Talking about Investing at the Thanksgiving Table

Amit Raizada

November 28, 2020

There will be a lot of empty seats at Thanksgiving tables this year. Staying close to home is in fashion this holiday season, and—because of the pandemic—people are limiting their Thanksgiving celebrations to only their closest family.

Being forced to stay away from the people we love can be devastating. However, I think close-knit Thanksgiving celebrations allow a rare but important opportunity: to talk with your closest family members about the importance of investing (and the strategies behind it).

There can only be one word to describe investing in 2020: rollercoaster. Never before have we seen the stock market fluctuate so wildly. With the single fastest stock market drop in history in March, to the single fastest recovery in the months that followed, investing in 2020 has been anything but normal.

That’s why we have followed the same tried-and-true strategy at Spectrum Business Ventures: Invest in the future and invest for the long-term. With the unprecedented volatility that came in the wake of the COVID-19 pandemic, it’s possible that one or more of your family members may have shifted their investing strategy. Whether it’s your father—who panicked in April and liquidated a majority of assets—or your daughter who discovered Robinhood in June and piled in on overinflated stocks perpetuated by hype rather than value, many of us have engaged first hand with investment over the last eight months.

During this unprecedented moment in our world and in our markets, it’s important to debrief and center yourself—strategically and emotionally—with your family. And here’s how you do it.

Talk about what happened—and why it happened.

On March 16th, the reality of COVID-19 kicked in for the real world. Markets dropped an astonishing 13%, halting trading within the first 15 minutes and sending the Nasdaq to its worst day ever. However, Markets had been on the downward trend since mid-February, even as all seemed normal.

When the reality of the pandemic hit the real world a few weeks later in early April, many were wondering why the stock market wasn’t dropping now. After all, panic was in the air and toilet paper was flying off the shelves. Enter the concept of “pricing in.”

Large-scale investors can’t predict the future, so they “price in” what they think will happen into their real-time decisions. This means that, when a big market event occurs, it likely was already reflected in the price movement weeks or months ago. This is exactly what happened in late March—markets were uncertain of the status of the coronavirus back in late February and many fund managers opted to get out rather than endure the possibility of economic impact.

It is vitally important to understand and talk about these stock market fundamentals with less-informed investors. Those who invest without knowing how the market works are destined to be crushed by the waves of the more informed.

COVID-19: A teaching moment

These concepts are not simple, nor are they instantly intuitive. There’s a chance that someone at your table this year may have gotten caught up in some rash investment decisions that kept their balance a lot lower than it could have been.

Of course, we can’t go in back in time, but if we could, it’s likely that you or your family member would have been much better off continuing their long-term investment strategy and not reflexively taking money out of the market.

That’s exactly why this is the perfect teaching moment for aspiring investors. The last year has made expressly clear the importance of having a comprehensive, long-term investment strategy based in the firms and markets of the future. Now is as good a time as ever to start putting these philosophies into practice.

Finances are one of the most important aspects of our lives, so why shouldn’t we discuss strategies with those closest to us? As you are all seated around the small Thanksgiving table this year (or maybe you’re Zoom-ing in), don’t be afraid to bring up the mistakenly taboo topic of investments.

Lessons Learned from a Highly Speculative Stock Market

Amit Raizada

July 24, 2020

Lessons Learned from a Highly Speculative Stock Market

The recent price movements in the stock market emphasize the growing relevance of disruptive market investments for savvy investors. These investments have become essential for navigating the global economy's dramatic shifts, offering a unique lens to uncover long-term opportunities through innovation.

Understanding the Shift Toward Disruptive Market Investments

The huge swings up or down can be enticing—even intoxicating—for new investors. Promises of fast money on exaggerated market moves have led to a surge of reckless investing. However, this type of speculative trading often lacks the long-term potential found in disruptive market investments. The difference lies in identifying trends that cater to changing consumer needs, enabling investors to bank on sustainable innovations.

The Age of Robinhood and Immediate Gratification

The popular investing app Robinhood has democratized market access, encouraging a wave of new traders. While this has led to some impressive short-term gains, it has also sparked troubling trends. The allure of options trading and penny stocks often eclipses the long-term value of disruptive market investments. By focusing on companies that innovate and fill market gaps, investors can avoid the pitfalls of speculation and instead build sustainable portfolios.

Case Studies of Disruption: Hertz and Nikola

At the end of May, Hertz declared bankruptcy, but its stock price inexplicably soared by 900 percent due to speculative trading. Similarly, Nikola’s rise and abrupt fall highlight the dangers of jumping onto short-term trends without understanding the fundamentals of disruptive innovation. Investors looking to capitalize on the transformative power of disruptive market investments should focus on ventures that address real-world needs and offer groundbreaking solutions.

The Future of Investing: Focus on Disruption

Investment is more than just a numbers game. By emphasizing disruptive market investments, aspiring investors can tap into ventures that revolutionize industries and provide long-term value. Whether it’s filling voids in the market created by younger generations or delivering cutting-edge technologies, the future belongs to those who can identify and support innovation. Disruption doesn’t just transform industries—it creates opportunities for life-changing returns while positively impacting the world. You can read more about Investment Philosophy here 

Millennials and Markets, Part II: Currencies and Gigs

Amit Raizada

July 6, 2020

In the first installment of my series on young people and their changing investment habits, we looked at how their “millennial outlook” on investment had been shaped by adverse economic conditions in which many were raised and by a desire to use investment as a strategic tool to drive social change. In that article, we discussed how sustainability is a significant concern among millennial investors, as many seek to patronize innovative green firms like Tesla in lieu of the traditional fossil fuel giants.

But it’s no surprise that climate change and sustainability are important to young people. In this article, I wanted to examine some millennial preferences that are less intuitive to outside investors. In many ways, this mirrors one of my favorite investment strategies – closely observing the preferences of young consumers to gain a foothold in the markets of the future.

Cryptocurrency

Cryptocurrencies like bitcoin, Ethereum, and Litecoin are continuing to gain popularity with millennials. But I believe a deeper, psychological shift is underlying the younger generations’ move to crypto. Many young people experienced the Great Recession in their teens and the COVID-19 pandemic in their twenties, is it any wonder that they’re circumspect about banks?

As the Federal Reserve enacts protocols of “unlimited” quantitative easing – a process where America’s central bank buys assets to pump money into the economy – there is a profound concern about the state of inflation, the dollar, and fiat money in general. If the Fed has the ability to essentially create money out of thin air, what does it mean for the value of our greater economy?

By investing in blockchain technology, investors are putting their money behind a valuable innovation with advantages that look quite enticing against the backdrop of today’s economic woes. By allocating a portion of their portfolio to cryptocurrency, the next generation is essentially hedging against the failings of the global economic system. If economic policy or global unrest causes the collapse of fiat currencies, what will be there to take its place? Cryptocurrency.

It’s important to note that the situation I’m describing is closer to a doomsday scenario than reality, and I wouldn’t necessarily recommend allocating a large sum of money to cryptocurrency. However, as a proponent of diversification, I side with millennials in my belief that crypto has its place in any well-diversified portfolio.

Solo Entrepreneurship / Self-Employment Technologies

Some larger corporations view their employees as expendable, which leads employees to take flight in search of better benefits and pay (I personally think companies need to incorporate a people-first approach into their business model).

With more tools available to nascent entrepreneurs than ever, the next generation of investors is turning to companies that empower the “little guy.” Shopify—an e-commerce platform that offers extensive resources for budding businesses—has seen an incredible resurgence since the crash in March, signaling that investors expect retail stores to increase their online presence (and sales) in the years to come. As barriers to entry are lifted and overhead expenses minimized, small business finds a space to thrive, making Shopify and related services like Square (a mobile payment company) incredibly enticing investment opportunities to the young investor.

As we see millennials make the jump from corporate jobs into self-employment, the gig economy is in full swing. Technological innovation—by way of Uber, Lyft, Grubhub, Instacart, etc.—has afforded people the opportunity to dictate their own hours, pay, and freedom. Younger generations are serious about freedom, and their investments show that.

If you enjoyed our book series then please check out our Millennials and Markets Parts 1 and 3.