Immortal Retail Investing Practices Are Threatening The Market And Our Wallets

Investing has always been known as a 'win some, lose some' type of game, but it's hard to ignore the fact that retail investing has morphed into an acceptable form of gambling for the middle class. Last year's 44% drop in personal portfolios isn't a direct result of the gamification of investing apps, but it's definitely a side effect of this destructive culture. We have a moral and legal obligation to enable greater access to the tools that can protect investors while improving the investment experience.

According to the Economic Policy Institute, the so-called democratization of the stock market never actually occurred. While the masses gained access to mutual funds, IRAs, and 401(k)s, this 1980 event didn't shift the wealth gap. Lower classes of working America persistently had 10% or less of market share and assumably a minor influence on its prosperity. But this small presence within the market did show some real effects: The 1990 economic downturn was caused by high oil prices and interest rates, but also a pessimistic outlook from investors. So when investing apps rose in popularity, the hope that the average person could now build generational wealth increased along with the fear of how they could endanger the market.

While betting it all on the voracious rollercoaster of market phases isn't sustainable for the economy or someone's wallet, many people normalize this behavior. We insure everything in our lives, from our homes, our cars, and even our pets, why don't investors insure their portfolios? Well, even the most seasoned of investors can make uneducated trading decisions, and It's hard to blame them when advanced trading options have become so easily accessible. Enticing graphics, gamification, and marketing slogans could convince anyone that the extra cents and dollars they have can amount to a fortune. Similarly, putting all their eggs in one basket doesn't really feel as threatening when it becomes as easy as the press of a button.

While accessibility and investment equality are extremely important to promote better financial literacy, prudent investing must come first. Otherwise, the consequences could be deadly. Research from Northwestern University and the University of Michigan found that people who lost 75% of their wealth over a two-year period were then 50% more likely to die over the next two decades. While we cannot completely eliminate investment uncertainty, we can considerably reduce financial anxiety, increase retirement security, and allow retail investors and savers alike to enjoy positive financial outcomes with greater confidence.

In the case of mobile investing apps, companies should be required to limit a user's behavior depending on their available capital, offer protective investing options, and transparent information about the risks. They already have access to your bank accounts, so why is it out of the question to require you to meet with a professional or complete a questionnaire about your disposable income?

All investment firms have the knowledge and funding to build safeguards for their users. If they implemented a strategic framework for decreasing speculative behavior, their company and the general public would all benefit. Reckless investing can increase volatility and erode faith in markets, which directly leads to economic tailspins. Therefore, these platforms must protect their customers while simultaneously giving them the freedom to create their own portfolios. This could be done by introducing protective investing tactics like structured notes, annuity, and buffer ETFs. All of these options would make retail investors protected from plummeting markets while also educating them on the importance of having a long-term investing goal.

Protective investments grow and preserve your wealth while continuously delivering reasonable returns depending on what type you're using. They bring rationality back to investing without limiting democratization. With the proliferation of new tech, things like structured notes are becoming available to anyone, not just a high-net-worth individual.

Frankly, I think people will become more confident in their financial decisions once they have a solid education about investing, protective options, and what moves they shouldn't be making. Currently, many of those active on these neo-investing apps fall victim to the fear of missing out, piggybacking on stocks like GameStop and Tesla hoping the hype lasts long enough for them to cash out. While I admire their entrepreneurial spirit, these speculative behaviors create unnecessary financial anxiety.

Investment firms have a duty to protect their users and be accountable for their effect on the market. Empowering the public to take control of their financial future is acceptable as long as users understand the weight of their actions and providers shoulder the responsibility of what they're doing. Marketing schemes shouldn't promote investing as a golden ticket to wealth. The terms of any bond, structured note, or fractional share should be clearly explained to someone who is new to the market. Impact and profit are equally crucial for a company to balance. If we want to provide more than just hope for future generations, we need to do more than position ourselves as the middleman between financial success or ruin. Through protection, education, and transparency, we can simplify the process for people to take better control of their financial futures- creating lasting hope and impact.

About the author Jason Barsema is the co-founder of Halo Investing, which is a firm dedicated to democratizing protective investment solutions. Spending his career at Credit Suisse, Jason has years of experience in global economics, portfolio management and is passionate about prioritizing impact over profit