So you want to get into investing, but you are not a seasoned asset manager or market strategist. And you can see the market can be a daunting and volatile thing, like in the first quarter of this year when the S&P 500 started off at an all-time high and fell 12% year-to-date at the end of February. , effectively drowning out more than six months of gains.
But you have money in the bank. You can see him, just sitting there lazily sipping margaritas when he might be there to bring you back. If you knew where to put it…
Soon’s founders were in the same place a few years ago when they came up with a solution: an automated investment that uses that cash flow, putting idle money to work.
What to do with all that money?
“We were frustrated with the financial opinions that existed at the time,” says Chris Lovato, CEO of Soon. “We were working professionals, making lots of money in our early twenties – not particularly wealthy because we all came from working-class backgrounds – but had very strong cash flow. We were looking for ways to leverage our strongest asset at the time to create wealth for us.
So they did what typical millennials do. The founders downloaded Robinhood, Coinbase and a bunch of other apps and started investing straight away. “We realized that it’s really difficult to choose what to invest in, how much to invest, when to sell an asset, how much to sell, what is the exit strategy, etc.,” says Lovato. “There are so many decisions. The cognitive load to invest is high. Although we’ve been really smart guys in our careers, we realized we needed to know a lot more about investing – and unfortunately we learned it the hard way. We thought together how to make it easy for us first, then for everyone.
To explore solutions, Soon’s team downloaded transactions from their bank accounts over the past few years. They asked an algorithm to invest 20% or 30% of the deposits. Whenever there was a spend event, the algorithm determined which of the current asset positions appreciated the most and liquidated that asset.
“The end result was that we realized there was a whole built-in cash flow investing strategy that didn’t require the user to learn anything new,” says Lovato. “It was exactly what we were looking for, because it ticks that box: ‘I can invest money in this thing, and it will make the investments, and it will get the best possible returns while I’m spending.’ “Ultimately, the user benefits from improved cash flow, creating wealth without having to work directly at it.”
Soon’s approach will do another important thing: reduce exposure to market volatility. “It’s a very safe way to invest,” says Lovato. “The way I characterize this is, imagine an investment account where you put $500 a month. On Soon, it’s the same thing – your $500 a month is flowing in. Let’s say that at the end of the year, there is a market downturn. In the investment account, 100% of your investment is exposed to this market volatility. In the Soon account, this market exposure could be drastically reduced to 30%, 20%, or as little as 10%, depending on the asset mix and the amount liquidated when spent. Remember, we don’t just put money into it, like everyone else does. We are cash flow and short to medium term investments. This could mean that there is less money invested at any given time than you would have in a long-term approach.
Invest, spend, sell…rinse and repeat
So each time a user spends, Soon will look for an asset to liquidate?
Yeah. As Lovato explains, “When we detect a spend event, our back-end system automatically keeps an index of all the assets you’ve invested in, and it determines which of those positions has risen the most. We send an order sale to our custodian company, we receive a confirmation, then the proceeds from the sale are sent back to the user’s bank to back up their current account.
Soon, which is expected to officially launch its services in May, has caught the industry’s attention and was recently accepted into the prestigious Y Combinator program with illustrious alumni including Stripe, Airbnb and Doordash. Lovato says Y Combinator helped Soon refine its value proposition and decide to delay the release of its debit card. The company has now focused its next product release on a “smaller part of our product – what we call a fully automated, attachable swipe account,” says Lovato. “This account connects to your existing bank account and monitors incoming and outgoing transactions. With the swipe account available for entry, at the end of the week we will send you the total amount of winnings made, which will be deposited into your account. »
A whole new kind of fintech
With its innovative approach, Soon will essentially carve out a niche for itself in the world of fintech. “We’re first in how we approach this,” Lovato says.
Lovato explains that there are currently five silos in the world of fintech. He nodded to banking companies like Chime and Sofi for bringing improved banking services to more people, but said that in the end “it’s still just banks”.
He pointed to companies like Robinhood and Public that offer brokerage services to the masses, democratizing access and making free trade possible, but noted that “it’s still just about brokerage accounts.”
When it comes to wealth management, Lovato acknowledged that companies like Betterment and Wealthfront offer long-term savings investing strategies, but they’re just injecting technology into the mix to make investing more accessible to the average person.
And when it comes to data aggregators like Mint, Finicity, MX, and Plaid, Lovato applauds these companies for their work in helping people better plan their financial lives, but also noted their limitations.
“Ultimately what Soon will effectively do is take all of these silos and bring them together into a single intelligence layer that will then be able to make decisions on behalf of users,” Lovato says. “We can do more financial planning for the user – it’s like having a personal financial planner in your pocket all the time.”
Lovato says Soon will truly be the only product that eliminates the need to time the market and speculate, eliminating the hassle and stress involved with all the other services available. “We see this as a way to democratize investing across a broad spectrum,” he says. “Being able to unlock cash flow as a way to build wealth is a game changer. This is for anyone with a little extra savings.