Profile: Stash
In the US, investing in the stock market used to be a topic solely for mid-age someones possessing a stable professional job and very likely owns properties. In a recent survey by Gallup, adult that are older than 35 are more likely to invest in the stock market than adults that are younger than 35. In another word, the persona of a stock market player should be a wealthy person and old enough to be parents. However, with the strike of the recession in recent years, some middle class investors are leaving the risky stock market and find a better place to store their wealth.
The stock market is a risky, fast-paced, but rewarding place. Many Americans had heard of terms such as “compound interest.” Having your wealth increased by 5% annually will be a lot of money after 10 years or so. It is natural for investors to enter the stock market optimistically. The risky but highly profitable stock market attracted investors from different economic backgrounds. However, in many cases, it is only a matter of time for investors with lower socio-economic background to realize the stock market is rarely stable and even lost money at it. Stock value of companies rise and fall every second and not even the best financial analysts can always predict what will happen next with a hundred percent accuracy. For investors who don’t have the knowledge of how the stock market works or have the access for investment advices on market trends, investing money in the stock market is like gambling. They are merely betting their luck on chances.
However, this does not mean the stock market is only the game for the well prepared, wealthy upper class. Young adults and less wealthy people should invest in the stock market too. With the access of business and finance education and the availability of online stock trading, millennial investors can learn better about the financial market and make better decisions. In fact, anyone can catch up in their financial market knowledge, as most information is free online. In addition, With the availability of online stock trading, the barrier of entry is lowered significantly too.
Now, it is possible for anyone to set up trading account to purchase stocks via mobile apps too. Stash is micro-investment application that allow users to set up a trading account. At the same time, Stash is a SEC register investment adviser. Its mobile application allows any users to invest via their platform while also providing investment guidance contents. This informs their users before making investment decisions. One of their most useful feature is the ability to buy fraction shares. Some company’s stock value is close to $1,000. Not all investors can afford such expansive stock. Owning fractional stock allows users still can diversify their investment although they don’t have a lot of cash for investment.
Stash definitely encourages young millennials and the working class to invest at the stock market. Users only needed to pay $5 to open their account and $1 monthly fee. It is surprising that Stash doesn’t charge commission fee whenever users are trading stocks or transferring money in or out of their account, but they don't. Commission fee is commonly charged by stock brokers when their clients make a transaction or in a period of time. However, like any other financial investments, realized capital gain will be taxed.
According to the company’s policy, when a user’s account reaches $5,000, Stash will stop charging the $1 monthly fee give $0.25% annual interest to the user, or $12.50 for a $5,000 account. This interest rate is higher than many saving accounts in bank. Perhaps they are investing the saved money on some highly profitable investments like what most commercial banks do?
Users can choose from a selection of more than 30 ETF (exchange-traded fund), such as stocks, bonds, or commodities selected by Stash’s team. Investments are chosen based on a model driven by factors including historical performance, expense (fee) ratio, risk profile and asset allocation.
Nevertheless, Stash is planning to set up features like retirement fund investment plans in the future. Millennials are entering the workforce and just like every generation, millennials will become old and need to save up for retirement.
The founders of Stash, Brandon Krieg and Ed Robinson had worked at Wall Street for decades. As described above, they realized investment in stock market is relatively unfair for small investors. Investment bankers and hedge fund managers would reject smaller investors as they yield less revenue and provides less liquidity than bigger investors. Size matters in financial investment. At the same time, some millennials have the sentiments to distrust the Wall Street as greedy and capitalistic. Recent activities like “Occupy Wall Street” proved the sentiment is strong among the youth. Hence some of these millennials are missing the opportunity to invest for themselves. Thus, Krieg and Robinson decided to found Stash and trying to encourage young millennials to invest in the stock market; even their portfolios aren’t big as their former clients in Wall Street.
In August 2016, Stash had raised $9.25 million dollars in series A funding, the first round funding for capital investment. Even earlier in October 2015, Stash claimed to have about 150,000 investors and 500,000 content subscribers. Cumulatively, all users in Stash had invested more than 25 millions of dollar in the stock market. This has proved that Stash is a worthy startup and great for venture capitalist to be invested in (no pun intended). With mobile applications like Stash drawing more attention to the inner machinations of the stock market, the demographic of the US stock market players will change.
User interface of Stash