Yahoo Finance Brands Are Turning Fans Into Shareholders — Should You Invest in Your Favorites?
Warren Buffett often advises people to invest in brands they know and understand. He follows his own advice with investments in companies like Coca-Cola, his favorite soft drink.
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But is this always a good strategy? And should you take it one step further to invest not just in companies, but in individuals you follow and admire? The answer from experts is a solid “maybe,” depending on your risk tolerance and other factors.
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Investing in Brands
From Apple to Tesla, today’s investment apps make it pretty easy to buy shares, or even fractional shares, in popular companies. For some beginning investors, building your portfolio with popular brands can be a comfortable way to get started.
“When it comes to stocks, being a fan of a brand like Disney, Tesla or any other company can certainly spark your interest, but it shouldn’t be the sole reason you invest,” advised Ned Priestly, CEO at MQL. “You need to dig deeper into the company’s financial health, market position and growth potential.”
Investing in your favorite brands doesn’t always mean putting your hard-earned money at risk. LIONS’ LoveTheWork.com website spotlighted several companies, including Xbox and Kentucky Fried Chicken, that launched campaigns encouraging fans to invest via sweat equity in various promotional projects.
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Other Ways To Invest
KFC asked fans in China to sell exclusive KFC-branded products through the WeChat platform. Fans, in turn, received vouchers and rebates for every sale. KFC earned $42 million in sales in four months with the campaign.
Similarly, XBox invited fans to customize game controllers and sell the designs, according to LIONS’ website.
Of course, many companies use affiliate marketing to encourage influencers, bloggers, YouTube creators and other individuals with a social media following to promote their products and earn a share of the profits.
How To Invest in People
A new platform called HumanIPO.app takes personalized investing to another level, inviting people to invest in individual creators and support their products. With HumanIPO.app, which uses the tagline “Turn your fans into shareholders,” you can issue shares backed by your time and success. Fans can then buy, sell and trade shares like stocks and also purchase your time at an hourly rate.
The concept isn’t exactly new, however. Back in 2008, artist and creator Mike Merrill became the world’s first publicly traded person.
In a recent interview with GOBankingRates, Merrill said, “The idea was that if corporations could be defined as people, then it was fair to take the advantages of being a corporation and apply it to a person.”
In creating this IPO, Merrill said he relied on his own ingenuity, creative thinking and guidance from his network.
“Luckily, I am surrounded by smart people, many of whom are now my shareholders. With their help, we designed a market that let people buy and sell shares in me and also vote on any questions I needed help with.”
When HumanIPO launched, Merrill said, it seemed to be a perfect fit for his concept. He became one of the first people to list his personal brand in the marketplace.
“The HumanIPO project was the first time I’d seen someone try to recreate the experiment I’ve been doing as a platform. By basing the shares on units of time, they figured out a really elegant solution. I loved what they built and talked with them soon after their launch. I see it as an extension of my own personal experiment,” he said.
Should You Invest in People?
Because it’s a relatively new concept, without the history and foundation of the stock market behind it, investing in people carries risks.
Merrill likened investing in individuals to investing in a meme stock — but with some distinct social advantages over highly volatile investments like GameStop.
“It’s probably not a good way to make money,” he said of human capital investments. “But it’s a great way to meet people … It’s as much about the community and other investors (ideally) as it is the movement of the share price.
“The social reasons to invest can still have a great ROI. I’ve met so many people because they first became shareholders.”
He spotlighted one of the other advantages of investing in people before brands.
“It makes sense if you look at how people can become very famous very quickly now, and then [they] leverage that into a business or a service,” he said. “The person comes before the business, so maybe it makes sense to just invest in people?”
Whether you choose to invest in your favorite snack food or your favorite YouTube personality, keep the risks in mind, Priestly said.
“Assess the potential downsides and how they might impact your investment … While your passion for a brand or individual can be a factor, it should be balanced with a thorough analysis. Don’t let your emotions override sound financial judgment.”
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This article originally appeared on GOBankingRates.com: Brands Are Turning Fans Into Shareholders — Should You Invest in Your Favorites?
