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Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

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Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#21

Post by mrbluecoat »

carbocation wrote: post #6

FZROX gives me 0% fees, can be bought in my retirement accounts, and is attached to a company with something like $1 trillion AUM. The latter gives me faith that it will still be around next year. I appreciate that the 0% fee options are limited, but personally I’d rather deal with 0.03% fees than entrust my money to a small shop. Especially when the reason to do so is not some trading edge, but saving a small amount…

Same, M1 gives me similar options and protections for a nominal fee: https://help.m1.com/en/articles/9331969-how-much-does-it-cos...

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#22

Post by hn_throwaway_99 »

jansen wrote: post #13
carbocation wrote: post #6

FZROX gives me 0% fees, can be bought in my retirement accounts, and is attached to a company with something like $1 trillion AUM. The latter gives me faith that it will still be around next year. I appreciate that the 0% fee options are limited, but personally I’d rather deal with 0.03% fees than entrust my money to a small shop. Especially when the reason to do so is not some trading edge, but saving a small amount…

Every shop is a small shop when it starts out. Maybe give these guys a break?

I appreciate the sentiment, and I agree, but this really matters. There have been so many stories of fintechs collapsing recently, where people were really just trying to make an extra few percentage points of yield, and then people lost all of their savings.

I also like to root for the little guy, but the trust barrier will be the largest hurdle I think that this company needs to overcome, and so it's fair to discuss it.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#24

Post by ddulaney »

dayone1 wrote: post #11

1) are you going to sell your trade flow to Citadel / market makers like Robinhood and your competitors do? That's the dirty secret way of making money that you seem to have completely excluded. The reality is that adds up to substantial "invisible" fees that the investor has no transparency over because you sell your trade flows to them and they make a higher than normal spread. And the whole "doesn't matter if we s…

For 1 — dude, please back off the “[the rules] are a farce”.

Citadel and friends pay to trade with you because they think you’re dumb and they can make money off you. They’re giving you or your broker a better deal because they think they’re smarter than you. That’s all it is. They’d rather trade with you than with the median person on the market. Because they think you’re dumb.

You’re welcome to be insulted by that. It’s an insulting thing. But it’s not some grand conspiracy.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#25

Post by wrsh07 »

dayone1 wrote: post #11

1) are you going to sell your trade flow to Citadel / market makers like Robinhood and your competitors do? That's the dirty secret way of making money that you seem to have completely excluded. The reality is that adds up to substantial "invisible" fees that the investor has no transparency over because you sell your trade flows to them and they make a higher than normal spread. And the whole "doesn't matter if we s…

Pfof is woefully misunderstood

In general, citadel wants to pay to trade with retail investors because it knows it isn't going to face adverse selection. So it will give them tighter bid/ask ratios (this is better for the customer) than they would get if they were trading in the open market, citadel isn't going to get hosed by one of them (because there's no adverse selection)

It's win win win

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#26

Post by tschwimmer »

I like the idea behind this business and like the value that you are providing. I'm a target customer because I'm sensitive to investment fees and have done lots of comparison shopping over my investing lifetime.

Unfortunately, I won't use your product. While you do appear to be cheaper than Vanguard for a comparable product, I don't think the risk of switching is worth it. The primary risk I'd be worried about is your business model changing (or you getting acquired by legacy finance) and increasing fees down the line, at which point I'd feel like I'd want to switch back to Vanguard. I'm also worried about exposing myself to your organizational risk (e.g. your internal controls failing and an employe running off with the money, your accountant falling victim to a deepfake scam, etc.) which I suspect is going to be much higher than your competitors. For the additional .17%, I actually feel that Vanguard is a damn good bargain.

I think your product actually does have a lot of value for folks invested in crappy mutual funds or with some advisor taking a massive AUM fee, but I don't really think those consumers are generally lacking the information required to understand that your product is superior, I think they're just going for something different.

It's a tough spot. The market size is obviously tantalizing but I feel like the segments are all reasonably well served as it stands. For the folks that you're really targeting, I think it's very hard to beat Vanguard. Their corporate structure and huge size really gives them a massive advantage that seems hard to beat. Best of luck to you folks!

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#27

Post by jjmaxwell4 »

shred45 wrote: post #14

Do you manage the portfolio of each customer individually? How closely will this match the target portfolio for smaller investment sizes? I see that there are minimum investment sizes. Do I need to buy at least one share of each member of the SP500 for instance? How do transaction fees compare with expense ratios of, say, Vanguard? I see that you account for them in your backtest, but it would be helpful to represent…

We use fractional shares. But otherwise you are correct, our minimums are set to allow you to buy at least $5 of each member of the US 500.

We do not charge trade commissions. There are some SEC fees charged for trading across most major brokerages. The national best bid offer (NBBO) means you will get executed at the current best price for a given security across all exchanges.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#28

Post by shred45 »

ddulaney wrote: post #24
dayone1 wrote: post #11

1) are you going to sell your trade flow to Citadel / market makers like Robinhood and your competitors do? That's the dirty secret way of making money that you seem to have completely excluded. The reality is that adds up to substantial "invisible" fees that the investor has no transparency over because you sell your trade flows to them and they make a higher than normal spread. And the whole "doesn't matter if we s…

For 1 — dude, please back off the “[the rules] are a farce”. Citadel and friends pay to trade with you because they think you’re dumb and they can make money off you. They’re giving you or your broker a better deal because they think they’re smarter than you. That’s all it is. They’d rather trade with you than with the median person on the market. Because they think you’re dumb. You’re welcome to be insulted by that.…

Its not the median they are worried about, its the 99th percentile. They _dont_ want to trade with Optiver, 2 Sigma, etc, or some hedge fund thats working a massive trade.

Trading with a highly sophisticated counterparty can be very costly and undo the small profit they have made from thousands of other trades.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#29

Post by wrsh07 »

wrsh07 wrote: post #25
dayone1 wrote: post #11

1) are you going to sell your trade flow to Citadel / market makers like Robinhood and your competitors do? That's the dirty secret way of making money that you seem to have completely excluded. The reality is that adds up to substantial "invisible" fees that the investor has no transparency over because you sell your trade flows to them and they make a higher than normal spread. And the whole "doesn't matter if we s…

Pfof is woefully misunderstood In general, citadel wants to pay to trade with retail investors because it knows it isn't going to face adverse selection. So it will give them tighter bid/ask ratios (this is better for the customer) than they would get if they were trading in the open market, citadel isn't going to get hosed by one of them (because there's no adverse selection) It's win win win

Here's the money stuff excerpt: https://marginalrevolution.com/marginalrevolution/2021/02/th...

> I feel like most of what I read about payment for order flow is insane? Otherwise normal people will start out mainstream explainer articles by saying, like, “Robinhood sells your order to Citadel so Citadel can front-run it.” No! First of all, it is illegal to front-run your order, and the Securities and Exchange Commission does, you know, keep an eye on this stuff. Second, the wholesaler is ordinarily filling your order at a price that is better than what’s available in the public market, so “front-running”—going out and buying on the stock exchange and then turning around and selling to you at a profit—doesn’t work. Third, because retail orders are generally uninformative, the wholesaler is not rubbing its hands together being like “bwahahaha now I know that Matt Levine is buying GameStop, it will definitely go up, I must buy a ton of it before he gets any!” The whole story is widely accepted but also completely transparent nonsense.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#30

Post by tschwimmer »

jansen wrote: post #13
carbocation wrote: post #6

FZROX gives me 0% fees, can be bought in my retirement accounts, and is attached to a company with something like $1 trillion AUM. The latter gives me faith that it will still be around next year. I appreciate that the 0% fee options are limited, but personally I’d rather deal with 0.03% fees than entrust my money to a small shop. Especially when the reason to do so is not some trading edge, but saving a small amount…

Every shop is a small shop when it starts out. Maybe give these guys a break?

I mean, no. For many people the investments being handled may represent their life savings. It represents potentially decades of work. This isn't some SaaS where poor reliability means wasted time and maybe some money - the stakes are considerably higher.
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