Staygg - new app lets you invest small amounts of money for free | Hacker News Reader

Staygg - new app lets you invest small amounts of money for free

staygg.com

37 pointscarloafs22 comments

I hate to be the naysayer, but NOBODY SHOULD USE THIS.

If you don't have a lot of money, open a Vanguard account and forget about it. If you don't have the $1000 to set up a Vanguard account, put your money in an FDIC-insured bank account. Seriously, if you don't have $1000 to invest you are MUCH better minimizing effort and risk than trying to make an extra 5% on your money (that's less than $50 per year).

Also, nobody should "invest" in any app that makes you pay to hide the ads.

Finally it's here, the official Ponzi app.

But seriously - What exactly am I buying? Where are the details of the indexed fund? No charges, how does that work? Don't these people need to pay brokerage fees? I'm highly suspicious.

My guess: they are eating the management fees on an indexed fund that they are just managing themselves. With enough volume they can offer other fee-ful funds like the other guys and cover the costs. It's just a loss leader.

I'm assuming it's not a Ponzi scheme, but obviously could be wrong.

If everything is up-and-up this is actually kind of cool. I've been disappointed at the lack of decent investment options for low-income savers.

If it's not too private, what would be an ideal amount (min-max) for you to invest as a low-income saver?

Furthermore, maybe it would be better to handle immediate expenses instead of trying to save every penny which wouldn't have any tangible returns anyway?

I'm not a low-income saver myself, but I see lots of low-income savers that just can't hit the minimums. I really would love to see a fee-free option for them that they can drop $5 into here and there and have it add up.

Some Vanguard index funds have a $1000 minimum and you don't have to risk your money with a (frankly) sketchy investment like this.

You can also buy them on the stock exchange for less than $10 in transaction fee, and I think the minimum there is a lot less than $1000.

Good point. IIRC, if you buy the ETFs directly from Vanguard, there is no transaction fee, making it even less expensive.

I'm thinking that they'll hide the brokerage fees by buying low-cost S&P index funds themselves in "large" chunks then breaking them off for users. The index funds still have brokerage fees tied into the cost of the fund, but the app itself won't charge users for entering or leaving the fund of funds.

If they're only buying additional index stock on a weekly/monthly basis they could potentially make that back in advertising revenue. Alternatively, by just paying out of pocket, if they get enough users they can now claim they've run a x $ amount mutual fund -- good resume padding.

It makes me a bit nauseous whenever I read or hear that somebody wants to outperform the market with an actively managed fund that is resembling an index fund. Like draugadrotten writes, such an endeavor can't be free.

The rule of thumb for the targeted audience of such a startup should be exactly the opposite. To never pay someone to actively manage their portfolio that is.

"Data from recent decades demonstrates that the majority of actively managed large and mid-cap stock funds in United States fail to outperform their passive stock index counterparts."[0]

Edit:

No, seriously. What the kids they are targeting need is to learn to manage their personal finances[1] and invest very early in very boring things. With a very simple and boring strategy that takes a couple hours a year[2].

Most fund managers are essentially useless[3] and according to numerous studies very seldom outperform the market. Unless you have millions in spare change to give away to someone who gambles with your money, stay away from them.

[0] http://en.wikipedia.org/wiki/Active_management#Disadvantages...

[1] http://www.reddit.com/r/personalfinance/wiki/index

[2] http://www.etf.com/docs/IfYouCan.pdf

[3] https://www.youtube.com/watch?v=SwkjqGd8NC4

I don't think it is promising to outperform the market at all

"Our fund aims to replicate the returns of the S&P 500."

Doing that reliably over a meaningful period of time is the problem. In my book (from the perspective of an investor) you'd need to "outperform?" the index to cover the costs of frequent trades and potential losses at no actual cost to the investor.

It says replicate, not outperform.

Just buy the Vanguard index fund.

It's easy to replicate the returns on the index, you just use the dividends to pay the fees, since the S&P500 index includes only capital gains only and is not "Total Return" (include capital gains plus dividend).

"somebody wants to outperform the market with an actively managed fund that is resembling an index fund"

It sounds like you don't know what these words mean.

I honestly can't imagine any level-headed investor trusting any amount of money to a bunch of recently-graduated economics majors through an iPhone app.

At least they used vanilla Bootstrap for their website.

Is this mutual fund registered with the SEC?

Why would I put my money here rather than robinhood.io, which is FINRA accredited, free, and has top tier investors?

This needs way better transparency

What we need is an app to vacuum up whatever spare change is left of retail customers at the top of a stock market, and Staygg is that app.

Hey guys,

I'm Carlos, one the of the Staygg founders. The app is not a Ponzi scheme, the fees will be made up in other ways as described in the FAQs on the website, and the mutual fund will provide daily liquidity, will be registered with the SEC, and will nearly perfectly replicate the S&P 500 - it does not aim to outperform the S&P 500. The mutual fund itself will not be innovative in any way - except that it's free - and the investment team won't be actively managing the fund. The real motivation behind this product is that each person on the Staygg team thought it would be cool to have an app like this so we decided to make it ourselves and make it available to others.

Thanks for the feedback.

Carlos

I think this trend is a disaster for tech/finance interoperability. You should - for all intents and purposes - be your most liquid in your savings. Not your least.

- Fees are hidden, nothing is "free" - The time from when you pay until you own the shares is hidden The time from when you "sell" until you have the money again is hidden - They "aim" to replicate the S&P500 but then they can differ. How much and how often. - All risk and volatility is hidden - Security of computer systems. They seem to be brilliant math guys with little computer security experience at all. Bitcoin syndrome.

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