Learn How to Invest In the Stock Market Before You Can Afford To.
In August of 2018, I moved to San Francisco to study computer science. This was a big transition for me as until this point I had been living in the southern United States and studying psychology. I found a school in the heart of Silicon Valley that promised to teach me how to be a software developer over the course of two years, and then to help me find a great job in the technology industry. I found few reasons why this wouldn’t be the perfect opportunity for me, and so I packed my bags.
Fast forward to now, the time of this article’s publishing, where I am deep into my software development learning. The projects I work on mimic the design and functionality of real and established online applications. At school, I’m given a safe environment with minimal consequences associated with failure. I write code that doesn’t work the way I intended it to all the time. This is because I don’t yet know how to write code well and so I experience many small failures every day. My school expects this and encourages it. “Fail faster” is a phrase I often hear.
A hallmark of a great educational institution is that it is designed to give you a safe space to fail — and to recover, all while the consequences are relatively low. There is a rapidly growing awareness that students learn exponentially more from their failures than their successes and I must say I’ve found the same to be especially true for myself.
In one of my classes, I was tasked with creating a product/application in the financial and economic industry. Inspired by my own desire to learn more about the world of finance and the stock market specifically, I wanted to create a product that I knew myself and many of my peers could benefit from. I was reminded of how lucky I was to have space in my education to learn and fail before the consequences were severe and noticed that there was a gap in the financial industry where there should be a similar space to learn.
Millennials and the Stock Market
I have family that has worked in the financial industry and I have been adjacent to the industry the majority of my life. Although I should have known more about the financial industry and investing at the time I decided to create an app in the industry, I didn’t. It occurred to me that if I, with all of my resources, didn’t know what it meant to invest in the stock market it was likely many of my peers didn’t either. For all that I didn’t know about the stock market, I did know that it could be incredibly lucrative if you found success with it — or devastating if your investments did poorly. My perception of the market was shrouded in fear and misunderstanding, likely prompted by my introduction to the market.
In September of 2008, I had recently turned thirteen and the stock market had very little to do with my everyday life — it would be fair to say I knew nothing about and had no opinions on the stock market. This soon changed on September 29th, 2008 when the Dow Jones Industrial Average infamously fell to 777.68 points, the largest drop in the history of the market. Hysteria ensued, and although I may not have understood how it functioned, the stock market was now something I was conscious of day-to-day.
Many millennials experienced a similar introduction to the stock market in 2008, one characterized by panic and confusion. We had a front row seat to the financial turmoil of millions of Americans. I won’t cover the timeline of the market crash or the totality of its implications in this article, but if you would like to read more about and better understand why 2008 was not a good year for the stock market to make an entrance to your life, this is a great resource. In a nutshell, millennials are intimidated by the stock market, and with good reason.
While it is likely that fear has been a hindrance to millennials becoming involved with the stock market, there is another equally great obstacle: we hold almost no understanding of how it works or how to do it. Nope. Zip. Nada. While we ourselves have matured, our understanding of the ever elusive “stocks & bonds” hasn’t. Eighty percent of people under 30 aren’t involved with the stock market, compared to fifty-two percent of the United States’ general population who aren’t. Four-fifths of millennials are unable to answer basic questions about finance. To further this issue, it isn’t easy to teach yourself about the market or how to get involved with it. Reading material and tutorials exist to try to teach young people how to invest but these resources are frequently inaccessible in the sense that they are not budget friendly or time friendly.
Perhaps most importantly, the majority of young people don’t have the resources financially to become involved in the stock market. Investments are often seen as a luxury and not a strategic use of funds. When asked why they don’t invest in the stock market, 40% of millennials said they didn’t have the budget for it. More often than not, saved money is put toward paying off debt or creating emergency funds. The idea of painstakingly raking up some savings only to put them on the seemingly invisible rollercoaster that is the stock market just doesn't feel reasonable.
If you have read this far you might accuse me of categorizing millennials as broke, uneducated, and frightened. You’re right, that's exactly what I’ve done. Its difficult to want to do much of anything when you’re broke, uneducated, and afraid, much less watch your hard earned dollars show themselves out the door. This makes it difficult to take on the commitment of learning and risks associated with the stock market. Many people want to categorize millennials as lazy, but that's not true. We’re simply tired. If the financial industry wants to break the stereotype that investing is a sport reserved for “old white men” and make learning to invest achievable for everyone, they will have to meet us where we are, not vice versa.
There is an exponential benefit to getting involved with the stock market at the beginning stages in your adult life. One of the most successful investors in history, Warren Buffet, said: “The stock market is a device for transferring money from the impatient to the patient.” When you invest in the stock market you play the long game; the sooner you invest, the more time that investment has to grow. This has multiple implications: firstly, you will collect larger dividends (rewards) the sooner you become involved with a dedicated portfolio. Secondly, it is a safe bet for getting you closer toward a solid retirement plan.
Meet Investea 🌱
Failure — But Make It Lucrative
So, where does this put us now? We know that millennials are just about as likely to practice voodoo as they are to place a trade. Something else we know is that young people spend a lot of time on their electronic devices and that gaming is as popular as it has ever been. If there was a way to present learning in the stock market as a game and put in on the devices we use every day, perhaps millennials and the stock market wouldn’t have to present as such a Capulet and Montague situation after all.
This is where Investea comes in. Investea seeks to do what other investment learning platforms haven’t — meet millennials where they are. Inspired by the format of my co-founder and I’s own education that allows for failure in a safe space, Investea follows the stock market’s actual data, in real time. The only thing that isn’t authentic is the money that you invest.
Contrary to popular belief, the best time to learn about investments and the stock market first hand is before you actually have the financial resources to traditionally do so.
We present users with the unique opportunity to learn what it means to invest in the stock market with little to no consequence of doing so poorly. This takes the fear and mystery out of the stock market and encourages users to get involved. We believe this product will be especially effective because while a first-time investor usually risks their own finances in order to gain exposure to the market, our users won’t have to. With Investea, even if you were tempted to put your real life financial portfolio in question by making high-risk investment decisions, you wouldn’t be able to.
An ideal Investea user success story would include an individual who began to make mock investments on our platform in their spare time and then transitioned to consistently spending infrequent time managing their mock portfolio. We hope to develop a casual user environment — an informal space for what is traditionally considered a very formal practice. Over time as our user becomes more experienced with the workings of the market, we anticipate them eventually migrating to a platform that enables them to start putting real money on the table in small, controlled doses; such as Stash or Acorns. We aspire to be the stepping stone they need to empower themselves towards a better financial future.
We are excited to be bringing Investea to you soon. Please check back shortly for more information and exciting announcements. Read about Investea’s development process in the second part of this article, here.
This post is co-written by Luc Bottener and Betsy Bailey. You can find Luc’s portfolio here or on Github. Betsy is on Github and Medium, and you can view her portfolio here. Special thanks to Luc’s dog, Chewie, for his thoughtful insight and direction on this post.
Don’t worry, we went ahead and counted for you. The term millennial is used 12 times in this article, which we didn’t love doing, but was necessary. Thanks for playing along.
