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Robinhood stock trading app confirms $110M raise at $1.3B valuation

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Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#101

Post by SEJeff »

cjslep wrote: post #79
problems wrote: post #28

Earlier quoted context omitted.

Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes, to gamble. And for that purpose, often having the leverage is a good thing. The way I see it, the bets are much more entertaining than those at casinos and with better odds. Maybe it's just me, but I find casinos incredibly boring, but gambling on the market ca…

I think the bigger problem is the erosion of the distinction between "investor" and "speculator", which is often unclear for novices entering the market (for whom Robinhood is significantly lowering the barrier for). Robinhood provides the firing range and a gun but no safety instructions. So I'm willing to bet you view this app very differently than someone who finds it on the App Store in a spur of the moment entic…

But even if you pay the $9-$15 for their Gold account, you still can only get on margin the amount of capital you have in the account max ie: if you deposit $5 and have $5 of cash on hand in your robinhood, but own ~$1200 of stocks, you can use https://support.robinhood.com/hc/en-us/articles/213262686-Ro...

Note that I am a robinhood user and do not use gold or any margin investing. I use it for speculation for long term stuff and have the rest in boring index ETFs / funds primarily. I think the entire idea of investing on margin as playing with fire when you lack fireproof gloves.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#102

Post by SEJeff »

doctorbellario wrote: post #99
problems wrote: post #28

Earlier quoted context omitted.

Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes, to gamble. And for that purpose, often having the leverage is a good thing. The way I see it, the bets are much more entertaining than those at casinos and with better odds. Maybe it's just me, but I find casinos incredibly boring, but gambling on the market ca…

What are returns like on "boring index-tracking ETFs"?

Ask Jack Bogle... I'm sure he'll have a lesson or 5 for you.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#103

Post by harryh »

Leader2light wrote: post #21

I use Robinhood daily and love it. Low level traders could care less if HFT are making a penny off them. Also you can put limit orders....... No way I could trade the way I do and still make money if I was paying 7$ or more per trade. Crazy the industry can charge that much.

This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product.

How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers for purchasing liquidity a penny at a time.

Worth keeping in mind as you trade stocks every day.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#104

Post by [deleted] »

mr_turtle wrote: post #48
supster wrote: post #19

Earlier quoted context omitted.

All the major retail brokers sell their order flow, so you generally eat this cost no matter who you use. In addition, the hidden cost is fractions of a penny on the dollar (so still better than the $5-7 a regular broker charges per trade anyways).

What's the long play then? Surely Robin Hood isn't absorbing the the transaction fees as a loss leader just to increase it's user base? If that's the play, any other company can emulate that.. The incentive seems to be this may cause a price war with existing brokerages.

[deleted]

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#105

Post by kogepathic »

sigstoat wrote: post #84
user5994461 wrote: post #55

Earlier quoted context omitted.

Casino have truly insane margin on the money you play with them (and equally truly insane revenues). When they lend you money, they know exactly how much of that will go back to their hands soon (and they have a ton of cash flow to cover). Robinhood is effectively lending money with little guarantee to take anything back and no source of income.

> Robinhood is effectively lending money with little guarantee to take anything back and no source of income. i have not looked into robinhood's margin offering, so maybe it's very different, but in my other brokerage accounts, margin works something like this: i buy $10k of SPY. after the trade closes, the broker says "ok, you own $10k of SPY, and that's good for another $5k of margin." so then i can go buy another…

> so... they've got a great guarantee they can take it all back.

And what of the case where the value of your SPY position falls below your $5k+interest debt to them?

Edit: derp. A margin call would cover this.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#106

Post by auganov »

The_Hoff wrote: post #69
omarforgotpwd wrote: post #39

Earlier quoted context omitted.

Same exact situation here. Because I put in lots of relatively small dollar value trades $10 transaction fees at TD Ameritrade would eat all my profits pretty quickly.

Still a lot, but TD dropped their fee to $6.95 https://www.tdameritrade.com/pricing.page

And Fidelity is at $4.95 which is the lowest for big brokerages I think https://www.fidelity.com/why-fidelity/pricing-fees

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#107

Post by scott00 »

rl3 wrote: post #50
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

> Even if you are a professional trader you'll take a bath on margin over the long run. Huh? It would be difficult to find a professional trader that doesn't ​ trade equities on margin. They pretty much have to due to the way the settlement process works. The returns of a professional trader depend on many factors, including available capital and the capacity or manner in which the trader operates. That said, they're…

Typical margin rates for professional traders are far below 5%. See https://www.interactivebrokers.com/en/index.php?f=1595. And IB is basically the most expensive professionally focused brokerage. If you've got a million bucks you can probably get Fed Funds + 50 basis points.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#108

Post by brilliantcode »

Remember LendingClub which was a money lending business that touted it's machine learning KYC & AML process would automate the overhead but what happened was it just let a ton of people with non existent credit to grab money...that they will never pay back. Techcrunch, news, tv, they had it all.

I'm not saying Robinhood is bad or anything but the business model and the valuation built on top of it is very questionable.

It's almost like gravity does not exist anymore. It's all about making it across the IPO finish line and then it's like fuck what happens to everyone else because I've already got Monssack Fonseca shuffling my untaxable money.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#110

Post by pembrook »

Enticing millenials to "trade" individual stocks is quite possibly the most anti-Robinhood thing I can think of. The only thing more ironic would be to encourage them to take on margin...which as it turns out is literally Robinhood's business model.

99% of users on the platform will ulimately end up participating in a direct transfer of their own wealth to a more sophisticated trader or algo (i.e. The banks and hedge funds who aren't just doing this for "fun" and have the financial and political backing of the world's elite). Side note: even those hedge funds can't consistently beat the market.

If you are reading this, for your own finacial future I beg of you, please take your money to Vanguard instead and buy some index funds. Scratch your "trading" itch by trying to game your asset allocation instead. Future you will thank present you.

If you don't believe me, please look into any of the academic research that has been conducted around efficient markets.

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