As SelfWealth welcomes the next-generation of investors to the stock market, we understand that it can be a tricky task trying to identify areas to invest on behalf of a child. 

Fortunately, the stock market offers a number of investment themes that lend themselves towards investing for the future, one of the benefits of investing for kids from an early age.

Without further ado, here are three of the popular investment themes of the future for kids.

 

1. Ethical and ESG funds

Ethical funds are specialist funds and open-ended investment companies that only invest in shares from companies they recognise as being ethically sound, including from a social, environment and moral standpoint.

Typically, ethical investment funds will use ‘negative’ screening measures to remove companies from investment consideration. For example, a stock may be excluded from an index fund if they are involved in an undesirable sector or industry such as gambling, fossil fuels, animal cruelty, or tobacco. Ethical funds may also carry out ‘positive’ screenings, where they specifically target companies that are contributing in a positive way to the world. 

Another screening measure is selecting companies that excel in environmental, social and corporate governance (ESG) practices. Here, businesses will be assessed not just on what they do, but how they go about it. The notion of impact investing is another criteria funds may use to target firms that are working on solving some of the world’s key challenges. 

Over the last two years, ethical funds have seen a significant increase in interest as more investors think about what they are supporting. Interest in this area is only expected to increase over the coming years, which aligns with those looking to invest on behalf of kids. 

Some of the popular funds in this sector include Australian Ethical Investment (ASX: AEF) and Morphic Ethical Equities Fund (ASX: MEC), while there are also a number of ETFs such as Betashares Global Sustainability Leaders ETF (ASX: ETHI), BetaShares Australian Sustainability Leaders ETF (ASX: FAIR), Russell Australian Responsible Investment (ASX: RARI) and Vanguard Ethically Conscious International Shares (ASX: VESG).

 

 

2. Renewable energy 

As the world makes the transition to more sustainable and environmentally-conscious forms of energy, companies focusing on renewable energy have become a popular investment theme for many long-term investors. Today’s generation of children will grow up witnessing this transition unfold, making renewable energy stocks a long-term option that kids can follow closely.

The transition has been fuelled throughout the pandemic, with oil demand plunging, political changes in the US, and many governments around the world recognising they will need to phase out the sale of petrol and diesel-powered vehicles. 

The International Energy Agency (IEA) has been among those forecasting major growth for renewables, while an increasing number of super funds have cut exposure to fossil fuels in the wake of pressure from stakeholders and activists.

The green energy sector includes a number of sub-thematics. There are pure-play renewables in wind, solar and hydrogen such as Tilt Renewables (ASX: TLT), Mercury NZ (ASX: MCY) and Meridian Energy (ASX: MEZ), to name a few of the larger ASX names.

On the other hand, there is a growing band of companies playing a supporting role in the uptake of green energy, like rare earths companies and aspiring zero-carbon lithium producers hoping to contribute towards the roll-out of electric vehicles. 

The ASX also plays host to a number of ETFs offering exposure to the renewables thematic, including the ETFS Battery Tech and Lithium ETF (ASX: ACDC), BetaShares Climate Change Innovation ETF (ASX: ERTH) and VanEck Vectors Global Clean Energy ETF (ASX: CLNE), with the last two options only recently listing in 2021.

 

 

3. Medical research and pioneering science

The last 18 months have only acted as a reminder about the crucial role that science, innovation and research play within our society. Many companies on the forefront of research and development in the medical, biotechnology and pharmaceutical sectors have witnessed stellar gains in recent times, not to mention their contribution towards society.

Household names such as CSL (ASX: CSL) have long been a favourite among long-term ASX investors, and when it comes to investing for kids, companies of this calibre are regularly viewed as a portfolio candidate.

The speculative nature of companies engaged in clinical research and development means that individual stock selection in this sector can be fraught with risk. However, exchange-traded funds like the ETFS S&P Biotech ETF (ASX: CURE) seek to provide exposure to a diversified basket of companies engaged in the research, development and manufacturing of products based on genetic analysis and genetic engineering. 

There are also ETFs like the iShares Global Healthcare ETF (ASX: IXJ) and BetaShares Global Healthcare ETF (ASX: DRUG) offering broader exposure to the healthcare industry.

 

How do I open a kid’s share trading account?

It is simple to open a SelfWealth kids share trading account. Simply follow these steps:

  1. Sign in to your SelfWealth trading account on the website
  2. Click on the avatar (top right corner)
  3. Choose ‘Settings’
  4. Click “Open an Additional SelfWealth Trading Portfolio”
  5. Click “Start Application”
  6. Select “Kids (Minor)” from the options regarding application type and follow the prompts – have the minor’s birth certificate or birth certificate extract ready!

 

Learn all about SelfWealth kids trading accounts in our introductory guide here. Take the opportunity to make an impact and shape the financial future of a child, apply to open a kids share trading account today!

If you have any questions, please visit help.selfwealth.com.au for a quick answer.

If you want to talk to us directly, you can get us on live chat during trading hours or email us at support@selfwealth.com.au.

 

SelfWealth Ltd ACN 52 154 324 428 (“SelfWealth”) (Australian Financial Services Licence Number 421789). The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice.