veterans and women with high quality small and medium-sized business career opportunities across the country, including within Star Mountains portfolio which in aggregate represents over 200 companies.

Note: Awards and recognitions by unaffiliated rating services, companies and/or publications should not be construed by a client or prospective client as a guarantee that he / she / it will experience a certain level of results if Star Mountain is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement, testimonial endorsement, recommendation or referral of Star Mountain or its representatives by any of its clients or any other third party. Rankings published by magazines and others are generally based exclusively on information prepared and / or submitted by the recognized advisor. Moreover, with regard to all performance information contained herein, directly or indirectly, if any, readers should note that past results are not indicative of future results. The description and the selection methodologies of each award and recognition are subjective and will vary.

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Star Mountain Capital Named One of Pensions & Investments 2019 Best Places to Work - Business Wire

A long-time Ragland plant is getting what local leaders say is St. Clair Countys biggest capital investment in more than 20 years.

The National Cement Co. of Alabama has announced plans to pump more than $250 million into building a new kiln at its Ragland production plant.

The company has been producing cement in Ragland since 1910 and ships manufactured cement products to customers in Alabama, Georgia, the Carolinas, Tennessee, Mississippi and Florida. Its parent company is Vicat SA, based in France.

Construction should begin in the first quarter of 2020, with start-up scheduled for 2022. Normal work will continue at the plant through construction.

Spencer Weitman, National Cement of Alabamas president, said the project should bind the company in Alabama for some time.

It will ensure that our employees and our Ragland facility can continue to be competitive for years to come by upgrading our plant with the latest technology and equipment, Weitman said. We have enjoyed a long, successful partnership with the Ragland community, and look forward to that continuing for many years to come.

Economic and government leaders praised Gov. Kay Ivey, the Alabama Department of Commerce, the Birmingham Business Alliance and local leadership for aiding the project.

The investment in National Cements facility is a great example of our ability as a state, county, and city to work together and increase opportunities for the residents of St. Clair County, Paul Manning, chairman of the St. Clair County Commission, said. We are excited about their continued commitment to the Town of Ragland, and we have always appreciated their support of the St. Clair County community."

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National Cement investing $250 million in Ragland plant - AL.com

DURANGO, Colo.--(BUSINESS WIRE)--Swan Global Investments (Swan), a specialized asset management firm with a 20-year track record at the forefront of hedged equity solutions, today announced a new educational content partnership with the Investments & Wealth Institute (the Institute). The two organizations have partnered to launch an education series for financial advisors: All Options on the Table: Holistic Investment Strategies for a Volatile, Low-Yield World. Member and non-member registration for the first-of-its-kind course can be found here.

All Options on the Table is a 10-part series led by Swans Client Portfolio Manager, Marc Odo. The curriculum will help advisors gain practical insights regarding options and options-based strategies, including due diligence and portfolio implementation. Swan and the Institute developed this resource to provide advisors with an edge as they help clients see around corners and build portfolios that are aligned to changing marketplace realities.

Swan believes advisors must understand that a conventional portfolio comprised of 60% stocks and 40% bonds exposes clients to undefined and unnecessary risk. Increasingly, bonds are no longer able to serve the dual-mandate of delivering downside protection and offering attractive returns. As a result, advisors need to be searching for other solutions including options-based strategies to mitigate risk and produce positive returns for their clients, especially those nearing or navigating retirement.

As the traditional 60/40 portfolio becomes increasingly ineffective, advisors need to identify alternative solutions and strategies, such as options, that will offer their clients both downside protection and the potential for enticing returns, Odo said. Through our partnership with the Institute, Swan seeks to equip advisors with the knowledge they need to implement options-based strategies, which will ultimately put their clients in the position to retain and grow precious capital on the road to wealth and retirement.

With the investing environment undergoing swift change, we saw this partnership with Swan as an opportunity to educate advisors on how to implement options-based strategies to balance risk and reward in clients portfolios, said Sean R. Walters, CAE, Chief Executive Officer, Investments & Wealth Institute.

The course will cover several timely topics, including:

About Swan

Founded in 1997, Swan Global Investments is a leading asset management firm that offers time-tested investment solutions built with a goal of producing consistent returns over time, by protecting irreplaceable capital from catastrophic loss.

About The Investments & Wealth Institute

The Investments & Wealth Institute is a professional association, advanced education provider, and standards body for financial advisors, investment consultants, financial planners and wealth managers who embrace excellence and ethics. Through its events, continuing education courses, and acclaimed certificationsCertified Investment Management Analyst (CIMA), Certified Private Wealth Advisor (CPWA), and Retirement Management Advisor (RMA)it delivers rigorous, highly practical education.

Important Risk Information

Swan Global Investments is an SEC registered Investment Advisor that specializes in managing money using the proprietary Defined Risk Strategy (DRS). Please note that registration of the Advisor does not imply a certain level of skill or training. All investments involve the risk of potential investment losses as well as the potential for investment gains. Prior performance is no guarantee of future results. This communication is informational only and is not a solicitation or investment advice. Further information may be obtained by contacting the company directly at 970-382-8901 or http://www.swanglobalinvestments.com. 470-SGI-121919

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Swan Global Investments and the Investments & Wealth Institute Establish Partnership to Educate Financial Advisors on Options-Based Strategies -...

As pensions, companies and mutual-fund managers come under pressure to act in line with their investors conscience, so-called socially responsible investing strategies have blossomed.

Indeed, investments in funds focused on SRI have grown to $17.67 billion through November, from $2.83 billion in 2015, according to Morningstar. Moreover, the U.S. Forum for Sustainable and Responsible Investments estimates that around $12 trillion of assets in the U.S. are managed under some sustainable investing strategy in 2018, reflecting growing demand for investments that purport to align with clients social values.

On top of that, the number of large, publicly traded companies across the globe that have said that they are adopting environmental, social and corporate-governance criteria and the number of fund managers who say they are using ESG screens to identify investments also has been growing rapidly.

According to a survey by KPMG, 75% of the largest 100 companies across 49 countries say they are employing ESG business models or incorporating aspects of sustainability approaches, as of 2017, compared with 12% in 1993.

Yet the debate over how to define ESG or to implement strategies that employ such considerations has drawn confusion, even division, among those interested in furthering those investing aims. This has led to heightened scrutiny among regulators who have complained of a lack of consistency in ESG data and ratings.

I think the first issue is that we dont even know what ESG means, said Securities and Exchange Commission Commissioner Hester Peirce on Tuesday, in an interview with CNBC. So, I think defining that would be an important first step before trying to develop metrics, she said.

See: ESG funds face SEC questions over criteria

With that in mind, heres a general primer of what its proponents claim sustainable investing achieves as well as some of the challenges.

ESG attempts to encompass how a company is performing against a rubric of nonfinancial risks that cant be measured as a line item in a corporations accounting statement, but could still harm it economically if incidents around these risks arise.

Sustainable investors, or anyone who employs ESG criteria, put such risks in three buckets which are represented by the three letters in ESG. The environmental component tracks a range of issues including a companys carbon footprint or how a business has adapted to climate change; Social issues can include product-safety problems and labor abuses in supply chains; Governance assesses the quality of a companys management and whether the board maintains sufficient oversight.

Yet beyond that, there is a lack of uniformity around basic terms in the industry as different fund managers follow their own approaches to sustainable investing, said Bonnie Wongtrakool, global head of ESG Investments at Western Asset Management, a Pasadena, Calif.-based global investment manager with more than $400 billion in assets.

The broadest pool of sustainable investors fall in the ESG integration schoolpreferring to look at ESG factors as just another risk to screen stocks and bonds when they are selecting assets. In practice, this might be more about scoring how well companies address nonfinancial risks, and working with executives to improve company performance on such aspects, according to Wongtrakool.

There are other less inclusive approaches, too.

Impact investors look to deliver a specific social and economic benefit and not just financial gains as part of their investment, while socially responsible investors, or SRI, look to exclude and divest from companies outright.

Clients are unsure of what they want to achieve when they refer to ESG, said Dan Chi Wong, global ESG specialist at Nikko Asset Management. Clients may also have varying degrees of understanding of what ESG integration means, conflating it with other ESG strategies such as exclusions.

This confusion may have also resulted in accusations of mis-selling as investors are surprised by what is held within their ESG-oriented portfolios. In particular, the general public has sometimes been surprised by the inclusion of oil-and-gas companies in ESG-friendly indexes and mutual funds.

You have some investors saying I thought ESG just meant excluding fossil fuels, but companies that generate revenues from oil-and-gas production could be held by ESG-integrating money managers, said Wongtrakool. For example, such investors could look to invest in energy companies that perform better on ESG criteria, such as carbon reduction and renewable energy investments, compared against other competitors.

Opinion: For ESG investors, the newest challenge is separating fact from greenwashing

A recent Wall Street Journal report indicated that the SEC has sent examination letters to investment firms looking into how they determine ESG criteria. Peirce, a Republican commissioner for the SEC appointed by President Donald Trump, has been vocal about ESG investments and has criticized the lack of consistency in ESG ratings across the investment management industry.

Read: Socially responsible investors may have unwittingly backed police-state surveillance in China

Check out: Critics say KKRs responsible investment stance is being clouded by its stake in a controversial tear-gas maker

A lack of standardized and frequent data on ESG metrics have been a major issue for a category of investing seeking uniformity and consistency, according to analysts at State Street.

Different scoring methods have led to varying grades, at times, for the same company. For that reason, some asset managers have compiled their own scores that use data from third-party providers.

Different ESG data providers may provide varying but overlapping data, and the opaqueness in how the different data are used in the analysis makes it difficult to integrate the information, said Wong.

Investors have also complained that not enough companies disclose ESG-related information such as their level of carbon emissions or the number of women that sit on their board. That can sometimes lead to lower ESG scores for smaller companies simply because they may not have the staff and resources to report such information, according to Hamish Galpin at Herms Investment Management.

That is why institutional investors such as the California Public Employees Retirement System have called on the SEC to pressure companies to provide more ESG-related information, and to release accompanying standards for their disclosure. Currently, the SEC doesnt make such disclosure mandatory, and its officials such as William Hinman, director of the regulators division of corporation finance, have outlined a reluctance to force businesses to report such information.

To make up for the lack of regulatory assistance, market participants have turned to organizations like the Sustainability Accounting Standards Board, or SASB, an organization formed in 2011 that provides voluntary guidelines for companies to report sustainability issues that are considered financially material to investors.

In 2018, SASB published a list of 77 standards that they say could materially affect the financial condition or operating performance of a company.

And impact-investing participants point to the Global Reporting Initiative, or GRI, which was started in 1997 and recommends standards for sustainability reporting.

However, there currently is no universally accepted standard for reporting.

Sustainable-investing proponents insist that what is good for society can translate to good investment returns. It is a position advocated by major asset managers who say monitoring ESG factors can offer a valuable window into matters that arent reflected in a companys financial statements.

ESG datacan indeed be a proxy for reputation and quality of management, said Wong.

A recent study by the BlackRock Investment Institute found that ESG-focused MSCI equity indexes matched or beat the annual returns of traditional benchmarks over a period between 2012 and 2018. The outperformance was particularly noticeable in emerging markets where corporate disclosure on ESG risks can lag behind that of the U.S. and Europe.

But critics say claims of outperformance are reliant on how investors break down periods of comparison, with different lengths of time yielding different outcomes as to the benefits of ESG.

The promise of marrying profit and values has allowed the industry to rapidly expand beyond its small-time origins when 18th-century Methodists and Quakers would avoid investing in companies involved in the sale of liquor and tobacco, or so-called sin industries, according to Jennifer Coombs, associate professor at the College for Financial Planning.

Modern-day impact investing, perhaps, is often pegged to a 2004 report titled Who Cares Wins: Connecting Financial Markets to Changing World from the United Nations secretary-general and the UN Global Compact along with the Swiss government.

Part of that argument is that inattention to nonfinancial risks can lead to a sharp blowback against complacent investors. Recent scandals such as Boeings 737 Max airplanes has highlighted the importance of paying attention to such issues, said Thomas Graff, head of fixed-income at Brown Advisory.

These are the kinds of risks that ESG analysis can sometimes unearth, but classic quantitative business analysis can miss, he said.

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Heres what you need to know about the $12 trillion ESG investment world - MarketWatch

Cryptocurrency investors have been pushed to move beyond Bitcoin (BTC). With hundreds of altcoins to choose from and several seeing some massive gains thanks to the 2017 bull run, investors have had their pick of the litter when it comes to making speculative investments on what they believe would be the next big thing.

However, things havent gone particularly well for a lot of these guys. Earlier today, a tweet from a cryptocurrency investor with Twitter handle (@jratcliff) showed the performances of some of Bitcoins competitors in the industry since the bullish run of 2017.

According to him, investors would have lost more than half of their funds if they had chosen these altcoins over Bitcoin. As the asset was up 89 percent for the past year alone, while the majority of these altcoins had seen negative returns. This isnt shocking, as Bitcoin has fueled the vast majority of the bullish runs weve witnessed to date. Its been the catalyst of growth for the cryptocurrency market as a whole, and while many developers claim their assets could be better, they still owe a lot of their visibility to Bitcoin.

Bitcoins dominance in the cryptocurrency market is absolute. It still leads the market in terms of market share and trade volumes. Currently, the Bitcoin Dominance Index a metric thats tracks Bitcoins share of the global cryptocurrency industry by market capitalization stands at 66.45 percent. When one entity controls half of a market shrug hundreds of participants, its a behemoth.

But, beyond being used for speculative purposes, Bitcoin has been adopted as a means of payment by some major companies. Some payment processors have also added it to their list of settlement assets. Scaling technologies like the Lightning Network have also increased support for BTC, bringing the asset closer to regular spenders.

Institutions also made in-roads into cryptocurrency, but their eyes have largely been fixated on Bitcoin. Firms like Bakkt and Grayscale Investments have led the charge, doing their bit to meet the demands of institutions.

Although Bitcoin has plummeted a lot this year since rallying from the cryptocurrency winter of 2018, the assets dominance as an investment vehicle has spread across the investment circle as a whole. Earlier this week, CNN released a roundup of assets and their performance across the past decade and crowned Bitcoin as the best-performing assets of the decade.

Quoting data from Bank of America Securities, the news medium pointed out that a $1 investment in Bitcoin at the start of the decade would have yielded $90,000 today. In comparison, U.S. stocks, 30-year treasury bonds, and gold would have yielded $3.46, $2.08, and $1.34 respectively today on a $1 investment made a decade ago.

Images courtesy of Shutterstock, Trading View and Twitter.

Excerpt from:
Bitcoin Outclasses Other Cryptocurrencies as an Investment Option, Heres Why - BeInCrypto

Altitude Investment Management Partner Jon Trauben. Altitude Investment Management

To Trauben, 2019 was less about what went wrong in the cannabis industry, but rather what went right.

In 2018, Trauben says "there was a lot of fast money trying to play an irrational exuberance game."

"I understand the pain people have felt," Trauben said. "But I think we're coming to a healthy point, which is, 'let's stop talking about the fast money trade and let's talk about a real industry.'"

To that end, Trauben said his fund is looking at growth-stage investment opportunities across the cannabis industry.

In the US, that means companies that are either in good shape and looking for capital, or distressed opportunities.

"These growth-stage companies are boxing out the remnants of the startup cycle," says Trauben. "So we think the startup cycle is pretty much over."

On top of that, Trauben's firm is staffing up in Europe, as major markets like Germany move toward a medical cannabis framework.

As Europe legalizes, companies there are taking their playbooks from the "vertically-integrated" strategies that companies had developed to capture the US and Canadian markets.

"That's a clear opportunity for us," says Trauben.

Altitude, a New York City-based fund started by veterans of the hedge fund and private equity world, raised a new $100 million fund last winter.

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Cannabis VCs share top predictions of hottest areas to invest - Business Insider Nordic

Alison Southwick and Robert Brokamp, CFP

Dec 20, 2019 at 11:48AM

It's Motley Fool Answers' fifth-anniversary show, and it has been a doozy of a half-decade in the worlds of investing and finance. So much has happened, in fact, that it's almost too much for just two cohosts to cover. So for this retrospective episode, Robert Brokamp and Alison Southwick have brought back a special guest who was there right at the beginning: former Motley Fool editor Dayana Yochim. They'll consider some of the more interesting trends since that first episode, including the rise of the robo-advisors, the free-trading revolution, and the infamous latte backlash.

To catch full episodes of all The Motley Fool's free podcasts, check out ourpodcast center. To get started investing, check out ourquick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Dec. 17, 2019.

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick...

Dayana Yochim: Wait, wait, wait, wait, wait, wait, wait. Like, I thought you invited me here, to do drunk history. No?

Robert Brokamp: That's coming.

Southwick: I mean, are you already drunk?

Yochim: Yeah! I had a roadie to get ready for this. OK, do whatever you're going to do.

Southwick: Bro! Guess what! It's our fifth anniversary episode...

Brokamp: Congratulations to us!

Southwick: ...and who better to reminisce with us about what has changed in the last five years in the world of money -- and other trends -- than Dayana Yochim, our own Stu Sutcliffe.

Brokamp: Who's that?

Southwick: Thank you, Rick! Rick appreciated that. It's the fifth Beatle.

Yochim: Wow, that's really embarrassing.

Southwick: Left before the Beatles became big.

Yochim: Yeah! Yeah! I launched you guys.

Brokamp: You did, and you are the composer and performer of our theme song, "From Beneath Your Blankets."

Yochim: Right!

Southwick: Is that your band name?

Yochim: Actually, that's a really good band name. No, no, no. For acoustical purposes we had to put a blanket over our heads when recording so that the xylophone sounded just as sweet...

Southwick: And it does.

Brokamp: And it does!

Southwick: It sounds so perfect. Well, Dayana, thanks for joining us! Thanks for getting the band back together!

Yochim: It's so great to be here!

Southwick: All that, and more, on this week's episode of Motley Fool Answers.

__

Southwick: Roughly five years ago I had an idea, and the idea was to hang out more with the people I liked at work, and so I finagled Bro, Dayana, and Rick into doing a podcast and getting our bosses to sign off on it; thus, Motley Fool Answers was born. Aw! So 262 episodes and 10 million downloads later, here we are. And so much has happened in the last five years, such as...

Yochim: Bitcoin!

Southwick: AI!

Yochim: PharmaBro!

Southwick: Brexit.

Yochim: Pot stocks.

Southwick: So much good TV.

Yochim: Equifax hack.

Southwick: IPOs and FAANG became a what?

Yochim: Uh, let's see. Oh, loved ones who passed away. Sorry. Not loved ones.

Brokamp: Well, I loved some of them.

Southwick: So tell me. Tell me about your relationship with both of them I didn't know about, Dayana.

Brokamp: We all loved Bogle.

Yochim: And other stuff happened.

Southwick: Yes, it surely did, but we thought that we'd bring you back, Dayana, here some five years later from launching this podcast, to talk about what were some of the biggest trends and things that happened in the last five years in the world of money. Er.

Brokamp: Money things.

Southwick: Money things.

Brokamp: Money events.

Southwick: So we have what? Five of them?

Brokamp: Five, maybe six. We'll see what happens.

Southwick: I guess before we start, Dayana, you are at HerMoney.com.

Yochim: I am. I'm working with Jean Chatzky, who you know from the Today show.

Brokamp: One of my all-time favs.

Yochim: She's awesome. She's really delightful in real life, too. Yup, I'm working with them at the site HerMoney.com and all sorts of other projects that we do and it's awesome.

Southwick: Yay! Well, I'm thankful that you were able to come back and join us, even though you're off to bigger and better and awesome things. You still remember us, when.

Yochim: I do. The little people.

Southwick: Yeah. Bro, how about you kick us off?

Brokamp: Well, over the last five years, big events. Number one, stocks! So our very first episode...

Southwick: Stocks!

Yochim: Stocks!

Brokamp: Our first episode aired on December 16, 2014. At that point the S&P 500 was at $1,973. As of this taping it's at $3,190. Throw in dividends at the 75% -- total return almost 12% a year. That's pretty good. I'm not saying that we're responsible for that good performance. But it's probably not just a coincidence, either. A couple of other figures for you. International stocks have not done quite as well. A 5.8% average over the past five years.

Yochim: Alison's fault.

Brokamp: Alison's fault.

Southwick: To be fair, we only went to a couple of other countries, so we didn't really do our part to stimulate the international economy.

Brokamp: That's true. We've got to work on that. And then good old bonds returned 3% a year. There are three notable investing milestones -- at least to me -- over the last five years. We'll go through those very quickly.

Southwick: What?

Brokamp: Yes. However, because stocks have done so well this year, what you have now if you invested that $10,000 in a bond fund you'd have $25,500 and $31,000 in stocks. But that outperformance of stocks is all due to just this year since 2000. It's just another reason why we, here at The Motley Fool emphasize that you have to be a long-term investor. And that's number one.

Southwick: All right, Dayana.

Yochim: I think a notable thing that happened in the past five years was the rise of the robo overlords. Our robo overlords took over our portfolios. And a robo-advisor, for those who don't know, is an automated investing service that manages a portfolio. It's based on your timeline, how long you have to invest, and your risk temperament. They do the quiz and they automatically build a portfolio, typically of index investments and ETFs, that's well diversified and they rebalance it on a regular basis so that basically you don't have to do anything. You let them manage your portfolio. The fees...

Southwick: And by them you mean the robots.

Yochim: Yes.

Southwick: Some sort of AI or something. Computers, don't worry about it.

Yochim: Just computers. That's the answer to all of this. You'll pay, typically, 0.25-0.50% as a portfolio management fee. It's pretty low but, here at The Motley Fool, I know you guys really take a hard look at fees and individual investors can probably do better than that. But again, this is a convenience and it is a low-cost way to really be hands-off but still be an effective investor.

At the end of 2015 robos were managing about $60 billion in assets. Today they manage just shy of $1 trillion, and they're expected to cross the $1 trillion milestone just next year, so the growth of consumers using robo-advisors has been huge. And it's not just fintech companies.

Southwick: Betterment. Wealthfront. All these are start-ups.

Yochim: The biggest robo-advisor is actually Vanguard's Personal Advisor Services. They manage more than $100 billion compared to Betterment, which is the largest fintech that's a robo-advisor and they manage around $15 billion. So the big guys got in on the action, and that can account for a lot of the growth, but also financial planners or wealth management services. This was a great way for them to manage client portfolios, to cut their costs of doing so, but also provide that service for folks.

I think we will continue to see a growth in robos and also a growth in the sophistication of the types of services they offer.

Brokamp: Along the lines of that you've also seen the rise of target date funds. One of the broader themes is that people are offloading more of their investment management. I love target date funds. The benefits of the robos are that [with] the robo you take a questionnaire so that your outside allocation is very unique to you, at least based on your risk tolerance. They also claim that they're more tax efficient, which probably is true. But you add that into the growth of index funds and people are just taking more of a hands-off approach to investing.

Southwick: Bro, number three.

Brokamp: The Latte Factor backlash.

Yochim: Ooh! Go buy a lot of hate.

Brokamp: For those of you who don't know The Latte Factor, it probably started back in the 1990s with a guy named David Bach who was a Morgan Stanley financial advisor before he became a financial author. The principle is that depending on which book or article you read, that if you give up your daily coffee that costs you $3-5 a day and you invest that money, over 40 years you'll have $2 million or something like that.

Southwick: I mean, the math works.

Brokamp: The math works. Well, sort of.

Southwick: We've gotten emails from listeners who argue very strongly that you should forgo the latte.

Brokamp: Right. And again, it's associated with David Bach, but a lot of other people have jumped on that. Kevin O'Leary of Shark Tank fame told CNBC in 2017, "Do I pay $2.50 for coffee? Never, never, never do I do that. That is such a waste of money for something that costs 20 cents. I never by a frappe latte, blah, blah, blah, woof, woof, woof."

Southwick: It should be, "But will I spend $250 on a bottle of wine." Yes, absolutely.

Yochim: And my suit cost more than half a year of mortgage payments.

Brokamp: Well, we'll get to that, too. And then earlier this year, Suze Orman came out with a video and said, again, the same sort of deal. If you give up your coffee and invest it, you'll have $1 million. She said, "You are peeing $1 million down the drain after drinking the coffee."

Southwick: Colorful, Suze!

Brokamp: "Do you really want to do that? No, make coffee at home. Every penny counts. It's not a need -- it's a want." And she said, "I don't even do that, and I can afford it and chances are you can't." Thus began the backlash. The backlash. So lots of articles came out about it. In a span of a month two articles came out with the "F" word in it. One was Barry Ritholtz, financial advisor and journalist wrote an article entitled, "Buy Yourself an F*ing Latte," and then a month later Sallie Krawcheck, the CEO of Ellevest, wrote, "Just buy the F*ing Latte."

Yochim: I believe on HerMoney there was the F*ing latte is just a metaphor, people.

Brokamp: So the criticisms came down to this. First of all, some people did criticize the math, either it being inaccurate or overly optimistic because they assumed you would earn like 12% a year, which is a little bit more than the stock market has done over the long term.

Two, it's focusing on small things, but not focusing on the big, systematic issues like wages not increasing very much. Like the increasing cost of healthcare, and college, and school loans. The gender pay gap. The cost of child care. All these things that are really important and are really explaining why people have trouble getting ahead. And yes, the advice is coming from people who have expensive clothes and have their own private islands like Suze Orman.

And then the other one was -- from Sallie Krawcheck in particular -- that it's sexist. The way it's explained it's not like give up your six-pack. It's not give up your martini. It's not give up your [...]. It's focusing on the latte. The stats do show that women drink lattes more than men do, so they saw it as a lot of mansplaining.

As for me, personally, I'm mixed on it. I understand that there are these systematic issues that do need to be addressed. Things like the defined benefit pension has certainly been tough on people. That said, if you are among the millions of Americans who don't even have $1,000 in your bank account or is behind in your retirement savings, if giving up your coffee means you can invest another $1,000 a year; doing that for 10, 20, or 30 years will make a difference.

Yochim: But totally give up avocado toast.

Brokamp: But one is less domestic, right? That's what it's moved to.

Yochim: Yes, that's the new version of the latte. I agree with you. The problem with giving up the latte is -- besides the math issues we have behind it -- are you really going to save that money? It is a small luxury people have. Better to spend your energy every day lamenting the fact that you're drinking the awful coffee from work is to look at your biggest expenses and sweat the big stuff.

Brokamp: I totally agree.

Yochim: You can save months' worth of latte money by calling your insurer and negotiating a better rate on that. By doing the research before you buy a home. By making very conscious decisions on these big-ticket items that will make a significant difference in your personal finances over time.

Southwick: Dayana, No. 4.

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5 Big Changes in Investing From the Last 5 Years - Motley Fool

A new report confirms, once again, an old bit of wisdom: The smartest investment for most people across the globe are low-cost, low-volatility index funds.

That's according to investment research firm Morningstar's 2019 "Mind the Gap" report, a biennial global study of investor returns. Morningstar found that individual investor returns are lower, overall, than the returns for the mutual funds and ETFs that they are investing in. The "gap" in the report's headline refers to the gap between how any fund performs and how people invested in that fund fare. Returns had the worst performance in the most volatile markets.

That indicates that people are withdrawing their money from the stock market at inopportune times, or when the market is dropping, according to Morningstar. If investors left their money alone, as experts advise, during times of stock market turbulence, you would not expect a "gap" compared to the total returns for a fund that they are invested in.

Individuals fared better when they were invested in low-cost, low-volatility funds, Russel Kinnel, chair of Morningstar's North America ratings committee, noted in a press release. The report also found that those making automatic contributions to their investments say, by contributing a percentage of every paycheck were the most successful.

"Investors should continue to prioritize low-cost and less-volatile funds, and steady investments that can stand the test of time," says Kinnel.

The good news: The gap between a fund's performance and its investors' performance is shrinking. Before 2017, the gap was more than three times as big. Investors might be learning a thing or two.

Investing in low-cost index funds, which cover broad swaths of the stock market (therefore making them more diverse and less volatile), is the strategy most commonly advised by financial experts for individual investors. Even Warren Buffett, the billionaire founder of Berkshire Hathaway, advises people to stick to index funds over stock picking or other types of investing.

"Costs really matter in investments," Buffett told CNBC in 2017. "If returns are going to be seven or 8% and you're paying 1% for fees, that makes an enormous difference in how much money you're going to have in retirement."

Funds that passively track the S&P 500 or another index can have expense ratios the cost you pay the broker to invest as low as tenths of a percent. The average expense ratio of passive funds was 0.15% in 2018, according to Morningstar. The original index fund, the Vanguard 500, has an expense ratio of just 0.04%. Some brokerages, like Fidelity,among others, have even started to offer no-cost index funds.

That's good for everyday investors because a higher expense ratio, even something as seemingly small as 1%, can eat away at returns.

"Consistently buy an S&P 500 low-cost index fund," Buffett said. "I think it's the thing that makes the most sense practically all of the time."

As Morningstar's report notes, the low-cost funds are only effective if you continuously invest in them and don't try to time the market, or pull money out when it starts to drop. Doing so will hurt your returns, and you'll miss out from any potential rebound in the market. The S&P 500 had 17.8% 10-year annualized total since it bottomed out in March 2009, which matched the gains made by the S&P following the downturns in 1982 and 1987.

Update: This article has been updated to reflect that Schwab does not offer fee-free funds.

Don't miss: Index funds are more popular than everhere's why they're a smart investment

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These are the best types of investments for your portfolio, according to new Morningstar research - CNBC

Last December IPE asked various individuals in and around the world of institutional investment what their single biggest wish would be for the responsible investment industry/movement for 2019. This year, we asked them to revisit that wish: did it come true?

Almost all of those who participated in this exercise last year responded to IPEs new invitation.Generally, it seems 2019 has not delivered on their hopes, although several participants highlight momentum and progress. Still, the need forimprovements in the availability and usefulness of data is one theme that emerges from the comments.

Its been a busy year in sustainable finance and it closes very much in this vein, in particular with a rush of developments linked to the European Commissions action plan.

These include the Council and European Parliament this week reaching a political agreement on the taxonomy and the European supervisory authorities delivering their advice to the Commission relating to undue short-termism. ESMA, for example, encouraged theCommission to set its sights on the achievement of a unified set of international environmental, social and corporate governance disclosure standards.

This month also brought the unveiling of the Commissions economic growth strategy the European Green Deal and EU endorsement of the 2050 climate neutrality goal, plus the United Nations climate change conference in Madrid, where it was decided to postpone to next year discussions on issues such as trading of emissions reductions between countries.

How does 2019 stack up compared with the wishes expressed by investors this time one year ago? Read on to find out.

Carine Smith Ihenacho, chief corporate governance officer at NBIM, manager of Europes largest sovereign wealth fund

Last year NBIMs Ihenacho emphasised the need for standardised, concrete and relevant sustainability data. This year she says:

We have looked at companies reporting on issues like climate risk since 2010. We saw some improvements in 2019, but there are large variations between companies and sectors. With investments in 9,000 companies across the globe, I remain hopeful that my wish is gradually coming true. As a long-term investor we support the companies in their journey to report more standardised, concrete and relevant sustainability data.

Christina Olivecrona, senior sustainability analyst at SEK334bn (34bn)pension buffer fund AP2

A global carbon tax is still very far away. This is sad, as it would create enormous momentum for the transition to a low carbon economy. Progress is on the way and especially the EU is moving fast. An example is the carbon border adjustment mechanism in the Green Deal, which is designed to ensure that the price of imports reflects the products carbon content. This is a step towards a global price!

Our ability to improve in this area hangs on the quality of data

Nico Aspinall, CIO of The Peoples Pension

Nico Aspinall, chief investment officer of The Peoples Pension, an 8bn (9.4bn) UK multi-employer pension provider

My 2019 wish to have mandatory Taskforce for Climate-related Financial Disclosures remains. If investment managers are to get better at investing responsibly it is imperative that we have necessary data from every stock market in the world as much information from as many companies as possible. Our ability to improve in this area hangs on the quality of data.

Greg Haenni, CIO of CPEG, theCHF13.7bn (12.6bn) public pension fund for Geneva

Disagreement amongst providers different ratings for the same company shows that ESG data remains unreliable.Much of the reporting today is either voluntary or if required by legislation not standardised, which leads to challenges when making comparisons.Also, factors such as carbon intensity vary within sectors, while measures can be volatile over time.

Going forward, we expect a better alignment across companies, sectors and regions between financial and non-financial data.

David Russell, head of responsible investment at the 70.1bn Universities Superannuation Scheme

My wish was that pension fund consultants would more proactively address climate change. While it has risen up the agenda, there is still a long way to go.

2020 will see a push from both pension funds and regulators that will change how the industry as a whole reports on ESG. The past has been marked by the reporting of processes, but we want outcomes, i.e. less telling us that meetings took place and more telling us what happened as a result of them.

Claudia Kruse, managing director, responsible investment and governance at APG

Last December Kruse called for consideration of the social aspects of climate change, and for end-investors to be able to express their sustainability preferences in addition to their financial preferences.Looking back she says both of these topics were in focus in 2019.

The litmus test will be what difference this makes in the real economy

Claudia Kruse, managing director, responsible investment and governance at APG

For example, South Africa developed a Just Transition Plan and the EU has announced a Just Transition Fund. Individual pension funds like ABP committed to investing into the transition, and 159 global investors representing $10.1trn in assets now endorse the Investor Statement on a Just Transition.While demand for ESG investments is rising, the decision on how to include clients ESG preferences in the suitability assessment and eventual product recommendations under the EU Sustainable Finance Action Plan has yet to be finalised.

All in all, there has been progress and the litmus test will be what difference this makes in the real economy.

Joshua Kendall, senior ESG analyst at Insight Investment

Last year I wished for the green bond marketto move beyond the concentration of issuance from governments, financials and utilities.Diversity has increased, with the telecommunication sector now part of the market through household names such as Verizon, Vodafone and Telefonica.

We also saw evolution in the types of impact bonds available. Notable here was Enels transition bond, which could pave the way for issuance from petroleum companies in 2020. Whilst the growth overall has been positive, we have found the credentials of some of the issuance to be less than convincing.

Fiona Reynolds, CEO, Principles for Responsible Investment

Last year Reynolds wished for investors to step up on climate action and this month she says she would have the same wish for 2020.

Whilst there has definitely been more climate action from the investment community and gains have been made through programmes that PRI is involved in such as Climate Action 100+ and the Investor Agenda, there is still so much more to be done. Emissions are higher than at any other time in the planets history, COP 25 was a disappointment and the anti-climate lobbyists are winning the day ambition is spoken about but the action doesnt meet the words.

For the investment community the initiative I am most proud of this year is the Net Zero Asset Owner Alliance. If we can get all major funds to commit to a net zero target this will be a game changer.

Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change

A number of actors have raised their ambition on climate change during 2019. Companies are setting net zero emission targets at a remarkable rate, helped by engagement through Climate Action 100+. With over 60 of our members, we are working on how to align investment portfolios with the goals of the Paris Agreement. 70 countries and the EU are working to achieve climate neutrality by 2050.

Companies are setting net zero emission targets at a remarkable rate, helped by engagement through Climate Action 100+

Stephanie Pfeifer, CEO, IIGCC

This momentum is significant, but not sufficient. Ahead of COP26 in Glasgow, we need to see even greater ambitionand bolder action in putting the global economy on a path to carbon neutrality.

Catherine Howarth, CEO, ShareAction

My wish for 2019 was that the impacts of investments would be recognised as relevant to meeting fiduciary duties. Well, it hasnt quite come true! That said, 2019 witnessed the growing profile of so-called impact investing and also saw mainstream investors like pension funds asking far better questions about the impacts, both positive and negative, generated by companies in their portfolios.

My wish for 2020 remains the same. Heres hoping every pension fund seeks to calculate and improve its impact-adjusted returns for the benefit of its members.

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Did they come true? 2019 responsible investment wishes revisited - IPE.com