Stock trade app Robinhood raising at $5B+, up 4X in a year • Hacker News Board

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#31

Post by jtchang » Fri, Mar 16, 2018, 2:06 AM UTC

lewisl9029 wrote: post #23

asdsa5325 wrote: post #17

Crypto trading is the least notable reason why they are valued so high. Real reasons: 1) Large number of users 2) Large number of younger users (Millennials love Robinhood) 3) High amount of use per user (due to no fees) They are still a growth company. If they add IRAs (they said they would soon), Website (currently in closed beta), Options (currently in closed beta), and OTC (not sure if they will), then they'll li…

After using Schwab for both my banking and investments for more than a year now, I'm convinced that the most under-appreciated killer feature for a brokerage is actually cash management (i.e. a checking account you can pay bills from). Managing both my banking and investments at Schwab allows me to keep $0 in my checking account, and make use of their overdraft transfer feature to debit my investment account whenever…

I am curious how much money you pay on margin a year using this scheme.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#32

Post by swyx » Fri, Mar 16, 2018, 2:07 AM UTC

what a fantastically run company. a lot of cynics here but it takes a lot of fortitude and talent to run a startup with this level of mission critical reliability (else they get crushed by users and regulators). I’ve been on record before doubting they could move into crypto so fast, and while the rollout has been slow they have certainly moved far faster than I thought possible.

Yes, commission free trading is a complete gimmick and probably bad for you. But they have a $5bn company and I don’t. That is far more value creation than simple armchair criticism.

Yes, it’s “just” a trading app. But simplicity is hard and they have threaded that needle incredibly well. They are selling a commodity service but they know how to reach an audience that none of the incumbents can come close to touching.

My real thought is: what other industry can you do this to?

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#33

Post by prklmn » Fri, Mar 16, 2018, 2:07 AM UTC

justonepost wrote: post #27

What people don’t realize is that these 0$ trading commissions just make it up in their routing of the transactions. You’re not going to get the best price. Use interactive brokers if you want a good price. Flat fee is higher but the trade routes are great.

I can assure you that most robinhood users don’t have the slightest idea of what trade routing means. Also, I doubt there are many accounts placing big enough trades routinely for routing to have a material impact.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#34

Post by jcdavis » Fri, Mar 16, 2018, 2:08 AM UTC

wgerard wrote: post #26

dguo wrote: post #19

I appreciate the zero commission trading, but at the same time, I'm worried about the attitude towards "investing" that they promote. Most people should arguably be putting their money into index funds and holding for the long term[1], not picking individual stocks and following price movements on a daily basis. I wouldn't criticize anyone for speculating (i.e. gambling) with money they can afford to lose. I've done…

> Most people should arguably be putting their money into index funds and holding for the long term I think Robinhood is great for that! Zero commission means you can afford to buy small amounts without worrying about fees eating into your principal too much. You can put in $250 every pay period and buy a share of $SPY without losing ~3% to fees. With commissions involved you'd want to wait until you could afford a l…

Vanguard charges no fees for buying/selling their owns ETFs. I believe Schwab and others do as well.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#35

Post by omarforgotpwd » Fri, Mar 16, 2018, 2:08 AM UTC

dguo wrote: post #19

I appreciate the zero commission trading, but at the same time, I'm worried about the attitude towards "investing" that they promote. Most people should arguably be putting their money into index funds and holding for the long term[1], not picking individual stocks and following price movements on a daily basis. I wouldn't criticize anyone for speculating (i.e. gambling) with money they can afford to lose. I've done…

There's a middle ground between day trading and just putting your money in an S&P 500 index fund and never looking at it again. Trading stocks can be fun and help you make a lot of money if you're able to spot undervalued investments. It's very complicated, but anyone can learn the basics of value investing and do a little bit of stock picking on the side.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#36

Post by meatbundragon » Fri, Mar 16, 2018, 2:10 AM UTC

jcdavis wrote: post #34

wgerard wrote: post #26

Earlier quoted context omitted.

> Most people should arguably be putting their money into index funds and holding for the long term I think Robinhood is great for that! Zero commission means you can afford to buy small amounts without worrying about fees eating into your principal too much. You can put in $250 every pay period and buy a share of $SPY without losing ~3% to fees. With commissions involved you'd want to wait until you could afford a l…

Vanguard charges no fees for buying/selling their owns ETFs. I believe Schwab and others do as well.

While this is a great point, the casual segment of the customer base that is being discussed would certainly not have enough awareness of this fact. At the very least, I didn't even though I do trade ETFs and large cap stocks casually...

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#37

Post by tysonzni » Fri, Mar 16, 2018, 2:14 AM UTC

ozmbie wrote: post #24

dguo wrote: post #19

I appreciate the zero commission trading, but at the same time, I'm worried about the attitude towards "investing" that they promote. Most people should arguably be putting their money into index funds and holding for the long term[1], not picking individual stocks and following price movements on a daily basis. I wouldn't criticize anyone for speculating (i.e. gambling) with money they can afford to lose. I've done…

The whole software/startup approach is currently based on user growth which relies on retention, trigger, actions, and rewards. Long-term investments don’t fit that model so there is no incentive for them to encourage that form of user behaviour.

User retention is arguably linked to capital preservation. So they do have some incentive to ensure people don’t lose their investments by trading too much.

When the market gets more volatile or if there’s a sharp downturn, that would become a big issue. Not sure they had to address this yet because since 2014 their founding year the market had been on a smooth, upward trajectory. A recession however is already around the corner.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#38

Post by dguo » Fri, Mar 16, 2018, 2:15 AM UTC

wgerard wrote: post #26

dguo wrote: post #19

I appreciate the zero commission trading, but at the same time, I'm worried about the attitude towards "investing" that they promote. Most people should arguably be putting their money into index funds and holding for the long term[1], not picking individual stocks and following price movements on a daily basis. I wouldn't criticize anyone for speculating (i.e. gambling) with money they can afford to lose. I've done…

> Most people should arguably be putting their money into index funds and holding for the long term I think Robinhood is great for that! Zero commission means you can afford to buy small amounts without worrying about fees eating into your principal too much. You can put in $250 every pay period and buy a share of $SPY without losing ~3% to fees. With commissions involved you'd want to wait until you could afford a l…

That is true. I'm not saying Robinhood is all bad or can't be used in good ways. My concern is that overall, the product and marketing seem to be geared towards speculative, short-term trading. When I first signed up, the app was recommending that I check out stocks like Apple, Netflix, and Snapchat, not index funds.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#39

Post by stouset » Fri, Mar 16, 2018, 2:15 AM UTC

omarforgotpwd wrote: post #35

dguo wrote: post #19

I appreciate the zero commission trading, but at the same time, I'm worried about the attitude towards "investing" that they promote. Most people should arguably be putting their money into index funds and holding for the long term[1], not picking individual stocks and following price movements on a daily basis. I wouldn't criticize anyone for speculating (i.e. gambling) with money they can afford to lose. I've done…

There's a middle ground between day trading and just putting your money in an S&P 500 index fund and never looking at it again. Trading stocks can be fun and help you make a lot of money if you're able to spot undervalued investments. It's very complicated, but anyone can learn the basics of value investing and do a little bit of stock picking on the side.

That is an absolutely gargantuan “if”, given that any particular retail investor is overwhelmingly unlikely to possess novel knowledge or insight in any market.

The number of times this ever happens is outweighed a millionfold by the frequency of times where people incorrectly believe this to be the case.

What happens in the vast majority of cases is that people believe they’re making money, but after fees are actually losing to index funds. Or people believe they’re making money, but lose their shirts the moment the market turns sideways. Or people do succeed due to completely random chance, but the level of risk they took on to make that return is significantly higher than other investments with comparable returns.

Re: Stock trade app Robinhood raising at $5B+, up 4X in a year

#40

Post by anilshanbhag » Fri, Mar 16, 2018, 2:18 AM UTC

justonepost wrote: post #27

What people don’t realize is that these 0$ trading commissions just make it up in their routing of the transactions. You’re not going to get the best price. Use interactive brokers if you want a good price. Flat fee is higher but the trade routes are great.

This is really speculation. There is no reliable source to confirm this. I have used Robinhood for over 6 months now and never observed the trade price deviate from what is listed on Schwab and IB.

Also, for most people who trade 100-1000 shares it doesn't really matter.