How Wealthtech Makes Investing In Overseas Stocks Easy

Stock investment is one of the many alternatives in the investment world. Long before getting to know digital, this asset class was a very manual process. In the past, stock purchases were still using manual boards, paper for transactions, and had to be done face-to-face on the floor of the Indonesia Stock Exchange (IDX).

The IDX office was designed to have a multi-storey trading floor due to the limited space to accommodate trading activities at that time. The customer must also call the sales/broker to order the desired stock. Hence, the stock market in the past was mostly enjoyed by investors trader because there are not many issues and sentiments like today.

But it was different now. Recently, the rapid growth of digital, also triggered by the pandemic, has resulted in rapid innovation in the wealthtech field. Presence wealthtech, simplify the process of understanding stocks so much more fun, even though the risks borne remain the same.

External Affairs Director Pluang Wilson Andrew said that investment has now become part of the lifestyle of the younger generation and easy access to digital platforms accelerates increased literacy and financial inclusion in Indonesia.

"Investment is no longer an exclusive thing because the process has become much easier and can even be monitored in real-time via smartphone," he said to DailySocial.id.

Ajinkya Kulkarn, Co-founder of the Indian wealthtech application Wint Wealth, expressed the same opinion. He said, changing investor demographics and a series of new investment channels are pushing the fintech industry to provide a digital experience seamless pattern in one's investment journey. wealthtech, he continued, provides the same wealth creation opportunities for small retail investors with limited financial resources and ultra-rich investors.

“Even though these are millennial investors tech-savvy, they still need help to solve the complexities in the world of finance. Fintech offers professional advice as well as ease of execution through digital platforms. [..] Fintech builds trust, bridging the gap between investors and capital markets," he said.

According to him, wealthtech helps investors invest supported by IQ (Intelligent Quotient) which is highly based on research and consultation. They have the data knowledge and skills to dissect this information which helps them draw meaningful insights and deep understanding of the economic scenario. This allows investors to make wise, data-backed investment decisions.

“Amidst a changing regulatory environment, platforms wealthtech decomplicates finances and empowers novice investors to make wise and timely decisions to achieve long-term financial goals and create wealth.”

According to a CB Insights report published on March 8 2022, in the fourth quarter of 2021 startup funding wealthtech in the global market rose 156% year-on-year worth $14,6 billion. This good momentum has an impact on the trend of increasing the number of retail investors in Indonesia. Quoting from the Indonesian Central Securities Depository (KSEI), as of May 2022, the number of retail investors in the capital market reached 8,85 million SID (Single Investor Identification) or an increase of 18,29% year-to-date compared to December 2021.

This growth is dominated by the younger generation under 30 years old, amounting to 60,29% of the total number of investors. For the record, this figure includes the SID which summarizes the unique code for mutual fund, SBN and stock investors. Meanwhile, specifically for the number of share investors (C-BEST) it was recorded at 3,9 million SID. This figure increased by 13,26% year-to-date from the figure of 3,45 million SID.

When comparing the growth of SID in mutual funds and SBN, the increase in stock investors is still less. The number of mutual fund investors for the same period grew 19,58%, while SBN grew 14,76%. However, all three still have huge room for growth because their ratio to the total population is still below 2%.

Based on the risks, investing in shares is high risk, high return and is not recommended for beginners. According to the Associate Director of PT Pilarmas Investindo Sekuritas Maximilianus Nico Demus, investment must basically be based on knowledge and not because of what other people say, aka FOMO (fear of missing out).

“Buy what we know and are familiar with, don't tell people what to do. "Because we already know and know, for example BBCA (BCA) almost all have ATMs," he said as quoted from CNBC Indonesia.

He also suggested that if you want to try it for the first time, it's best to do it in small quantities, and get used to being disciplined and ready to do it cut loss. "For example, if it turns out that the decline is 1%-3% or 2%-4%, it is no longer a shame to cut loss. If it's time cut lossAs cut loss, "he said.

Domestic stock investment

Ajaib is one of the closest examples in an industry that has been able to grow rapidly through the stock products they have been offering since March 2020. The steps taken by Ajaib are slightly different compared to other players. wealthtech others tend to take the strategy of deepening the range of mutual fund products, or other asset classes, such as gold or cryptocurrencies, in introducing investment to beginners.

Ajaib wants to be known as a friendly application for novice retail investors, so all of Ajaib's strategies and products need to be aligned. VP of Product Ajaib Aurora Marsye said, the Ajaib application is fully designed to make it easier for novice investors to dive into the world of shares.

Features such as 100% online account registration in minutes; no minimum investment and open an account without an initial deposit; comprehensive chart display, in-depth technical and fundamental analysis; and various educational materials and discussion forums, are some of the main features to attract young people.

"We remove barriers which has been preventing young investors from entering the stock market. "With these various conveniences, the capital that new users need to prepare is quite brave," said Aurora some time ago.

Even though the application is made as friendly as possible for users, Ajaib still prioritizes the educational side considering that this investment is classified as an investment high risk high returns. One approach that is often taken is to hold regular trainings by utilizing social media platforms that many young people visit every day.

"Because the target is retail investors, we see where they play, now a lot of them play on social media. We approached them, picked up the ball. "We are sure that all parties will also take this strategy to make it easier for users to reach it," added Director of Stock Brokerage Ajaib Sekuritas Anna Lora.

This step, he continued, is part of the company's strategy in improving the literacy quality of stock investors. According to him, an increase in quantity is important, but maintaining the quality of users is equally important.

Its closest competitor, Stockbit, is also known as wealthtech which offers stock investment products. Pluang took different steps. This startup founded by Claudia Kolonas includes applications wealthtech with the most complete asset classes.

Investing in foreign shares

When first established with the EmasDigi brand, Pluang provided gold investment products. They continue to add to their portfolio, starting from index futures (micro e-mini S&P 500 and micro e-mini NASDAQ 1000), crypto assets, and mutual funds. Compared to its peers, Pluang is quite explorative and brave in introducing asset classes because it has the ambition to embrace all users who come from various risk profiles.

"As the first legal platform that provides safe access to US stock products, the launch of the US Stock Contract for Differences (CFD) product in early 2022 is Pluang's commitment to respond to the enthusiasm of Indonesian retail investors in investing directly in various well-known global companies in the capital market. the US affordably,” Wilson said.

He continued, in the combination of types of investment assets, the US stock index is an attractive combination that investors choose to pair with crypto assets, gold and mutual funds. According to the company's hypothesis, investors could have the opportunity to adapt to global investment trends.

Since launching the stock CFD asset class, it has received a positive response due to the availability of investment access to the US stock market. Of the 40 shares launched, technology company shares were the most popular choice among users. Next, followed by banking shares as an alternative choice. "In terms of quantitative growth, the AUM figure for this type of investment asset has continued to increase since its launch."

Pluang believes that global market products are strategic assets for Indonesian investors to own. The reason is, the value growth is very good and the market capitalization size is very large. The US stock market itself has experienced extraordinary growth since the pandemic, also the growth in asset values ​​and investors has shown a positive trend.

“We are observing how the Indonesian people are trying to diversify their assets in the US capital market. "In investment asset ownership, the US stock index has good potential to follow other investment assets such as crypto assets and digital gold."

In the company's internal findings, although not specifically detailed, the majority of users will start investing with one type of investment product first and periodically start investing with various other assets. The highest combination of asset ownership falls on ownership of crypto assets, digital gold, US stock indices and mutual funds.

Then, they also tend to add new asset classes to their investment portfolio for approximately two to three months. It was also stated that Pluang users were novice retail investors. However, they are considered to have been able to diversify their assets evenly and wisely according to the risk of the investment product portfolio available at Pluang.

This behavior is allegedly because they have been able to diversify their assets after participating in various educational programs, both routinely held by the company on various platforms and outside of it. "We hope that the educational content provided will increase our users' understanding in analyzing the risks of each investment product and can maximize the potential for increasing their financial assets."

As is known, the US stock market is one of the main choices for investing in terms of diversifying a portfolio. The country is home to some of the best technology and other wealth-generating businesses that offer great investment opportunities. According to reports Credit Suisse, US stock market capitalization represents approximately 56% of the total global market value.

Meanwhile, according to Investopedia, for many investors, buying overseas shares allows them to diversify by spreading the risk, in addition to providing exposure to economic growth in other countries. However, the risk of volatility is not much different from the local stock exchange because there are many factors that influence it.

So, again, stock investment is not for everyone. Many financial advisors consider foreign stocks to be a healthy addition to an investment portfolio. They recommend an allocation of 5% to 10% for conservative investors, and a maximum of 25% for aggressive investors.

However, because it is suitable for long-term investment, it is attractive. Some say, the longer an investor stays in the market, the lower the chances of losing money.

As mentioned David Gardner, co-founder of The Motley Fool, "It doesn't matter when you invest if you invest in great companies. A small percentage of shares account for the majority of overall market returns. That's why it's better to buy shares in great companies as soon as possible rather than waiting for a better price that may never come.”

Currently, there are not many players wealthtech local that works on this segment. Nanovest, made by the Sinarmas Group, is the only local one, then there is also Gotrade which now has legal status in Indonesia.

Nanovest not only provides foreign stock investments, also crypto assets and fund transfers. Just like Gotrade, Nanovest also partners with Alpaca to accommodate stock transactions. For crypto assets, the company already has an official license with the legal entity PT Grow Together Nano.

Gotrade

Strategic Initiatives Gotrade Ajisatria Suleiman said that the experience of investing in foreign companies is not new for Indonesians because everything can be accessed through foreign securities through their personal networks. However, that brought by Gotrade It could be said to be innovation because the company wants to democratize this access for all Indonesians.

"We believe that new retail investors should also have the same access to alternative investment products that are safe and legal," said Aji.

He continued, until now there is no local securities company in Indonesia that can offer foreign securities. Stock products at Gotrade Indonesia are derivative contracts that are 100% fully backed by real shares owned in the US through a partner, namely Alpaca Securities LLC, a FINRA regulated broker dealer.

In Indonesia, derivative investments are regulated by CoFTRA, so a Futures Broker's license is required. Valbury Asia Futures was chosen as a partner, considering it has a good reputation and in-depth knowledge, especially in the fields of regulation and compliance.

Explained further, for every share held by a Gotrade Indonesia customer, there is a corresponding share held by Valbury in a separate account at Alpaca Securities LLC. This allows Gotrade Indonesia to provide Indonesians access to US stocks in accordance with local Indonesian regulations.

“Our structure is regulated under Bappebti Regulations 1/2022 and 2/2022. The customer entered into a contract with Valbury, and Valbury then entered into related transactions with Alpaca Securities. Both of these trades occur in real time. "All transactions are reported to the Jakarta Futures Exchange (BBJ) and monetary aspects are handled by Kliring Berjangka Indonesia (KBI), a clearing house for futures and commodity trading."

Gotrade optimistic that the increasingly open digital access and massive educational steps from various parties will slowly increase the maturity and knowledge of novice retail investors regarding various investment products. This is reflected in the number of retail investors which doubled last year, not taking into account investors from alternative products such as crypto. The majority of these new investors are urban, tech-savvy, well-educated young people in entry-level or mid-career positions.

Before officially being present in Indonesia, Gotrade had been present in Singapore since 2019. Gotrade was founded by Rohit Mulani, Norman Wanto, and David Grant. This platform was previously called TR8 Securities which was registered in Labuhan, Malaysia. In its operations, it partners with Alpaca as a broker with a FINRA license and SIPC protection in the United States.

Gotrade is here to offer the convenience of trading shares from the United States stock exchange. This application allows users to buy fractional shares on the NYSE and shares traded on the NASDAQ starting from $1, aka in fraction or a fraction of one share. Investors still receive dividends according to their share ownership quota.

There is no mention of the number of Indonesian or global Gotrade users so far, nor the nominal AUM that has been collected.