Inflated prices, market volatility, and dire predictions of a looming correction are making investing in the stock market more challenging these days. But a Tampa startup is taking out some of the guesswork.
“It helps retail investors create market-beating portfolios using modern portfolio theory and behavioral analytics,” explains Justin Davis, who co-founded RiskSmith with Dr. Richard Smith in 2020.
RiskSmith offers retail investors tools previously used only by hedge funds and professional money managers. The goal is to help them profit more than they would by simply investing in index funds or turning over their money to professional managers.
As its name suggests, RiskSmith helps clients use risk to generate gain.
“We’re helping people create a portfolio that can perform better by better understanding how people can use risk,” says Davis, its chief product officer.
The all remote company is part of the Tampa Bay Wave and University of South Florida Fintech IX 2022 inaugural cohort, which began Monday. The accelerator program is the result of a multi-year partnership between the downtown Tampa-based nonprofit and USF’s Muma College of Business. It showcases the establishment of the Kate Tiedemann School of Business and Finance
on USF’s St. Petersburg campus.
RiskSmith makes use the tried-and-true algotithm: the modern portfolio theory
developed by Harry Markowitz in the 1950s, which touts the benefits of diversification as a means of mitigating risk.
The firm seeks to help investors recognize and manage the emotions that may lead them to hold onto to losing investments.
“The problem is people hate to lose twice as much as we love to win,” he says, citing the philosophy of Nobel Prize winner Daniel Kahnemann.
Investors currently can create an account at RiskSmith
, and access all of its services for free. The company is expecting to begin charging for premiere services in tiers later this year.
“We always want to provide a free version,” he says. “We really believe that individual investors are being hammered in the market.”
Users can opt to model and test different portfolio allocations to determine how much of a loss they may incur on a given day every month. Or they can put in their actual portfolios to the test to see if they want to tweak it.
The data is confidential. When users choose to share their portfolio with others, the actual number of shares owned isn’t disclosed. Others see only the percentage of revenue made.
“It allows financial advisors and clients to collaborate in a way they’ve never really been able to do before,” he points out.
Investors can get insights into a range of securities, including stocks, bonds and cryptocurrency. Trading is actually done with brokerage firms.
Dr. Smith, who previously founded and exited TradeStops in Brooksville, got the idea through his own experience investing.
The company already has some 400 users and is organizing a seed round. It is planning to expand its staff of eight by at least two or three in growth- and marketing-related positions this year.
So what kind of advice does Davis have for investors now?
“Prices don’t mean as much as people think they do, a lot of times,” he says. “We still think it’s a good time to go in as long as you understand the volatility you’re going to be in.”
RiskSmith is among 16 high-growth companies in the Fintech I X 2022 inaugural cohort which includes firms from Israel, England, Saudi Arabia and Germany. Three are led by women entrepreneurs; others represent military veterans, members of the LBGTQ+ community and minority founders.
Davis hopes the program will help RiskSmith expand its reach.
“Ultimately, at the end of the day, we want to get the product in the hands of more people,” he says.
Learn more about the accelerator program