Stocks are among the best long term investment options, as the fortune building of Warren Buffett as a first generation professional investor proves.
There are only two ways to wealth. The Steve Jobs way where you build a fortune through your own entrepreneurial endeavors or The Warren Buffett way where you develop a knack for spotting winners and investing in them as a habit, with discipline, and meticulously for the long term.
We are living in the era of fastest unicorns, where companies are going from incorporation to unicorn in a mere year or two, if not months. Yet, the common man is not benefiting from these wheels of fortune (the stocks of promising unicorns) – which are all too ubiquitous to miss.
The way the common man has access to stocks is mostly through retirement and pension funds, mutual funds etc, barring those who actively trade in stock markets. When common man chooses to invest in these funds, he entrusts the fund manager to exercise stock picking judgment sometimes paying hefty fees such as 2% per annum, for even standard fund management strategies such as S&P100 etc. Adjusted for the fund management fees, this indirect stock investor nets returns any where between 0- 25% per annum.
Even the best fund managers find it challenging to return over 25% compounded annual return. However, the individual marquee stocks and blue chips such as Apple, Google etc do deliver consistently exceptional compounded returns, especially in the early years post IPO. The marquee stocks are also easy to spot in the current digital information era.
Then, why does the average saver not get the benefit of investing in these
1. By the time the company goes public, it has already received several hundreds of dollars in funding from private investors (VCs) who have reaped the most benefit from early exposure to these companies.
2. By the time the company goes public, the competition and the herd mentality of VCs to chase the same companies that other VCs are funding and the hype cycle during the company’s long ascendancy to fortune while remaining private has ensured over valuation of the startup pre IPO and that there is no under pricing of IPO. So, very little upside remains for the little stake that is made open to the common man to subscribe to. Let us say VCs hold 50-60% of the company before it goes public, then excluding the owners and management, maybe 20-30% is made available to the public. This little stake which is open for public is again fought over fiercely by hedge funds who are regular clientele of investment banks, with banks giving them preferred allocations. So retail investors get very little allocations, even if they take the trouble to subscribe to IPOs.
3. Retail investors need to keep an eye on which companies are going public when, need to select the stocks, and need to go through tedious processes of filling up an application
4. That leaves us with retail investors investing in companies that are well past their IPOs (thus missing the lion’s share of the fat early returns).
Here, every time the retail investor invests, he frequently has a
2. Obsolete System
3. Unfair Pricing
4. Opaque and No Access
• Token features such as liquidity, divisibility into small units, transferability
• Eliminating the fees payable to multiple layers of intermediaries
• Ability to pick and choose promising ISTOs from a user friendly dashboard,
• Safety of a legally compliant security
• Early exposure to the upside of a potential unicorn
• Reach of a consumer product easily available on a smartphone wallet.
Why is this a boon to entrepreneurs worldwide?
• Entrepreneurs can go public sooner than the VCs would have them go.
• They can access a global borderless marketplace for investors with every risk appetite and quantum of funds to invest, both institutional and retail
• No fees to pay to intermediaries (and revolutionarily no investment banking and legal fees to pay in most plain vanilla IPOs ( ISTOs)
• Companies are in control of every process from pre-issuance, to issuance, and post-issuance of securities
• This levels the playing field for entrepreneurs in remote corners of the earth, with extra-ordinary growth prospects, not just the ones with access to a rich investor ecosystem Why is this a boon to retail and traditional stock market investors?
• Can bypass traditional fund managers, or reduce fees payable to asset managers
• Can access investment opportunities from around the globe, on a frictionless platform
• Liquidity early on, instead of locking up funds for 7-10 years with a fund manager
What are you waiting for? The security token ecosystem is maturing, so we can expect a replica of the Wall Street model on token streets sooner than you think! Would you ride this wave early on, or wait for everyone else to catch up and skim the early rewards?