I like Jennifer Openshaw. As part of the Oprah/Dr Phil/CNN circuit. she does a fantastic job of bringing financial theory and practice to the masses. Her book, The Millionaire Zone, focuses on basic tools like budgeting. complete with worksheets and learning materials.
I’d say she is to personal finance what Malcolm Gladwell is to behavioral finance.
As an extension of her brand and reach, it appears that Jennifer Openshaw has overreached with the announcement of her new venture, WeSeed (Read a good review of WeSeed at Mashable). The new site, billed as “the stock market for the rest of us”, looks like it was built to address those 100 million Americans with no stock market experience.
The site uses virtual money to abstract investing away from stocks and toward companies. Users are encouraged to find fields that they know something about (kids, houses, fashion, etc.) and invest in them. So like Peter Lynch, users get accustomed to looking at the stock market through a personal lens, where a user’s personal experience meets the corporate world.
But here’s the thing: WeSeed fails from the start. The whole premise is wrong. Witnessing the carnage on Wall Street and the trillions of dollars lost in equity from the stock and housing markets, I don’t think Joe the Plumber should be playing the markets. He should be purchasing Jennifer Openshaw’s budgeting, saving, and credit materials. And instead of putting any extra money he’s able to save into the next hot apparel stock — if he really wants to get rich, that money should really be going into CDs.
To get market performance for a small part of his savings, ETFs are more appropriate. Do we really want to increase stock ownership across a broad swath of investors who can’t afford to see the value of their portfolio swoon? Will this demographic be next in line for a bailout after they purchased financial instruments they didn’t understand?
Openshaw is on to something here. If she can parlay WeSeed to help the same demographic learn about ETFs and index funds, I think there would ultimately be more value.
[Ed. After this orginal blog posted, CEO and founder Jennifer Openshaw contacted us with some clarification and rebuttal to some of my points above. The full text follows below:
Thanks so much for your thoughts and feedback on WeSeed. It’s great to have the chance to talk to people like you about this thing we’re so passionate about. In terms of consumers and the stock market, you raise some really good points and they’re at the heart of what WeSeed is all about. I’d love to take just a minute to clarify our approach and philosophy.
Our overall point of view is that no one should dump all their money in stocks. You’re right, that would be, well, dangerous… and irresponsible… and the last thing we would want people to do.
WeSeed isn’t about getting rich quick… it is about getting smart. We truly believe that if every American owned just one share of stock, it would change their lives for the better. It would affect how they look at their 401(k)s, their jobs, the news, even the questions they’d ask a financial advisor… it’s really about becoming a more plugged-in participant of the economy.
We also totally agree that most consumers should have most of their money in index funds. And, as you know, portfolio allocation is key to performance. We that feel WeSeed the first step in understanding the world of index funds, mutual funds, advisors, and even single stocks, with the ultimate goal of a well-balanced portfolio. We believe that stocks – the stocks of products and companies you know -- are a smart, comfortable “close to home” place to begin.
Historically, the financial arena is not particularly approachable… so many people (as in 100 million) have never approached it. Given the current market conditions, it seems almost irresponsible to not engage in the stock market on your own… even if you work with an advisor. In the end, you’ll at least be a smarter consumer of advisory products and funds.
In it’s most simple form, we are following two golden rules: (1) the Buffett/Lynch model of investing in what you understand as simply a place to start and (2) the law of large numbers. We are just executing these two bedrock philosophies in a very modern, friendly, Web 2.0 way.
The fact is – not only can people lose money in the real market – they ARE losing money in the real market. We think the safest, smartest thing to do (especially now) is trade virtual shares in a safe collaborative environment and get smarter about how brands and companies translate into share price. We believe that over the long haul (the prudent “buy and hold” haul), the best brands come from the best companies, which ultimately have the most solid, legitimate, compelling stock profiles.
Consumers drive the retail market as well as the equity market. That consumer sentiment is what we enable and celebrate at WeSeed, and onsumer it has become more important than ever. Because of the internet, there is an almost perfect level of information in the financial marketplace and nearly all financial analysis is reflected in the share price. The real information (the “new news” if you will) about what may be happening next with a given stock is consumer sentiment.
Yes this is different. Yes this is a noble experiment. But we believe in people and we believe that given the tools and a voice they can do extraordinary things. That is why we skip to work in the morning, trying to make WeSeed the best it possibly can be. ]
