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Micro stock investment by crowds
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The Idea
Updated: Aug 9th 06. Create a site where people invest money in any stock (or fund, or whatever). The big difference to things like E-Trade is that you don't have to have lots of money, you can choose to invest as little as it takes to purchase 1 share. Some exchanges stipulate a minimum number of shares per transaction - this is where crowds come in. Once enough people have bought the same stock, the transaction is enacted. To differentiate from sharebuilder.com, create an internal market where people can sell their shares to other users, at whatever price the internal market can bear. Allow non-US residents to create accounts (handled via credit card). Translate the site for non-English speakers. Sharebuilder.com have a charge per investment. Revenue for this idea could come from taking a percentage of each sale. In this way, it costs nothing to purchase stock, and lowers the barrier for investment.
I thought of this idea when I was...
I want to invest the few hundred dollars I have in savings, but it's virtually impossible to invest so little in stock - it's better to keep it in my savings account. This would be a good way to get started in investment - if you only have a few hundred dollars it's a way to still have a portfolio. This is better suited to building a medium to long-term portfolio than day trading, but could be used for either. See http://aidan.yoyo.or.../micro_investor.html for a transcript of a conversation I had with AndyDoan about this.
Comments Posted
I had an extra thought on this. I figure the minimum amount of cash will have to be whatever it costs to buy one share in whatever stock. Otherwise you run into legal issues.
Some more information:
This is kind of how a mutual fund works, although usually someone else decides what stock gets bought with your funds, and you invest in the fund not an individual stock. However, from the stockmarket's perspective (and the SEC's) the company could be registered as a mutual fund.
Stock could also be sold to other members of the site at whatever price users were willing to pay for it. E.g. it might be trading at $10 a share, but someone might want to liquidise their assets quickly and sell all 3 shares for $25. Given that (as far as the real world market is concerned) the shares never leave the fund, this wouldn't have any real cost, which would mean it would be cheaper to sell your shares to another user than to sell them in the real market.
How is this different or better the ShareBuilder.com? There you can have money deposited into an account and when you have enough for a full share it's bought and the certificate is send to you. You can buy in on several exchanges and I think they added international indexes.
Thanks HereNow, didn't know it had been done - obviously I'd never heard of sharebuilder.com.
sharebuilder.com is only for US residents. It'd be nice for the rest of the world to get in on the action :-)
something that covers the markets outside of the US would be good :)
I especially like the mini-market within the "mutual fund" itself - selling to other members. This has great potential for the small-time investor with little capital.
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