Robinhood stock trading app valued at $1.3B with big raise from DST • Hacker News Board

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#141

Post by hendzen » Sat, Apr 01, 2017, 3:53 PM UTC

SirLJ wrote: post #128

mcguire wrote: post #120

Earlier quoted context omitted.

Especially with somewhat-diversified assets like SPYders or index funds. At least, it's worked reasonably well for me for the last 20 years.

Buy and hold will work until it doesn't and a lot of people will be left holding the bag, especially if you need the money at the bottom for medical, retirement, etc... Just check the Japan’s Nikkei stock index, almost 30 years later people are still waiting and are far far away from the top...

So what you're saying is that if the market starts behaving significantly different than it has throughout history, people will be screwed. How exactly does backtesting help you in this scenario? By definition, basing a strategy off a good backtest is assuming that the market will behave similarly in the future as it has in the past.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#142

Post by huntermeyer » Sat, Apr 01, 2017, 4:02 PM UTC

arcticfox wrote: post #85

adambratt wrote: post #69

Robinhood is just a marketing play. Anything about them selling flow or using margin offerings to become profitable is not realistic. Traditional brokerages have a customer acquisition cost of around $400 to get someone to deposit at least $100 in an account. They've got a million users and continue to grow quicker and quicker. For a small multiple of traditional CAC they are already close to their >$1B valuation jus…

What do they do to make money once they have their users on board?

They earn interest in the uninvested funds in user accounts.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#143

Post by Marazan » Sat, Apr 01, 2017, 4:02 PM UTC

SirLJ wrote: post #128

mcguire wrote: post #120

Earlier quoted context omitted.

Especially with somewhat-diversified assets like SPYders or index funds. At least, it's worked reasonably well for me for the last 20 years.

Buy and hold will work until it doesn't and a lot of people will be left holding the bag, especially if you need the money at the bottom for medical, retirement, etc... Just check the Japan’s Nikkei stock index, almost 30 years later people are still waiting and are far far away from the top...

And what does it look like as total returns or Dividends reinvested?

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#144

Post by vostok » Sat, Apr 01, 2017, 4:03 PM UTC

jcfrei wrote: post #136

vostok wrote: post #108

Earlier quoted context omitted.

> Can you be more specific? I believe you are talking about a market order. No, I am not talking about both limit orders and market orders. I am talking about nearly all orders that a retail trader would use. As an institutional trader, you would sometimes use orders that will be filled at worse prices than the lit market. Retail traders do not typically have a need for those orders. > Unless you have full access to…

> This is true, but the person filling your order does have a responsibility to ensure that your order is filled at the lit exchange price or better. If you find contrary evidence,the regulators would possibly be willing to pay you a lot of money for it. I'm still struggling with your definition of a lit exchange price. Are you referring to the NBBO? The price you get largely depends on the order size, so the NBBO on…

> If you are happy with the NBBO then you are right and I wouldn't worry too much - however if I recall correctly the NBBO is usually pretty wide

You still haven't shown evidence that price improvement is worse on Robinhood than on Schwab by an amount that exceeds Schwab's commissions. We both agree that for under 500 shares ($15,000 on a $30 stock) Robinhood is better even if there is 0 price improvement.

I've already explained in my previous response why you can't compare the KCG statistics to the Schwab statistics. I will repeat it again and rephrase it in case I was unclear. KCG does not have retail customers so their price improvement statistics are not comparable to Schwab's price improvement statistics. Retail customers get more price improvement because their flow is less toxic than institutional flow.

> Robinhood lists KCG, Citadel and Two Sigmas as their market centers.

I'm not really sure what this is referring to. Schwab routes to UBS, Citadel, KCG, G1X, and Two Sigma.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#145

Post by whitepoplar » Sat, Apr 01, 2017, 4:06 PM UTC

mcguire wrote: post #137

whitepoplar wrote: post #10

Earlier quoted context omitted.

1) Robinhood Gold is margin lending i.e. lending money to customers who want leverage. The monthly fee is effectively the loan's interest rate, rebranded in less shady terms. 2) They have very valuable order flow, which they sell. Almost all of Robinhood's customers are unsophisticated investors. Trading firms pay a lot of money for unsophisticated trading flow as there's room to "skim off the top". 3) Add in the typ…

"...less shady terms"? I'd say more shady. If you use less than the margin amount that they allow you, that fee looked at as an interest rate can be rather usurious.

Sorry, what I mean to say is that it's very shady, but they try to mask it in innocuous terms.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#146

Post by csomar » Sat, Apr 01, 2017, 4:14 PM UTC

nicholas73 wrote: post #119

rl3 wrote: post #70

Earlier quoted context omitted.

How do sketchy offshore shops collect on negative cash balances? 500:1 leverage sounds so crazy I wouldn't be surprised if it's used as a money laundering vector.

They don't, or shouldn't have to. Brokers that offer generous margins do something typical brokers do not - they auto-liquidate when you fall below minimum maintenance margin. Most retail brokers would give you a friendly phone call and let you liquidate the next day or so. Next, forex markets are so heavily traded they have a virtual guaranteed stop. That is, if you set the order you will get it filled no worse than…

I think most of these x500 Forex shops are bucket shops. They are not even derivatives. More known as CDF which means you are buying/selling against them.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#147

Post by SirLJ » Sat, Apr 01, 2017, 4:16 PM UTC

jonwachob91 wrote: post #129

SirLJ wrote: post #102

Here are my 2cents: Robinhood is irrelevant and border line dangerous. Irrelevant, because for someone who knows what they are doing in the stock market paying $10 or $0 per trade is not going to save them any money. Dangerous, because it promotes more trades for the “unsophisticated” investor and encourages leverage = very dangerous situation. Bottom line, if you do not know what you are doing, don’t do it, buy and…

You're right, Buy and Hold is a terrible strategy. Look how poor Warren Buffet is as a result of holding. /sarcasm Not having capital isn't the same as being unsophisticated. I could do all the right research on which stock I want to buy, but if I only have $100 to invest at the end of every month $10 fees would dig into my earnings very quickly. Assuming that people without large amounts to invest are stupid says mo…

I would NEVER EVER put my successful investing or trading strategy in the cloud or in the hands of a third party company, especially if they are in the same space, e.g. competing with me on the stock exchange...

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#148

Post by SirLJ » Sat, Apr 01, 2017, 4:22 PM UTC

md2be wrote: post #138

SirLJ wrote: post #102

Here are my 2cents: Robinhood is irrelevant and border line dangerous. Irrelevant, because for someone who knows what they are doing in the stock market paying $10 or $0 per trade is not going to save them any money. Dangerous, because it promotes more trades for the “unsophisticated” investor and encourages leverage = very dangerous situation. Bottom line, if you do not know what you are doing, don’t do it, buy and…

Wow, what a ignorant comment. You buy order would have to be in excess of $1000 for a transaction cost of $10 to be insignificant. As for the buy and hold remark, read the literature.

You need capital to do any meaningful investing, at a minimum 5 digits account, money make money, this is the simple truth...

Everything else is smoke and mirrors and unicorns...

There is no way you can turn $1000 into anything significant without insider trading information...

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#149

Post by cloakandswagger » Sat, Apr 01, 2017, 5:07 PM UTC

SirLJ wrote: post #148

md2be wrote: post #138

Earlier quoted context omitted.

Wow, what a ignorant comment. You buy order would have to be in excess of $1000 for a transaction cost of $10 to be insignificant. As for the buy and hold remark, read the literature.

You need capital to do any meaningful investing, at a minimum 5 digits account, money make money, this is the simple truth... Everything else is smoke and mirrors and unicorns... There is no way you can turn $1000 into anything significant without insider trading information...

You're getting downvoted but what you said is the truth.

All of this marketing around the miracle of investing small amounts (if you invested $100 into the market 20 years ago it'd be worth $1M today!) is just that, marketing. It's a way for brokerages and mutual fund salesmen to get more people into the game.

The brutal reality is that you need at LEAST $10K to ever see an appreciable return from the market. Investing $500 is a waste of your time unless you go into it with the understanding that:

A) You might make $50 a year from it

B) You're going to make an effort to actually learn about the stock market, fundamental analysis, etc with the aim of better knowing what you're doing when you have a bigger bankroll to invest.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#150

Post by SirLJ » Sat, Apr 01, 2017, 5:24 PM UTC

Marazan wrote: post #134

SirLJ wrote: post #109

Earlier quoted context omitted.

As in anything in life you need to have a strategy, even if you invest only in SPY ETF you still have to have a plan when to buy and when to sell. One interesting idea to start is to look into different trend following strategies. Get the data and back test different scenarios and see what is going to work for you according to your risk management, what draw downs you can tolerate, etc...

If you are committing to buy-and-hold you are committing to buying a diversified portfolio. No one advocating buy-and-hold recommends buying one thing.

If you back tested and you re confident in your analysis, more power to you! I am yet to find a truly diversified portfolio that can generate good returns for me...

My back tests and analysis are showing that I am not OK with buy and hold, because I don't want to stomach 50% draw downs or to wait 15 years for the NASDAQ to bounce back...

I am not that risk tolerant and I might need to sell some of my investments for medical, travel, even early retirement...

That's why I like to buy when the market goes up and sell when it goes down and be cash during crises like the dot com bubble and 2008 financial crisis... you can always buy them back on the way up when the trend changes...