🎧Making Investing Accessible & Rational for Retail Investors
A conversation with the founders of Wealthyhood, a DIY wealthbuilding app for long-term investors, Alex Christodoulakis and Kostas Faliagkas
Robinhood is so 2021! We discussed a more sustainable, rational and accessible future for retail investing with the co-founders of Wealthyhood. Below are some highlights of the conversation.
Listen to the full interview or watch on YouTube.
Since the beginning of 2022, this newsletter has explored crypto, venture capital, illiquid assets such as art and wine, they are interesting but they are also peripheral.
Investing doesn’t have to be complicated. I assume most readers of this newsletter invest one way or another but that’s not the case for the majority of the population. For most people, the key is to get started.
As I age, I often think about ‘what if I had started investing early and regularly?
Making it easy to start investing
We're currently focusing the experience on the easy to get started part, without knowing much about investments. We take you through the whole process from starting from scratch to ending up with a complete and well-diversified portfolio. And that's broken down into some very simple steps that we walk you through.
Selecting the asset classes that you want to invest in. Selecting the geographies that you want to get exposure to. Selecting sectors and industries that match your preferences. This you a template portfolio. Then it's about selecting the risk that you want. And at that point, you may still want to move assets. Then you select how you want those assets to be allocated. We make it easy for you because we run some optimization libraries.
The output is an optimized portfolio. But you can still further change the allocation to match your preferences.
Long-termism & simplicity
Wealthyhood was built around two principles:
Creating long-term portfolios and investing for the long-term
Makes it easy to maintain and rebalance portfolios
The idea came from the co-founders’ assessment of the current retail investment world:
If you're a very wealthy individual the investing world is easy for you to navigate. You have access to all these wealth managers and financial advisors and access to every investment opportunity.
Millennials invest mostly through mobile apps and they have 2 major options:
Option number one is they can pick a trading app. There are many like Freetrade, Trading212, and Robinhood in the US. A few of them are well-established. The problem here is that all these apps cultivates a mentality of gamblers. They make it very easy for you to access the stock market, buy stocks in a cheap and user-friendly way.
But the problem is that users end up gambling. They end up trying to become millionaires overnight and not following any sort of robust investment principles.
On the other extreme of the market, we saw a quite recent innovation. It was a robo-advisor. So guys like Nutmeg, Wealthify, Moneyfarm and they tried to solve the problem by creating another problem. So essentially you open these robo-advisor apps and you find portfolios based on your risk preferences. There are three problems here. Problem number one is that there is no personalization. They don't care if you George won't invest in tech biotech on or anything else, you have a big one or the five pre-made portfolios.
The second problem is that you have no control. You can only put money in or take money out of Europe, you cannot sell or buy individual assets or change the allocation that you have been given. And the third problem is that to give you this portfolio template and rebalance every once a year. They charge you from 0.75 to 1%.
Now this may sound small, but if you're investing for your retirement, you're going to get a trend. These or third is investing for the next 30 days. This may translate to more than one third of your wealth, not ending up into your pocket.
We thought these two extremes are not an ideal experience.
Let's create something that focuses on the beginner investor. Take them by hand help them create a well-diversified, but very personal portfolio and then give them all the tools to maintain it over time.
Hands-on investor education
Being an advocate of people starting to invest. I’ve been talking a lot about investor literacy and education, but not everyone has the time and willingness to do so. Wealthyhood’s approach is a combination of social media and ‘learning by doing’.
It's one thing to educate users, to articles and learning guides and everything. And the other, and more important is that because our users don't have hours and hours to get sophisticated investors is what we call hands-on education.
So the full guidance that you get while we use the product. So uninterrupted guidance and hands-on education. At every single step, there is an explanation of what this means and how this looks like on your portfolio.
More about Wealthyhood
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Or jump straight to create an account here.
Thank you for joining me in the exploration of the future of investing. In this newsletter, I’m looking at alternative assets, defi, investment technology and trends - without the hype.
George from Investorama.