Only a few generations ago, investing tended to remain the purview of the wealthy. No longer. Today, your neighborhood plumber might have a more impressive portfolio than your company’s CEO. And it’s all happened thanks to systematic democratization in the publicly traded capital markets
This isn’t to suggest that everyone can or should invest, of course. All investments carry some type of risk. Not all would-be investors like dealing with market fluctuations, especially amid today’s pandemic-erratic economic period. Yet most people who haven’t entered into the world of investing might be surprised at how welcoming it can be to newcomers. Even newcomers without large savings accounts or well-known families can participate.
Take the case of the retired optometrist whose DIY investing took him to the billion-asset mark. By taking the “tortoise” approach, he steadily grew his wealth despite the fact that he grew up poor, had a learning disability, and could easily have ended up living a life of crime. Basically, his story is another one of those “if I can do it, so can you” tales.
But can you really own a piece of the investing marketplace without putting your shirt—let alone your home and retirement—on the line? Thanks to several key factors, you can. What are those factors? Check out the list below.
1. The rise in accessible investing technologies.
In the recently published book, The Democratization of the Private Market, author Carine M. Schneider credits advances in technology for demystifying investing. As Schneider notes, emerging platforms and systems have allowed widespread inclusion into private company markets by qualified investors worldwide.
“Investors who are interested to invest in the private market (and are qualified) frequently don’t know where to find opportunities to invest. A variety of platforms are now available to support selling and buying of private company shares,” shares Schneider. In other words, if you want to buy, trade, and sell online, it’s no longer who you know and where you live. These markets are now much more accessible to all qualified investors. Not only are portals out there, but they help you avoid running afoul of regulatory problems and save on legal fees. Plus, they make it simple for you to manage your investments and understand their value.
Of course, you’ll want to research to see which investing portals are the right ones for your needs and compare transaction costs. Be sure to read reviews before submitting any personal data into an investing system. That way, you’re better protected.
2. The excitement around financially supporting new businesses since COVID.
Believe it or not, the global epidemic has had a positive effect on investments. Investors, many of whom are Millennial and Generation Z, are investing their dollars into the market. Their willingness to invest right away is helping businesses deliver new ideas to target audiences. In spite of the pandemic and global supply chain problems, the market continues its robust growth.
Looking only at the Dow Jones, The Dow Jones Industrial Average (DJIA) index dropped around 8,000 points in the four weeks from February 12 to March 11, 2020, but has since recovered to 34,580.08 points as of December 3, 2021. In February 2020 – just prior to the global coronavirus (COVID-19) pandemic, the DJIA index stood at a little over 29,000 points.
With more platforms designed for the general investor, such as Robinhood or Stash, the barrier to entry is low. You just need a bit of disposable income to invest in the public company markets. How much is a bit? NerdWallet shows that you can start investing in stocks for as little as $500. You will need more to invest in private companies and not every investor qualifies to make those investments, but the increase in platforms that support these transactions continues to grow.
3. The average consumer is becoming more financially savvy.
Yet another benefit of carrying a computer in your pocket: You can get investor information anytime, anywhere. As the Milken Institute explains, the secret to widespread investing is education. Tons and tons of education. In an article on its site, the Institute posits that “democratizing finance could follow the same basic path of requiring investors to spend the time, energy, and attention” on watching videos, reading reports, listening to podcasts, and taking other self-directed coursework.
Even if you’re not fully confident in the investment market, you’re likely to find information to give an “Aha!” moment. From the complexities of the stock market to questions surrounding how investments are taxed, anything investment-related is available on the web. You just have to look for it.
Does this mean everything you read is accurate? No. So conduct due diligence and find trusted sources so you’re not swayed in the wrong direction.
Have an appetite for building your wealth without too much help? You’re in luck. Thanks to the democratization of the investing realm, you’re better positioned than ever to grow your savings no matter what your upbringing or experience.