The pendulum of power swung from institutions to retail investors during the COVID-19 pandemic after droves of locked-down people, armed with technology, banded together to take on Wall Street through a series of epic short squeezes.
That, combined with the pinnacle of the bull market in late 2021 and the 2022 bear market that followed, provided retail with “the equivalent of their PhD and an entire career in finance over the course of 18-24 months” Rally Rd co-founder Rob Petrozzo told Benzinga in a recent interview.
Petrozzo has noticed that retail traders, post-COVID-19, are using the wealth of information available to them to research investments, including learning to understand the macro environment. Gen Z and the young Millennials “are so much more mature in their investment thesis now,” he said.
Rally, a company that provides investors with the ability to own fractional shares in alternative investments, has seen an influx of these more educated investors since the pandemic took hold, who understand the value of investing in alternative assets as opposed to stocks through the legacy financial system.
Rob Petrozzo On How The Investment Landscape Has Changed
Rally acquires highly sought-after assets, such as sports memorabilia, artwork, cars, comics and video games, with the idea that each asset’s value will appreciate over time or due to a cultural event where the item surges in popularity. The company then completes an initial public offering on each of its assets and offers shares backed by each collectible on its platform –where collectively shareholders hold ownership.
The value, isn’t just intrinsic, however, and Petrozzo has seen a cultural shift in how retail invests, which includes using emotion, something he says has changed the system forever.
When trading and investing in the stock market, a most-taught aspect of trading psychology is that emotions around any particular stock are best to be removed, but when retail traders squeezed GameStop, for example, up over 2,300% it was due to a collective “feeling” that Wall Street needed to be taught a lesson.
This brought emotion back into trading and showed that at times, it can be a successful strategy — on Rally, investors can own part of an asset and also fall in love with the item. “For us, we didn’t just purely commoditize those things –we wanted [them] to have a story and have emotion and have a heartbeat.”
“Platforms like Rally have made it where if you want to use emotion and you want to use, sort of, storytelling [as] part of your investment thesis, you can do that,” the Rally co-founder said. “Emotion is as important in investing and in life as all the binary outcomes of finance,” he added.
Rob Petrozzo on How Rally Levels The Playing Field For Retail Investors
“Rally was born out of the need to level the playing field, and that new investor, that younger millennial investor and the Gen Z investor, that’s what they value. They see an edge in having all this information but they haven’t had a way into assets like this in the past,” Petrozzo explained.
Petrozzo believes retail traders saw that a shift in investment strategies was on the horizon and began to look for apps like Rally. “Our earliest users and even the users that we’re bringing on now they saw around that turn. They saw that big finance was operated by a select few and everyone else, regardless of how much information you have or how determined you were to get in the game, you had to watch from the sidelines. That’s how the auction model has always worked in the past,” he said.
“Previous generations accepted that to a certain degree, I believe, and then Millennials and Gen Z, especially, refused to. So now that there’s strength in numbers, they have as much say if not more say in the trajectory of these assets and of these markets as the gatekeepers and the generations before them had,” Petrozzo said.
Stock market and crypto trading apps saw their user base massively expand, and their revenues surged during the pandemic, primarily through payment for order flow. Comparing trading platforms such as Robinhood and Coinbase to Rally Petrozzo said, “their focus has always been to make investing as quick as possible and to liberate dollars as easy from users, its all numbers, it’s all data, it’s binary outcomes.”
Alternatively, on Rally investors aren’t competing with or being manipulated by “big money” and investors have a collective voice when it comes to their shares. For example, although a large investor could attempt to purchase the entirety of the asset on Rally for their collection, the shareholders would first have to approve the transaction by vote.
Petrozzo on the Appeal of Rally to Shareholders
“If you combine Wall Street with the museum, like with the MOMA (Museum of Modern Art) and then you add a little bit ComiCon or the event aspect to it, that’s how you would get Rally,” Petrozzo explained, which is something that appeals to Millenial and Gen Z investors.
But Rally isn’t just for the Millennial and Gen Z generations. Rally has assets that speak to all generations through nostalgia, such as a father and son connection (through baseball cards), or memories of fifth grade (through dinosaur bones), Petrozzo said. “We’ll have investments and IPOs that we do on Rally where you’ll have an 18-year-old and an 80-year-old in the exact same investment.”
“Finding the assets that elicit that response from the older generation is something that we’re paying way more attention to now as well,” Petrozzo said.
And Rally’s appeal appears to be spreading to the Baby Boomer and Gen X generations, entirely based on word-of-mouth, which could be due to the older population becoming more aware of new options to diversify their portfolios. “If you let individuals come together and preach that message and get in groups — that's what Rally was really named after — getting a group of people who share that ethos, share that vision, get them together to invest in the things they love. They value that so much more than just numbers on a spreadsheet and they know they have the edge, they know they can really affect change if they do it together."
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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