Nikolas Sargeant
It was only a generation ago that investing was viewed as the purview of the rich. To invest required thousands of dollars in loose change, financial advisors and professional contacts to make it happen. Not now, not today.
These days, it wouldn’t be a surprise to learn that your regular plumber has a more diverse investment portfolio than the CEO of your employer. This is because of the systematic democratization of the investing world that began with the rise of online platforms.
It should always be pointed out that investing is a risky business, and not everyone is cut out for the market fluctuations and the subsequent ups and downs that every stock and commodity displays. That said, today’s investing landscape is a far more welcoming place than it used to be, and it’s one that just about anyone can meaningfully participate in with as little as a few hundred dollars.
A case in point is Herbert Wertheim, a retired optometrist and a self-made billionaire with a net worth $2.3 billion in 2019, according to Forbes. Wertheim told Forbes how he took a slow and steady approach, building up his portfolio that was worth just a few thousand dollars in the 1990s, eventually growing his wealth beyond his wildest dreams.
It’s an encouraging tale that’s theoretically possible for anyone to replicate, and it’s all thanks to the rise of more accessible investment platforms.
The Rise of Accessible Investing
In her book, The Democratization of the Private Market, Carine M. Schneider states that it’s the advances in technology that have made it possible for anyone to invest and grow their wealth. These accessible systems have massively increased inclusion, she explains. “Investors who are interested to invest in the private market (and are qualified) frequently don’t know where to find opportunities to invest,” Schneider writes. “A variety of platforms are now available to support selling and buying of private company shares.”
By that, what she means is that if you genuinely want to try your hand at investing and building up an asset portfolio, there’s really nothing to hold you back. Not only do online platforms open the door to private markets, but they have simple tools to help investors avoid running afoul of regulatory problems and tax compliance issues.
Platforms such as Robinhood and Stash offer simple user interfaces that make it easy for anyone to get started buying a few stocks and shares, with tools to analyze the markets and mitigate risk through diversification. They make it possible to get started with very little. All that’s required is a small bit of disposable income to invest in publicly traded companies. According to NerdWallet, it’s possible to get started building a reasonably diversified portfolio with just $500.
The internet makes it possible to track the stock markets, find information and educate yourself about new investments anywhere, at any time. The Milken Institute posits that the secret to successful investing is simply education - teach yourself as much as you can. It recommends spending as much time, energy and attention as you can, watching videos, listening to podcasts, reading reports and other kinds of research. The answers to all of your questions, such as how investments are taxed, which stocks are hot, and where the market is headed next, are just a Google search away.
Emerging Investment Markets
Now that investing is widespread, the groundwork has been laid for the rise of a new concept called asset tokenization that promises to make any kind of investment more accessible. Asset tokenization is the process of digitizing traditional assets and representing them as tokens on a blockchain. Those tokens can be bought and sold on the open market, just like cryptocurrencies, unlocking almost any asset class to new investors.
The tokenization of real-world assets promises to be the next great advance in the democratization of investing. The great thing about it is that it’s possible for almost any kind of asset, be it corporate debt, loans, real estate, invoices, gold, stocks, commodities or something else, to be tokenized. The other key advantage is that tokenization enables fractional ownership. For example, a luxury apartment can be tokenized and split into 50,000 digital tokens that each represent a small share of that property. Individuals can then buy just one of those tokens, if they wish, to jointly own that luxury apartment. It means that many kinds of assets, previously only accessible to the wealthy, are now open to everyday investors.
Tokenization is a nascent but growing market accessible by a number of platforms, including Soil, a blockchain-hosted lending protocol that seeks to merge the worlds of traditional finance and cryptocurrency. With Soil, real-world assets such as corporate debt and fixed-income investments are tokenized and sold on a decentralized marketplace, giving companies a simple way to obtain low-cost financing from crypto investors looking to earn interest on their stablecoin deposits.
In the case of Creditcoin, it has built a network that enables unsecured loans to be tokenized as real-world assets. These RWAs are then offered to crypto investors with yields of up to 20% APR on their USDC deposits, which are earned as a portion of the interest repaid on borrowers’ loans. Creditcoin’s main advantage versus traditional DeFi is that it does away with the requirement for borrowers to deposit collateral, instead allowing them to deposit RWAs.
A more varied asset tokenization platform is Centrifuge, whose Tinlake marketplace offers a structured credit process that’s similar to traditional loan finance. Borrowers can deposit assets such as invoices and property loans and transform these into NFTs, before using them as collateral in asset pools. Investors can then deposit their funds into specific asset pools that match their risk tolerance, earning a stated APY for as long as their funds are deposited.
The Doors Are Open
The best thing about these new tokenized asset investing platforms is their decentralized nature, which makes it possible for anyone to invest in them with as little as a few dollars. By digitizing investments and creating tokens that represent ownership, it’s possible to make any kind of asset much more accessible via highly efficient, low-cost marketplaces anyone can participate in.
The rise of asset tokenization means that the democratization of investing has reached its zenith. So if you have the appetite to build up your wealth but only have a few dollars spare, there are no more excuses. It’s possible to get started investing now, with hundreds of potential opportunities and all the information you need to make those investments profitable just a few clicks away.
