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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

#281

Post by thunderstrike »

Ntrails wrote: post #183
vivekd wrote: post #168

Earlier quoted context omitted.

As a small investor, borrowing money to invest is almost invariably a terrible, terrible idea, because any return you make on the investment will likely be cancelled out by the interest paid to borrow the money. I just looked up margin interest rates, for loans of 10 000 or less (which is what we are likely talking about with robin hood) the interest rate is Base Rate + 1.25% which is 8.50% interest. I don't know man…

Is that Base Rate something specific to them? Because it's a goddamned travesty for a pretty well secured loan.

Take a look at these broker's rates for comparison:

https://www.scottrade.com/investment-products/interest-margi...

https://www.fidelity.com/trading/advanced-trading-tools/marg...

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

#283

Post by pembrook »

artursapek wrote: post #257
pembrook wrote: post #239

Earlier quoted context omitted.

This comment is so wrong I don't even know where to begin.

What a condescending response. How is it wrong? Look at VFINX for example: - VFINX is up 72% in 10 years. AMZN for example is up 1220% in the same 10 years. - VFINX is up 72% in 5 years. XIV is up 530% in the same 5 years.

"Just pick winning stocks" and "sell them before they go down" are not strategies that any human OR algorithm has been able to perform consistently over long time frames. And no, Warren Buffet didn't make his fortune just trading stocks.

So I assume based on your strategy you put all of your money in AMZN 10 years ago, sold it right before each drop, re-bought right before each rise, and are now filthy rich. Oh you're not? I wonder why.

Also, XIV is an inverse volatility trading vehicle. It's not meant for long term investors and frequently goes through 90% drops. This kind of extreme volatility is corrosive for long term returns. The last 5 years have had abnormally low volatility due to extremely low interest rates, hence why that ETF has done so well over that time period. Of course it's effortless to cherry pick winners when looking backwards instead of forwards.

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

#284

Post by jbooth »

ThrustVectoring wrote: post #228
jbooth wrote: post #203

Earlier quoted context omitted.

They're offering 2x margin, if I read the article correctly. So it's at best 1/3 secured, and probably a lot less than that if you need to make a margin call and try to collect. The gigantic risk to Robin Hood isn't that they'll have problems collecting occasionally. They can make up for that by fiddling with their fees to come ahead in the average case. It's that some big market move busts everyone at once and they…

Uhm, what? That's still fully secured. It's actually 4/3rds secured, not 1/3rds. If you have $1000 in your account and borrow $2000 to buy stocks, you've got $3000 worth of stocks that they can sell to cover a $2000 loan. Whenever this ratio goes near or below 1, they can sell the secured stocks to cover it.

If the stocks (or wacky option/derivative trade) still have value, then yeah, there's no problem.

The problem is when people make a bet that doesn't work out. There are a lot of exotic trades that can clean you out completely in an instant if you bet wrong.

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

#285

Post by mr_turtle »

lurker456 wrote: post #155
mr_turtle wrote: post #48

Earlier quoted context omitted.

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.

Their end game is being bought by a larger financial org. RH is capturing a user base that has eluded more established institutions for a long time.

Oh damn, then it's just opening short/long term trading to a new segment of people that wouldn't otherwise do it. That's like 100% casino/poker bonuses during the poker boom.

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

#286

Post by squeaky-clean »

pembrook wrote: post #269
dsacco wrote: post #255

Earlier quoted context omitted.

>Enticing millenials to "trade" individual stocks is quite possibly the most anti-Robinhood thing I can think of. Listen, I understand that this is widespread, so I'm not targeting you specifically. But could we try not to use generalizations like "millenial", especially when they refer to vaguely defined generational boundaries? Your point is very strong, and stands on its own without making what I interpret as an i…

I used the term as it was originally intended, to describe an age group in the context of marketing a product. Robinhood's massive growth is being driven largely by their target of "millennials" (ie. young adults) coming to the platform without any allegiances to legacy brokers. The millennial customer base is one of the reasons cited for their valuation, since legacy brokers have had trouble gaining younger customer…

> Robinhood's massive growth is being driven largely by their target of "millennials" (ie. young adults) coming to the platform without any allegiances to legacy brokers.

Are you sure about that? I'm the only person I know in my age group using Robinhood. But it's gotten popular with my parents and their friends for example. My mom tried to sign up for Gold before I stopped her.

I don't think they're enticing millennials, just anyone who doesn't understand finance or trading very well, which it seems is most people.

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

#287

Post by bradleyjg »

kfrzcode wrote: post #267
mrtron wrote: post #225

Earlier quoted context omitted.

It is probably helpful to explain individual investment vehicles and why it is sane for someone new to invest. VTI is an ETF that is basically representative of the entire US market. It is somewhat like holding a little bit of everything in the US market. If you have a bunch of cash sitting in a savings account, and instead want that cash tethered to the swings of equities market, VTI is a reasonable choice.

Thanks for this, can you explain the others the parent mentions?

VYM is an index fund that tracks the FTSE High Dividend Yield Index invests in global equities (excluding REITs) with high dividend yields. About 1/3 of the current index is in 10 stocks all US: Microsoft Corp., Exxon Mobil Corp., Johnson & Johnson, JPMorgan Chase & Co., Wells Fargo & Co., General Electric Co., AT&T Inc., Procter & Gamble Co., Pfizer Inc. and Chevron Corp.

QYLD is even more exotic. It seeks to track the CBOE NASDAQ-100 BuyWrite Index. That index in turn seeks to track the performance of a theoretical portfolio of the 100 largest NASDAQ stocks on which covered calls are written with a certain formula. Covered calls are a type of options strategy.

I'm just another rando on the internet, but I would recommend neither VYM nor QYLD to people new to investing who aren't sure what to buy. VTI is a far more appropriate suggestion. As would be VT (like VTI but looking at all stock markets), BND (index fund for US investment grade bonds), and maybe BNDX (ex-US investment-grade bonds with currency hedges)

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

#288

Post by artursapek »

pembrook wrote: post #283
artursapek wrote: post #257

Earlier quoted context omitted.

What a condescending response. How is it wrong? Look at VFINX for example: - VFINX is up 72% in 10 years. AMZN for example is up 1220% in the same 10 years. - VFINX is up 72% in 5 years. XIV is up 530% in the same 5 years.

"Just pick winning stocks" and "sell them before they go down" are not strategies that any human OR algorithm has been able to perform consistently over long time frames. And no, Warren Buffet didn't make his fortune just trading stocks. So I assume based on your strategy you put all of your money in AMZN 10 years ago, sold it right before each drop, re-bought right before each rise, and are now filthy rich. Oh you'r…

> So I assume based on your strategy you put all of your money in AMZN 10 years ago, sold it right before each drop, re-bought right before each rise, and are now filthy rich. Oh you're not? I wonder why.

No, that's just a buy-and-hold... just the same as an index fund. I didn't cherry pick anything. Plenty of high profile stocks went up more than 72% in the last 10 years. They're not even hard to find.

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

#289

Post by tanderson92 »

bradleyjg wrote: post #287
kfrzcode wrote: post #267

Earlier quoted context omitted.

Thanks for this, can you explain the others the parent mentions?

VYM is an index fund that tracks the FTSE High Dividend Yield Index invests in global equities (excluding REITs) with high dividend yields. About 1/3 of the current index is in 10 stocks all US: Microsoft Corp., Exxon Mobil Corp., Johnson & Johnson, JPMorgan Chase & Co., Wells Fargo & Co., General Electric Co., AT&T Inc., Procter & Gamble Co., Pfizer Inc. and Chevron Corp. QYLD is even more exotic. It seeks to track…

I'm just another rando on the internet, but I concur with bradleyjg. Consider reading some of John Bogle's books or reading the Bogleheads wiki page. You cannot go too wrong with (VT / (VTI+VXUS) ) + BND.

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

#290

Post by GenWintergreen »

tanderson92 wrote: post #271
Steeeve wrote: post #260

Earlier quoted context omitted.

The difference being that margin investing by novice investors has already led to the worst economic collapse in history.

Many home buyers are novice investors. There was more to it than novice investors blowing up the real estate market due to misunderstanding margin.

Believe it or not, buying a very expensive home with poor understanding of the market and finance mostly through debt can be seen as analogous to un-collateralized leveraged investing....
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