Adventures in Fintech: An Interview With My Dad

Photo credit: woodleywonderworks, CC BY 2.0.

Hi Dad.

Hello.

Thanks for chatting with me.

No problem. Anything for my favorite daughter.

Your only daughter.

Yes, that’s the joke. Dad joke #1.

About a month ago, you emailed me and my brother about something called Fundrise. What’s Fundrise?

Yes, that is correct. Fundrise is a new way for people with smaller amounts of money to invest in real estate directly. When I mean directly, you are actually investing in certain types of real estate rather than in a mutual fund that invests in real estate like a REIT [Real Estate Investment Trust]. On the Fundrise website there is a FAQ that answers the question “why shouldn’t I just invest in a real estate mutual fund.”

So, it cuts out the middleman, or rather, swaps out the middleman?

Yes. They are attempting to use technology and some other resources to lower the costs to invest in real estate that before would require a larger minimal investment. With them you can invest a very low amount to start.

So instead of a bank, you use this service?

No. You wouldn’t use a bank to invest in real estate unless you are obtaining a mortgage to actually purchase particular real estate. Fundrise is a fintech [finance technology] type of company which uses current technology to “disrupt” or lower costs, make certain choices easier (app), etc.

Do you know how they are trying to do that? Do they have some special kind of algorithm?

I don’t know exactly how they do what they do but I believe the answer is on their website.

How did you hear about them?

I subscribe to various daily news emails (The Hustle and Need 2 Know) that contained an advertisement for Fundrise and I checked it out.

You’ve invested with their service. What convinced you to try it?

It seemed like a unique idea so I decided to research it first. All my online research showed that the company had a good reputation, has been around for a few years and had a large amount invested. Of course, I was still a bit hesitant so I only invested $1,000. Depending on how things progress, I may invest more.

I believe real estate is a good investment. Real estate should be a part of your investment portfolio once it reaches a certain size. But even then, it should be a smaller part, say 10–20 percent. It is all about diversification.

Generally I think you’re more aggressive than me with investments. Do you consider this a high risk investment? Medium risk?

I consider it a medium risk investment. When you start to invest with Fundrise, you can select a variety of portfolio risk. You can select long-term (more risk), or balanced (medium risk that I have), or supplemental income (low risk). But even then, your investment is further diversified into various real estate holdings.

You made your initial investment about a month ago. How was the process? Have you made any money yet? (I know a month is not a long time in terms of investment.)

It was super easy to open an account. I did everything online. The instructions were very clear. I sent my initial funds through my bank account, also online. Dividends are posted quarterly. I have been invested now for about one month and have already received a payment that was reinvested into my account. So far I made $4.59 on my $1,000 investment.

Big bucks! 😉

Ha. You have to start somewhere. There is no guarantee that I make any money. If you remember when the real estate market crashed, almost everyone invested in real estate lost during that period. Average 20-year real estate returns are about 10 percent (per Investopedia).

You owned several rental properties at the time of the last financial crash. They’ve recovered their market value as of last year, right? Would the Fundrise investments be vulnerable in the same way?

Yes. I own single-family rental real estate (houses). When the crash hit, my holdings lost about 30 percent of the value from what I purchased the houses. But they just recovered this past year. So I saw no real change in their value for the past 8–10 years. That can happen.

Yes, the Fundrise investments would be affected by economic events. But real estate is also local, so if the Fundrise portfolio is invested in California and that state happens to have some issues, that portion of the portfolio could be affected.

I didn’t know you were interested in fintech until I sent you that Racked article I found via the Billfold on the microlender Affirm which people were using to finance things like clothing. What interests you about fintech?

I have always been interested in technology. I remember buying an Apple II computer in junior high school. I was in Explorer Scouts for computers. I had friends who built computers. My initial degree was Computer Science until I changed it. I changed to business/finance so fintech combines both of my interests. Using technology to improve processes for the better.

If I had a choice of a company to work for it would be a company in the fintech sector.

For your “retirement job.”

Ha, right. I still don’t know what I want to do when I grow up.

I opened a Coinbase account and started getting interested in cryptocurrency, but that is extremely high risk. So now I’m looking into day trading. Also a potentially high risk area.

Originally you had planned to try your hand at being a professional poker player once you retired. How did that work out?

Financially not too well. I started in an upswing but then took some calculated chances that didn’t work out. I still love to play but haven’t been playing as much. I realize that I don’t like the variance of poker tournaments but prefer cash games where you can start and stop on your schedule. I like most of the people I meet from all walks of life. I met some very interesting people.

Playing professional poker at the lower stacks that I play in isn’t really that glamorous. You have to sit down so long which really isn’t healthy. But I enjoy the mental challenge.

It’s a grind. Didn’t you calculate what your hourly rate would have been while you were playing in Florida? And it was below minimum wage?

Yes. I played a poker game called Omaha when I was in Tampa for about three months. When all was done, I made less than $2/hour.

I decided to focus on cash games recently and had winning sessions four out of my last five times playing. But my focus has changed to the stock market, so I will be playing a bit less poker in the near future. Plus I am also planning to sell the rentals now that I am back to break-even (price-wise) which will also take some time.

Do you feel like day trading or looking into fintech companies like Fundrise fills a similar niche as poker did for you?

Investing in Fundrise didn’t take much time. The same goes for my other investments in mutual funds. I select sound companies like Vanguard or T. Rowe Price and diversify among various funds, so once I make my selection, I just monitor them periodically and rebalance when necessary. This really doesn’t take me much time.

Actively trading stocks is on an entirely different level than investing using mutual funds. Plus I’m new to day trading or swing trading so I have a steep learning curve. I had a small trading account in high school and did some small futures trading in college. I also have a brokerage account where I did some stock trading but that was more long-term focused.

But yes, short-term stock trading and poker fill a similar niche. You actually need some of the same skill sets for both. You need to manage risk, work with your bankroll/account balance, analyze situations, be focused, etc.

Like the Paperclips game. 😉

Ha. Not exactly but there are some attributes from the game that can be applied. Of course I’m not expected to grow my account exponentially. The author of a book I just read states that most individual day traders target $500–$1,000 per trading day. So potentially good money but not a fortune.

Best of luck with the day trading. I hope you enjoy the fancy new monitors you got!

Thank you. If things don’t work out, I will still have some fancy 32-inch monitors to play games on.

This interview has been lightly edited for clarity.

Marisa currently hikes in Colorado. She also feels very lucky to have her Dad as her personal financial advisor, since she knows he has her best interests at heart.


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