S.E.C. Gives Small Investors Access to Equity Crowdfunding

But, it does strike me that the Kickstarter model would be far superior if the backers got an equity stake in the company. As it works now, the backer takes a big risk in not getting a product, or getting a crappy product, yet enjoys no upside if the product is a smash hit.

It also strikes me that a barbell strategy to portfolios can be a good idea for some people. That is, invest 95-99% of your money in safe bets like Vanguard mutual funds, and then a few percent in high-risk, high-reward bets such as startups. It is unfortunate that worthy people who are not millionaires do not have the opportunity to do this. Even if people do not net make money from this, if people buy lottery tickets or go to casinos, why not allow them to risk money in a way that has potential to do good for society?

...do we?

Most of the investment advice I read says to use things like Vanguard ETFs for broad market funds.

Yes, and I just said we should regulate lotteries tightly and limit how much people can gamble on them. That removes that hypocrisy.

> That really depends on your perspective. I personally think that using wealth as a proxy for... well, really for anything other than wealth, ...

If you read my other comment, it has more to do with the risk of them surviving [financially] poor decision making.

Someone who makes $100k and puts $10k into risky bets is more likely to survive than someone who makes $30k and does the same thing. Its a question of scale.

> then you should focus on providing better financial education, instead of restricting the fiscal agency of everyone else in the same income bracket.

Education requires the student to be motivated to learn. There are plenty of resources to learn about financial decisions and community colleges teach relatively cheap personal finance classes.

This changes the rules so retail investors can invest blindly in stocks, i.e. without being first informed about the nature of the investment opportunity through the SEC disclosures. It seems pretty reasonable to me that if someone wants to raise money, they should be required to disclose, to the potential investor, enough information about the financial position of the company and the nature of the investment for the investor to make an informed decision. If you want it leveled between institutional and retail investors, I'd prefer leveling in the direction of more transparency for both classes of investors, rather than less. If the issue is just that the SEC process is too bureaucratic, then propose a reform to streamline it, rather than bypassing disclosures entirely.

One thing that makes it particularly needed is that a possible alternative, dealing with misleading fundraising through after-the-fact lawsuits, is mostly ineffective, since successful suits end up as judgments against bankrupt companies, who won't pay them. If a company gets a bunch of investors while not being entirely truthful with them about its financial position/revenues/etc., suing them after it collapses doesn't help you at that point. That's the situation we had before the SEC was created, and was the motivation for the 1933 Securities Act requiring companies to register an offering and make certain disclosures, prior to selling securities to the public.