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

#161

Post by johnpowell » Fri, Mar 16, 2018, 2:32 PM 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…

For some perspective. My uncle (retired from the Air Force) got into stocks in 1998. He did not tell my aunt until around 2002. He lost around 200K of their retirement because he was unwilling to accept loss. He is still at it and has moved on to day-trading and is doing just as bad. It is a addiction and he does not use Robinhood.

I was living with my sisters kid and set him up with a Robinhood account and stuck a few hundred in it. I explained things a bit and he was still sure he could time the market just with SPY and QQQ. He could not. I guess it is good people have a playground to learn that they really don't know what they are doing before they become my uncle.

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

#162

Post by radiorental » Fri, Mar 16, 2018, 2:33 PM UTC

jonbarker wrote: post #153

lewisl9029 wrote: post #55

Earlier quoted context omitted.

You definitely raise a valid point, but as I mentioned in reply to a sibling comment, I do try to prepare in advance for big purchases like those by selling off stocks to pay those off in cash. I would never deliberately use margin as a financing option due to those dangers you mentioned.

Your scenario meets the definition of 'using margin as a financing option'. It is the same as the overdraft option provided by credit cards, only it is more dangerous since in the margin call scenario they actually liquidate your stocks without asking you (if I recall from reading up on how this works at most discount brokerages a few years ago). The fact that you rarely do it helps some but as we know the thing abou…

Small point but I think you might mean Liabilities divided by Assets = 2. (aka the 6 month rule)

> It's literally the current assets (cash you could get access to in a year) divided by the current liabilities (all expenses due in a year)

Essentially you should have a 6 month runway. If you have 25K cash and 50K costs per year then the $25K will buy you 6 months to get yourself over a layoff/health issue/etc.

Just a small point because it's a rule I live by and you freaked me out for a moment thinking the advice/goalposts had move way beyond what I've saved for.

thanks

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

#163

Post by rifung » Fri, Mar 16, 2018, 2:37 PM UTC

barnabes wrote: post #151

austenallred wrote: post #119

Earlier quoted context omitted.

Yeah, worst case scenario use a limit

Do limits guarantee a price?

No but they put an upper bound on it which is likely what people would care about anyway

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

#164

Post by rifung » Fri, Mar 16, 2018, 2:41 PM 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.

While I also would like to learn how to trade stocks and believe in value investing, I think this comment severely understates the difficulty of beating the market. Let's not forget that the vast majority of professionals who do this day in and out can not beat the market on consistently.

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

#165

Post by username223 » Fri, Mar 16, 2018, 2:49 PM 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…

> I had to turn off push notifications for things like "Snapchat declined 5% today".

This is telling to me. If they have opt-out notifications nudging users to make various day-trades, they're in shady territory. Kind of the opposite of Robin Hood.

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

#166

Post by dguo » Fri, Mar 16, 2018, 2:50 PM UTC

btmorex wrote: post #116

dguo wrote: post #94

Earlier quoted context omitted.

That's better than the alternative of not investing at all because Vanguard is not user-friendly. And I know that's possible because I have friends who were in that situation. If you sign up with Vanguard, you still have to pick which fund(s) to buy. If you don't know anything about investing, that can be a daunting task. With Betterment, the only decision you have to make is the percentage split for stocks vs. bonds…

Isn't that why Vanguard has their Total Stock Market and Total Bond Market funds? Basically, they're the "invest in these if you don't want to bother" funds.

That's a good point. Deciding to go with those is still a choice though. It's like going to a restaurant that has both an omakase[1] option and regular dishes. Versus a restaurant that only offers omakase. The latter involves even less decision making.

[1]: https://en.wikipedia.org/wiki/Omakase

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

#167

Post by charlesdm » Fri, Mar 16, 2018, 3:03 PM UTC

tysonzni wrote: post #42

Robinhood is the only one among the new batch of fintech startups that encourages active trading. Their entire UI is built to optimize for ease of trade rather than thinking in terms of portfolio objective and diversification. Contrast that to Wealthfront, Betterment, or Acorn - they're all built on the "buy and hold" philosophy. They use technology to automate allocation, tax reduction and rebalancing, while investi…

What remains to be seen is whether passive investing will also be the way to go for the next 20 years.

One idea I often hear is that the more money that is being managed passively, the easier it is becomes for an active manager to "abuse" gaps in the market (i.e. when all these funds liquidate all their assets the same time, across the board -- not looking at whether you're selling Google or SmallCapX).

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

#168

Post by wils1245 » Fri, Mar 16, 2018, 3:04 PM UTC

wgerard wrote: post #61

jcdavis wrote: post #34

Earlier quoted context omitted.

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

True! That being said, using the Vanguard website is... significantly different from using the RH app.

How much are you willing to spend on a nice user interface? The whole point of passive investing is that you rarely interact with your account.

Even a slight difference in fees is worth thousands in the long run.

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

#169

Post by jonbarker » Fri, Mar 16, 2018, 3:09 PM UTC

radiorental wrote: post #162

jonbarker wrote: post #153

Earlier quoted context omitted.

Your scenario meets the definition of 'using margin as a financing option'. It is the same as the overdraft option provided by credit cards, only it is more dangerous since in the margin call scenario they actually liquidate your stocks without asking you (if I recall from reading up on how this works at most discount brokerages a few years ago). The fact that you rarely do it helps some but as we know the thing abou…

Small point but I think you might mean Liabilities divided by Assets = 2. (aka the 6 month rule) > It's literally the current assets (cash you could get access to in a year) divided by the current liabilities (all expenses due in a year) Essentially you should have a 6 month runway. If you have 25K cash and 50K costs per year then the $25K will buy you 6 months to get yourself over a layoff/health issue/etc. Just a s…

No, the numerator is current assets and the denominator is liabilities. This way if you have half of what you are about to spend in a year, your ratio is .5. If you have double what you are about to spend in a year, your ratio is 2. In your example, your current ratio is .5. Still you are doing way better than most people I know and the stats on national savings and lifestyle requirements bear this out as well.

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

#170

Post by smileysteve » Fri, Mar 16, 2018, 3:20 PM UTC

stouset wrote: post #39

omarforgotpwd wrote: post #35

Earlier quoted context omitted.

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 actual…

> given that any particular ~~retail~~ professional investor is overwhelmingly unlikely

Reminder from Random Walk Down Wall Street; Professionals rarely beat the S&P 500 Index on a time horizon. It's statistically likely, that if a professional fund does beat the index one year, then it will underperform the next year.