5 Takeaways From Their Conversation
Back in September, Yieldstreet CEO Milind Mehere and Tarsadia Founder Mitch Caplan were invited to speak at the Greenwich Economic Forum for a wide-ranging conversation on alternative assets and the future of fintech. For those unable to attend, here are five key takeaways from their conversation:
The Importance Of Education
Milind and Mitch both emphasized the importance of additional education within the alternatives space – not only for consumers, but for firms and investment platforms working alongside other partners in the space, as well as regulatory institutions. Because alternatives are now accessible to everyday retail investors after decades of legislative restrictions, it’s critical that those investors receive a proper education that allows them to fully understand the risks and returns associated with alternative investments. This would not only help to prevent potential costly missteps related to inexperience, it would also enable investors to make educated decisions about which investments make the most sense in the context of their individual portfolios.
Identifying Similarities Between Alternatives and the Beginning of the Internet Era
In reference to his time at E-Trade, Mitch recalls being at “ground zero” of the initial democratization of investing through the use of technology. In the early stages of the internet boom, a lot of investors were buying and selling stocks online without entirely understanding the associated risks. Over time, many were able to leverage their mistakes as learning experiences, and ultimately become successful investors. Mitch believes this is similar to what we are experiencing now with emerging alternatives and the gamification of online investments via social media and popular trading platforms like Robinhood. Eventually, risk-heavy online investment trends are likely to subside in favor of a more thoughtful approach, largely due to increased access to educational material and continued advancements in technology and the fintech space.
Are We Entering the Golden Age Of Fintech?
In many ways, Milind agreed with Mitch’s comparison, and went even further to suggest that we may be entering into a “Golden Age of fintech,” in the sense that consumers are more poised to benefit from online investment opportunities than ever before. As access to formerly illiquid asset classes becomes even more democratized through technology, Milind believes that in addition to fractionalization (or the ability for the next generation of investors to buy fractions of stocks through platforms like Robinhood), access to any number of alternative investment opportunities will similarly broaden, and at an increasingly low cost to consumers.
Technology, Alternatives Open Up New Possibilities For Capital Formation
Another important change noted by both Mitch and Milind was how the mechanics of capital formation are inevitably shifting in light of crowdfunding platforms like Yieldstreet. While some private investment groups are still in favor of operating from a closed architecture as opposed to a more inclusive, democratized architecture open to individual investors, Mitch suspects that the closed model will be far less viable in the long term. This is because, as Milind pointed out, technology and platforms like Yieldstreet provide new avenues for capital formation that didn’t exist in the past, in addition to sparking an increased demand for alternative investment opportunities. For example, rather than raising capital for a project internally, funds can market that project specifically to retail investors as a strategic way to complement and diversify their portfolios. In any case, Mitch and Milind seem to agree that the fintech landscape is on the precipice of a significant transformation.
Investors Desire Liquidity, But That Could Change
While there seems to be no argument that modern retail investors desire liquidity when it comes to their investments, Mitch and Milind were both quick to point out the various pitfalls of that strategy. The primary issue is that investors who are overly focused on liquidity 100% of the time are also more prone to reacting emotionally to the fluctuations of the market or related to their individual investments, which in turn can make them more susceptible to mistakes. While it’s perfectly understandable to fall into irrational thinking when an investment seems to be losing its value, we believe investors should actually be much more focused on the long term. And with the introduction of technology, illiquid investments are benefiting from increased transparency and optionality, with the evolution of even newer technologies like blockchain driving further innovations and possibilities, including the facilitation of new secondary markets.
Looking for more engaging and informative discussions on alternatives, the future of fintech, and the finance industry at large? Consider subscribing to The Yield on the podcast-streaming platform of your choice.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.