RobinHood tried and failed. Entrepreneurs, create an easier investment platform for Millennials and Gen Z

When talking to millennials and Gen Z adults about investing, their responses and confidence are overwhelming. This article here, Bit Coin there, adds meme stocks through social media and maybe adds Robinhood to the conversation mix. That's not the answer. Robinhood yesterday announced another 23% layoff of employees; which comes on top of a 9% layoff in the last quarter. What was supposed to be the great savior of investing for the next generation of investors is failing. Why? Well, Millennials and Gen Z are tough populations when it comes to investing.

Millennials and Gen Z, for all their tech savvy, are still not confident or knowledgeable about investing. According to a Yahoo Money article referencing a Pew Research study, only 37% of millennials feel well informed about their investments. According to a March 2021 survey by CreditCards.com, Gen Z investors were almost five times more likely to say they receive financial advice from social media than adults aged 41 and older, 28% turning to friends and online influencers for advice. They are unwilling to invest time and education to grow and protect their money, but turn to social media and influencers for critical advice. We now know why they invest in stocks from memes or based on "whispers" from friends and yet know so little about the company, industry or trends. Why is it so convoluted and complicated? Don't they know about passive investing?

If you look at the rise of passive investing over the last 30 years, why aren't more millennial and gen Z investors simply choosing index funds? markets that just track the Dow Jones, NASDAQ and S&P 500? Don't they want decent returns with medium market risk and without worrying about individual stocks? Why not just own shares of 500 of the largest publicly traded companies in the United States all at once and sleep at night?

You could if you simply invested in an S&P 500 index exchange-traded fund (ETF), which simply tracks the performance of 500 of the largest market-cap-weighted stocks that trade on the Nasdaq and the Stock Exchange of New York (NYSE). Sound simple? He is. According to investment firm The Motley Fool, over the past 30 years, the S&P 500 Index has recorded a compound average annual growth rate of 10.7% per year. That's a pretty good annual return and you don't even have to know any of the 500 companies in the index. A recent Los Angeles Times article reported that passive investing using ETFs or mutual funds now accounts for up to 43% market share.

So Robinhood tried to target these emerging investor populations and really struggled. Other early market entrants like Betterment and Wealthfront have both been sold in recent years to larger investment firms. Overall, with billions in venture capital investments over the past 12 years, the market share of these new robo-advisors is still less than 10% of the overall investment market. The opportunity for innovative or disruptive entrepreneurs is therefore huge. You just need to design an easy-to-use platform that a six-year-old could...