Hey monkeys,
I was recently reading about Robin Hood, a no-fee venture trading app valued at $1.3 billion, and was surprised. Apparently Robin Hood had been rejected by 75 venture capitalists before taking off.
The idea came to the creators when
It became clear to us that the smartphone would be your primary tool for accessing the markets and doing financial transactions in general. When we looked at the space and we compared what we saw with the institutional world, where maybe firms were placing millions of trades per day at effectively no cost, we realized that from a technology standpoint, that's not that different from millions of customer placing trades per day, and that we could offer that at low cost by leveraging that same automation.
Robin Hood now boasts over 2 million users, 1 million of which joined before the app even came out. Robin Hood prides itself with allowing "investors" to buy stocks as quickly and easily as uploading a picture on Instagram.
The first generation of online brokerages put up some forms online and a marketing page, but that process behind the scenes was still the same. That's why when you open up a brokerage account that's not Robinhood, you can't buy the stock right away — you have to wait one or two weeks, usually. So we were really the first to create that experience of being able to go from nothing to being an owner of a stock instantaneously because that's what people expect from products.You're usually downloading Robinhood precisely because you want to do something. Something gives you the idea, you want to buy a stock — let's download Robinhood to do it. So removing that friction is just categorically a good thing. The brokerages might say, "We slow down the process so that you can make sure you're making a well-informed deliberate decision," but that's just a load of crap. They slow it down because they don't have engineers, they don't have the ability to make an awesome user experience, and it's not a priority.
The average age of a Robin Hood user is 30 years old, a prime millennial. These very millennials claim to enjoy being able to purchase stocks without feeling "screwed over". Apparently, Robin Hood creates an experience similar to "purchasing something on Amazon" yet better.
It's obvious that Robin Hood succeeded because the creators understood the space and consumer market relatively well.
What do you guys think of Robin Hood? Since its so new, do you think it can eventually grow large enough to compare with established brokers? Is Robin Hood simply aimed at naïve millennials who want to 'enjoy investing'?
Please discuss.
It's fun and inexpensive
I mean, what's the end goal? Who actually trades large sums of money with robinhood? I'm sorry, but if I'm going to put anything significant to work, I want to have a real brokerage that is accessible through a keyboard and computer screen, where I can navigate financials, statements, and investment memos easier than on a 4" iPhone screen.
Robinhood is used for when I see "NVDA TO THE MOON" hype on CNBC, i throw a few hundred into NVDA and follow the hype.
I use it to "put my money where my mouth is."
If I think a stock is going to go up but I don't want to risk any real amount of money, I'll pick up a share or two on Robinhood. Sadly my account has averaged like 50% +/- /yr since I started using it. Only ended up making a few hundred $$$ though. Probably should have followed my gut feeling and put down a lot more. Any real trades are made using a bit more complete program. Robinhood has a few too many glitches to risk more than a $100 or so. I like the concept though.
Currently have 60k invested and see no problem - free trades is a no brainer
Yes, but with $60k invested, you would also have 30 free trades / month using Merrill Lynch (100 free trades / month if you have $100k+ invested, plus the minimum account balance factors in B of A deposits) and probably several other brokers (I use ML but as this is largely a commoditized industry at this point, I would imagine Schwab, Fidelity, etc. have similar rates). Considering trading costs have gone down significantly in the past year, I think it may become hard for RH to attract investors with a decent balance.
Honestly, I never invested my money because I heard of the harsh fees and just left it all in my money market account. When RH came out the marketing of free trades was enough for me to give it a shot. Probably not a case for most but I think there is some mistrust with traditional brokerages and the transparency RH provided was enough for me to commit.
My concerns would be execution of the trade and also that they will not allow drip or allow shorting. I like the no comms trading and if I felt like throwing a bit at a stock i would use them.
NO idea what this "Robin Hood" is. I came here expecting to get a history lesson, instead I got this.
I expected some rant or verbal diarrhea about income inequality.
Most brokerages require permanent residency or US citizenship to open accounts, so I use Robinhood mainly and it's been fine with 50k+ invested.
I like where RH's heart is at. They are wanting to level the playing field for everyone and millennials (myself included) are cost-conscious. That being said, it's crazy to charge clients 2% (give or take) commission on an order. Imagine buying 100 shares of BABA and paying about $358 in commissions (yes, I pulled that from my platform at work to see what it would cost to place that trade at my firm). What the fuck is that? For what? Executing the order? Then again, we don't have a lot of non-managed brokerage accounts. we prefer to get paid to manage the assets and do well with that. RH has already disrupted the commission schedule for some of the other discount brokers. Fidelity and TD slashed their commissions. I like the usability of RH and the fact that it's just a mobile app does not bother me. I don't think RH is aimed at naive millennials, but I am sure that the majority of the accounts consists of college kids putting money into shitty penny stocks, etc. and expecting it to "go to the moon".
how do they make money though?
They make money on their margin accounts (Robinhood Gold) and interest on cash and securities held with RH.
Payment for order flow as well
I think it is good for people who would like to dip their toes in investing. Apart from that I dont think it'll grow large enough to compete with establisged brokers. It kind of sounds like Pied Piper
I could see it competing one day, but at this point their offering is just a bit too light. It definitely has a user base but the fact that you can only trade NYSE and NASDAQ, and only trade on your phone holds it back.
I didn't realize that people can only use Robinhood on their phone. That's definitely a drawback, but I guess it can me more convenient for millennials.
Lmao no, I do not use a Robinhood. It doesn't even list a bunch of stocks. Try finding Nestle on Robinhood. Oh right, you can't
That's because Nestle doesn't trade on the NASDAQ or the NYSE....
Yes, and my Etrade lets me make those trades no problem. Thanks for stating the obvious
Robin Hood is the prefect app for those who subscribe to Reddit's Wall Street Bets subreddit and believe a YOLO approach to the markets is the best. It also allows millennials to feel they are superior to the likes of Buffett, Ackman, and others when they boast a 600% jump in some bullshit, no-name stock.
I think its good from a business standpoint to tap into this younger crowd all the while selling the data that is being collected and selling the information (which is why Robbin Hood is "free").
It's great for someone looking to get their feet wet in the investing game. A friend at my internship last year turned me onto it and it's what really got me interested in investing in the first place. For someone just starting out it's the perfect platform.
After having been around it for a year it does have some drawbacks but the free trades/no commissions is hard to beat, especially for a kid in college who doesn't have a lot of cash to throw around.
It's an intuitive app that's perfect for people who want to start investing. Optionality is limited (can't short sell, only stocks etc.), but overall a great add to stir things up for the incumbent brokerages imo.
I use IB for trading and that's after working at a discount broker and in trading for 10 years. They are great, end of. I know one of the guys who was on their board when they launched, it's still a shit product i think. Told him it was a shit idea at the time - now I think he is probably laughing to the bank with that "shit" idea
I'd like to add an edit that the discount broker was an internship I did when I was 19 and a sophomore in College...
I doubt it will grow large enough to compete with traditional brokerages. First of all it's only an app, there is not desktop platform currently. Also you cannot short sell and the assets you can buy are limited to stocks. I mean it's nice if you want to trade something and make some quick change. In terms of short-term investing it's useful. However for those who like to invest for the long-term, I just don't think it's all too great. If they want to compete with traditional brokerages at some stage they are going to have to charge a commission fee (perhaps they can charge a really low one?). I feel like the majority of people out there like the feel of using a traditional brokerage. You get more out of it.
However I do think it's useful for people who want to start investing and the founders realizing that there was a market for this was brilliant IMO.
Its a great idea, but for anybody seriously "trading" with any type of real capital would be better off with Interactive Brokers. My one problem has always been that I'm almost positive that RH is front running their order flow. While this doesn't matter much for small, long term trades, some of the fills I've gotten are absolutely atrocious.
Robinhood and I aren't on speaking terms. I set a stop loss for AMD today at $20.05, and what price did it execute on? $19.45!
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