Despite the recent popular coverage of finance applications such as Robinhood or investing groups like Reddit’s WallStreetBets, there are still many Millennials and Gen-Zers on the investing sidelines. While student debt and poor job prospects are most likely to blame for younger generations not having spare capital to purchase stocks with, even if they did, these two groups don’t know where to begin in the first place. Nikhil Agarwal, Anam Lakhani and Eve Halimi faced these same issues themselves, creating Alinea Invest as their solution. Alinea Invest is a mobile investing app with a mission to “empower the next generation of investors.” The startup is based in New York City and recently completed Y Combinator accelerator program in their Winter 2021 batch.
Frederick Daso: What are the main factors behind Gen-Z’s uniformed decisions when investing in the stock market?
Anam Lakhani and Eve Halimi: Currently, it’s a challenge for retail investors to acquire accessible insights on stocks and ETFs. There’s a lot of financial jargon to sift through in lengthy, complicated SEC filings and earnings reports. As an alternative to accurate information, we see Gen-Z’s turning to social media for advice; in turn, young investors are making dangerous bets and gambling within the stock market. Social media can promote this misconception that the stock market is a place to earn money quickly. Successful investors will tell you that’s false – the stock market is a vehicle to grow your money over time.
On the Alinea app, users can make informed investment decisions with our digestible bite-sized insights, including information on a company’s management team, popular products, revenue streams, operational risk, and impact scores.
Daso: How have traditional investing norms and platforms failed to meet Gen-Z’s particular needs and views?
Lakhani and Halimi: Gen-Z’s are significantly more socially conscious than previous generations; they care about causes such as climate change, environmental impact, racial injustice and inclusivity. Traditional platforms fail to allow retail investors to invest according to their values. At Alinea, we want our community to express their personal values through their investing decisions. For all of history, investing in the stock market has been centered around corporate profits, but we aim to create a shift in which investing also reflects corporate responsibility.
Traditional platforms cater to the same audience, men and often white, and have left behind demographics such as women, minorities, and college students. With Gen-Z being the most diverse generation, we know it’s time for a different investing experience that appeals to demographics that have been mainly overlooked.
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Daso: One can assume that college students view their education as a long-term investment. Yet, there seems to be a lack of that same long-term decision-making for their personal finances. Why do you think that is the case?
Lakhani and Halimi: Popular stock trading platforms generate revenue based on the volume of trades on their app and heavily gamify their platforms to get users to trade no matter what the cost. Many have even paralleled heavy usage on such platforms to a gambling addiction, leading to both psychological and financial consequences. App notifications nudge users to buy and sell stocks, although research shows the more you trade, the more likely you are to lose money – and according to Scott Galloway, only 1.6% of day traders are profitable. Additionally, with the rise of such platforms, clickbait is abundant with eye-grabbing headlines like “How I Made a Million Dollars in a Month.” It sends the wrong message to new and young investors.
On the Alinea app, we don’t want our community to associate investing with a stressful, anxiety-inducing experience. So we’ve gone as far as to remove the colors red and green from our app entirely. Research shows that successful investors can make rational decisions removed from emotional triggers such as fear or greed. It’s a Warren Buffet-approved strategy, and the Alinea app is here to guide our community through the ups and downs of their investing journey.
Daso: How is Alinea designed to get Gen Z’s more involved in investing and help them make smarter money decisions?
Lakhani and Halimi: Alinea aims to be a financial wellness company for the next generation, and while we’re starting with investing, we plan to extend beyond that to offer solutions to Gen-Z’s financial health. Since investing and saving go hand in hand, we see our community become more aware and proactive about their saving and budgeting habits, impacting their overall financial health.
Similarly, while Gen-Z’s continue to learn about companies they invest in, it wouldn’t be surprising to see if these insights change how they interact with these companies on a day-to-day basis. For example, if a company positively impacts society and the environment, Gen Z’s may feel more inclined to buy their products and vice versa.
Daso: Are there any underlying stereotypes or cultural barriers that might discourage Gen-Z’s from investing? If so, what features have you created with Alinea to address these obstacles?
Lakhani and Halimi: The most common underlying stereotype we’ve seen is that many Gen-Z’s don’t feel like investors because, for so long, investing in the stock market was essentially marketed to and created for a specific population. Even today, the loudest group fits a certain mold, as we’ve seen with the Wall Street Bets saga.
The three most common concerns we’ve seen are 1) I don’t know where to start, 2) I don’t know enough to be investing and 3) I don’t have enough money. On the Alinea app, we’ve built features to address all three of these concerns. First, we ask you a few questions about yourself and find personalized investments to your interests and values. Second, we offer bite-sized insights so you can get to know the companies you’re investing. Lastly, we offer fractional shares so our users can invest in stocks with as little as $1.
Daso: From past discussions, you’ve stressed the importance of community. Investing is mostly done on an individual basis. Talking about money is, in most circumstances, taboo in America. What’s your belief about developing Alinea around communities to overcome the individual nature and collective taboo around managing money?
Lakhani and Halimi: Many people feel like investing is not for them because they’ve never had conversations in their close circles, and it’s not a topic we necessarily learn about in school. The result of this is the exclusion of demographics such as women, minorities, and college students, especially first-generation college students. Much like how you need a gym buddy for workouts, you are more likely to invest with a friend’s encouragement. We know this because we’ve experienced it firsthand. If it wasn’t for discussions with our friends and peers, we would have been too afraid to start investing, so it is essential to have a welcoming and inclusive community to support you on your journey. When you talk about investing with friends, it removes both the taboo of talking about money and the intimidation of getting started. You are also more likely to learn something from these conversations and explore different industries and ideas.
When we started our investing journey, we built an Alinea community on our campus at Columbia University. We observed that when you learn and start investing in college, you start to feel more comfortable and form important, lasting financial habits. Today, we have ten investing communities across college campuses such as WashU, Yale, UCLA, NYU, and UChicago, with over 65 Alinea community coordinators. In the coming months, we plan to grow our community to additional university campuses and get more Gen-Zs started on their investing journey!