When the stock market plummets, investors tend to feel nervous. When a global pandemic induces 2-month rolling lockdowns around the world, the anxiety amplifies. When the Federal Reserve and Treasury Department step in to stop the bleeding with trillions in stimulus, we’ve entered uncharted waters. 

With financial and economic uncertainty palpable, investors are left without knowing where to turn or how to invest. Education and control over their financial future are still lacking. 

For all the benefits of shiny new investment platforms like Robinhood, new investors are prone to poor risk management with little educational recourse at their disposal. The stock market is in flux, so investors must understand there is more beyond equities. Diversification is the optimal approach right now. 

This is the second financial crisis Millennials have experienced already, the other being in 2008. Maybe this time, the fintech market needs to slow down and cater to a new crop of investors shaken by the economic environment with education — not encourage risky strategies with new technology. 

Diversification and Better Information 

It may seem obvious, but putting all of your eggs in one financial basket is never a good idea. For example, only holding stocks would’ve blown up your portfolio last month. If you had only invested your money in the S&P 500, you would’ve been down roughly 30 percent in only 22 days

Diversification is the optimal means to reduce your risk exposure while still generating passive income from investment returns. 

By spreading your investments over multiple asset classes like investment-grade corporate bonds, government bonds, stocks, gold, P2P lending, commodities, and digital assets, you reduce the likelihood of a “Black Swan” event erasing digits from your portfolio balance. At the same time, your portfolio can remain steady with both risky assets like stocks and less risky assets like government debt, such as Treasury Notes. 

Investments like P2P lending even offer enticing yields that vastly outpace the paltry interest garnered by bank savings accounts too. 

For example, commercial banks only offered deposit savings rates at a national average of less than 0.1 percent before the crisis. And if you’ve been following emails from your bank, you may have noticed that they continue ratcheting down the interest rates on deposits further as the Fed cut the Federal Funds Rate to virtually zero and removed the reserve requirements of banks. 

Investors may be anxious to generate returns outside of a savings account, so P2P lending platforms are a prudent move. You don’t always need to chase returns with stocks and leverage — other options are available. 

Corporate bonds and cash are more appealing to the risk-averse investor, offering low yields in the case of bonds and a stable store of value in the case of cash. Gold is the classic safe-haven asset that performs well during a crisis, and Treasuries are about as safe of an investment as you can get. If you really want to shoot for volatility, you can even dip your toes into crypto assets. 

The point is that investors need to be diversified. Unfortunately, that appears to be easier said than done today. 

Education, Information, and Aggregating Information 

Misinformation is everywhere during a crisis, and it includes poor investment advice trying to squeeze a buck out of nervous investors. Apprehensive investors may not know where to turn when trillions of dollars are thrown around, and rumors of helicopter money are simmering. 

And that’s where emerging fintech’s major problem resides. The technology has outpaced the resources for investors. 

The technology, shiny tools, and new investment vehicles are great — but few options exist for newbie investors to really grasp how that technology affects their investment. They want to diversify their investments; they just don’t know how to without taking the advice of a broker or signing up for a new app and blindly throwing money into it. 

Hubs for financial education, paired with excellent customer service, should become a primary focus of emerging fintech platforms right now. Then the technology can catch up, but we’re leaving swaths of investors behind in a sea of financial complexity and chaos. Fortunately, some companies are taking up the mantle of catering to the requirements of the modern investor. 

For example, platforms like Constant are trying to encourage the development of more reliable resources and information. The platform provides 24/7 investment assistant services and boutique tools and educational material to support curious or shaken investors. 

Originally starting as a P2P lending platform with customizable loan rates, Constant is transitioning to a more expansive role as an educational hub, and is considering supplying liquidity to loan originators and might even offer bonds. Their goal is to empower the investor rather than milk trading fees from them. 

And the idea of functioning more of a customer-service and educational hub for investment is promising. Users come for the information service and stay for the investment products available on the platform. 

On the contrary, most popular fintech applications today are fragmented, only enveloping one specific asset class like stocks. For example, Robinhood is great for introducing users to investing but can be convoluted and encourage first-time users to throw all their money at the whims of equity markets, which is really no better than gambling for newcomers. 

The learning curve for investing is steep, and poor risk management that results from fragmented resources is just another example of technology outpacing the service and education that investors need. During a pandemic, patience might be what the fintech market needs. 

Then investors can understand that diversification is their best friend. Better resources and information are the solutions to getting that message across during a crisis.  Opinions expressed here are the opinions of the author. Influencive does not endorse or review brands mentioned; does not and can not investigate relationships with brands, products, and people mentioned and is up to the author to disclose. VIP Contributors and Contributors, amongst other accounts and articles, are professional fee-based.