Let us introduce you to Stock Bits!
6 min read
At Oval we are excited to bring another innovation in the investment space. You asked and we have delivered... but the Oval way.
We are excited to finally give you the opportunity to invest on the basis of single companies on the Oval platform. How? With our partners Cirdan Capital and SmartETN, we have created Stock Bits, ETNs that allow you to invest fractional amounts with respect to the underlying share prices. We will initially launch 4 Stock Bits: Amazon, Apple, Netflix and Tesla.
Why these companies?
We have decided to select these single companies, the ones that you love, follow, and maybe use every day. We know this because our community voted for them when we asked you to have your say. This is just the start though, if we see you like them we will allow you to vote for the next companies to be launched on the platform.
This gives you the opportunity to invest in products and services that you actually use every day and help you feel confident in your investment journey. We also think that if you do not understand indexes, it may be helpful approaching something that is more intuitive to track as the products are indexed on the companies’ share performances.
How are Stock Bits on Oval?
We want to remind you we are not a trading platform, both in mission and execution, so if you want to trade, Oval is not the one for you. At Oval, we believe in long term investments and consistent accumulation plans and we hope you can do this for the 4 companies we have selected to start with.
Oval Stock Bits will be offered through ETNs and thus you can buy Stock Bits. You will always be able to invest a minimum of 10€ as an initial investment and a minimum of 1€ per top up. If you wanted to buy Amazon today, one share costs 3,300$ which is 2,706€. This is a lot of money to buy just one share and be able to follow Amazon’s performance in the market. We believe in a strategy of diversification, so we want to allow you to diversify, without having to put all your available investment capital towards a single share, and to plan your weekly recurring investment with whatever amount you want.
• Oval Stock Bits will be offered in Euro and the price shown in app will start at 1000. Given all the companies we have selected initially are available in USD, our partner will hedge so that you do not have any exchange rate risk. What does this actually mean?
Let's say you buy Apple today at a hypothetical price of 150$ - meaning one share is worth 120€ (1$ = 0.80€). Let's say that in 1 year Apple is worth 180$ (up 20%) but the USD/EUR exchange rate has moved so that 1$ = 0.60€, this means the investment is actually worth 108€ (and not 144€), so you lose out on 36€ (25%). With Oval’s Stock Bits the price will always move in the same way as the actual share price, as our partner hedges on the USD/EUR exchange rate risk. We will explain hedging in our future blog posts.
• Oval Stock Bits will be priced daily. The Oval app and mechanism is not made for intraday trading, and the rationale behind our products is to buy and hold. The sale is confirmed at the closing price of the day when the order is executed, and not instantly. Oval Stock Bits have zero management costs and zero trading commissions. We apply only a one off 1% entry and exit fee when you buy and sell, to consider the protection on the exchange rate risk, and you can then keep the investment as long as you want with no other costs.
• Oval Stock Bits like all other indexes are calculated as total return. This means that any dividend that the company gives will be reinvested directly, and will be reflected in the product’s performance.
• Oval Stock Bits have an early redemption event, that if the product loses more than 80% of its initial value, or even if the underlying company defaults, you will get back at least 10% of your capital based on the effective price at closure.
Although it has been a good market with overall positive performances, with cost averaging and by investing regularly and in a recurring manner you are not timing the market and you are avoiding thinking about the daily fluctuations movements which may create bad investment decisions. We always mention that Oval investments are for the long run, so our approach is to buy and hold, knowing you can take your money out any time at a cost.
Why do we believe this strategy is better than trading? There is a saying on trading. It is the 90-90-90 scenario. 90% of people that trade lose 90% of their money in 90 days. This is because timing the market is very difficult and even finance experts with sophisticated computers and endless data are not able to do it. On the other hand, the market in general has grown over time, and a patient investment strategy can overcome short term swings.
To show you in practice what we mean by patient investing, let’s look at the four chosen shares and what an investment would look like if 10 years ago you could have started investing, 10$ every week, each week for 10 years. The total amount of money invested would be 5,570$ = 10$ * 10 years * 55.7 weeks, without accounting for inflation.
The actual money you would have in investments would be on each company as follows:
If you held the money in a piggy bank or even a current account today you would have 5,570$. If you had invested the 10$ every week regularly on Amazon, without looking at it for 10 years, today you would have 44,143$. This is a difference of 38,573$ or a profit of nearly 800%.
If you held the money in a piggy bank or even a current account today you would have 5,570$. If you had invested the 10$ every week regularly on Apple, without looking at it for 10 years, today you would have 28,405$. This is a difference of 22,835$ or a profit of over 500%.
If you held the money in a piggy bank or even a current account today you would have 5,570$. If you had invested the 10$ every week regularly on Netflix, without looking at it for 10 years, today you would have 78,952$. This is a difference of 73,382$ or a profit of over 1,400%.
Given Tesla IPOed slightly less than 10 years ago, if you held the money in a piggy bank or even a current account today you would have 5,320$. If you had invested the 10$ every week regularly on Tesla, without looking at it for the same period, today you would have 275,827$. This is a difference of 270,257$ or a profit of over 5,000%.
Who is this investment for?
Like always we want to remind you that this investment is not for everyone. Allocating a large portion of your capital to one product is risky as you could lose the investment amount if the company does not perform. This risk decreases if you invest in multiple companies.
These ETNs are designed for retail investors with moderate experience of financial markets. They have a medium term investment horizon and are looking for an investment opportunity that reflects an expectation that the underlying will increase in value over time and are able to bear a total loss of the amount invested.
As we evolve with Oval with Stock Bits please make sure to let us know the companies that you believe in and that you would like to invest in you can do so here. We look forward to building this new app feature together.
Oval Marketplace does not provide investment advice and individual investors should make their own decisions. Seek the advice of a financial consultant if you are not sure about your investment. Your capital is at risk and the value of investments can go up as well as down and you may receive back less than your original investment: you should not invest money that you can’t afford to lose.
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