The Hipsters Are Coming…
Mathematical neuroscientist Jonathan Touboul from the Collège de France in Paris, has come up with a mathematical formula to explain how hipsters’ appearances converge because trends in fashion and lifestyle move so quickly that those who attempt to adopt them before they take off - your bearded or quirkily-haired, artisanal-clothed, ironically-pipe-smoking, tattooed hipsters – are too slow to pick up a new trend once their original trend has become too popular.
And, most interestingly, he thinks that this can be applied to the financial markets, and could be the reason why some companies enjoy such sustained investment – American Apparel and Urban Outfitters being two that appeal to the hipster/contrarian investor in particular.
The way this works is such - the stock enjoys the initial boost from the first wave of contrarian investors, and then becomes fashionable, and is then simultaneously enjoying the investment from the second wave of slightly slowly adoptees whilst no longer being cool enough for the first wave hipsters. Eventually, it becomes fodder for the traditional investor, drawn to the stock by the interest it has gained along the way.
But that’s just stock… what happens when hipsters want in on investment portfolios?
Meanwhile in California…
Wealthfront is an automated investment service firm based out of Palo Alto, California. It’s by no means the only company of its kind – there is also Betterment and Nutmeg to name a couple – but it is by far the biggest.
Wealthfront uses a simple web-interface and limited jargon to explain investment strategies to potential clients. Aimed mainly at millennials with minimum knowledge of the markets, they’ve been able to raise $2.6billion in assets in the eight years they’ve been around.
But it’s not just the speed that they’ve grown that makes them interesting – it’s the sheer number of their investors, and the fact that the majority of them are under 40. More and more companies, like Wealthfront, are offering lower entry levels and breaking down the barriers for those wanting to join the party. And they are not the only ones…
Timberlane Partners are revolutionizing property investment in the US, offering investment in real-estate but by not just buying neglected apartment buildings in promising neighborhoods, renovating, raising rents, and filling them with young professionals, but also taking extra care to provide touches it can market specifically to the perceived whims of millennial tenants. With this Timberlane have hit on a winning formula.
The four-year-old firm earned a 24 percent return on its first five buildings. An additional seven sites, owned for at least a year, are producing annual yields—cash as a share of investment—of 11.2 percent. Investors funded an expansion into Salt Lake City in 2013 and Los Angeles in 2014, and Timberlane now has a real estate portfolio of $160 million, up from less than $80 million at the end of 2013.
But whether its buying bonds in beer, investing strategically in online automated services, or just buying into the housing bubble – hipster investors are marked by another card, their desire to invest ethically.
Solar is in, oil is out; organic, small-batch cocoa is in, big-brand confectioners such as Nestlé are out; credit unions good, banks bad… and so the list goes on. But whereas previous generations were happy just to grow their money, this generation likes to do so without detrimental effect to those around them.
And it could be that some stocks will, in the future, fall completely out of favor with whole swaths of investors.
Fractalerts’ Final Thought
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Because, after all, we might help you invest in the traditional markets, but we do it in a modern way.