You don’t have to ‘bottom fish’ for cheap stocks — there's a way to buy fractional shares of the names you love
- Stockpile is a company that sells gift cards that can be redeemed for stock.
- The company also allows users to buy fractional shares, which it says makes trading more affordable.
- These two features have led Stockpile to have a fairly young user base that is trading stocks earlier than ever.
Gift cards have come to embody the lazy gift, the one for the relatives you don't really know and the colleague you drew in Secret Santa. But, what if buying a gift card was just the start of a gift that could potentially last a lifetime?
For Avi Lele, that's exactly what his company is trying to do. Stockpile is a FINRA licensed stock broker that is bringing stock picking to the masses, in the form of gift cards.
"A few Christmases ago, I wanted to get my nieces and nephews something a little bit different than what I had been getting them every year, which was toys and clothes," Lele told Markets Insider. "I said, 'Hey what if I give them stock in their favorite companies instead.'"
Lele tried to gift them stocks, but short of getting their social security numbers and opening a traditional brokerage account in their name, there wasn't a lot he could do. Besides, the stocks they wanted were some of the hottest tech names on the market and each cost several hundred dollars per share. It was that frustration that led Lele to start Stockpile.
Seven years and $45 million of funding later, Stockpile gift cards can be found at a number of major retailers like Target and Wegman's. Turn one of the gift cards over and scratch off the lotto-like grey material to reveal a code that the recipient can enter in Stockpile's app to redeem.
Perhaps more intriguing than the gift cards, is the ability to buy fractions of a share through Stockpile. Amazon is a company everyone knows, but at around $1,200 a share, one that not everyone can afford. Stockpile allows its users to invest in fractional shares of companies. You can buy one-tenth of a share of Amazon for $120, or one-half of a share of Apple for about $85.
A fractional share more or less works like a full one would. If a full share goes up in value by 10% in a day, so does the fractional share. Dividends are paid to shareholders according to the number of shares they own. If you only own half a share, you only get half the dividend payment. You can't vote in company elections with fractional shares though, according to the company's terms of service.
To make that all possible, Stockpile will buy a full share of the desired company and hold onto the remaining fractional share until it can use it to fill another user's order.
"You don't have to bottom fish for cheap penny stocks, or other bad investments," Lele said. "Every stock is in your price range."
Lele said the lower barrier to entry has attracted a unique set of users. Stockpile has more female users than other brokerages, but is still about 60% male. Users are a lot younger than traditional investors too, according to Lele. 65% of accounts are owned by millennials.
"Our youngest investors are literally a few weeks old because their mom got a gift card for a baby shower," Lele said.
The younger demographic on Stockpile tends to lean towards tech stocks. The most popular holdings on Stockpile include names like Apple, Amazon, Facebook, Tesla and Google.
The concentration of younger users is what sparked a newer section of the app devoted to teaching stock market fundamentals. Short articles on things like market cap and the S&P 500 help users expand their knowledge of the market and invest in smarter ways. Anecdotally, Lele says he sees accounts that start with a gift of stock and eventually end up investing in more complicated products like exchange-traded funds.
"We have some young investors that have started amassing some serious money. their lawn mowing money, their babysitting money, their bar mitzvah loot, all of that adds up to a pretty significant account," he added.
Lele hopes that Stockpile can help millennials invest for their future better than he did. He said being intimidated by the process led him to invest too little, too late.
Lele declined to provide information about the number of users or disclose how well they tend to do on the app. What he did say though, was that he was a bit envious of the returns from his young users.
"The millennial generation tends to spot things early," Lele said. "The Peter Lynch principal, buy what you know. Millennials know. I think they are in the know more than we are, more than I am. I'm not a millennial, wish I was."
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Contributer : Tech Insider http://ift.tt/2yIAh4q
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