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Robinhood and How to Lose Money

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Re: Robinhood and How to Lose Money

#151

Post by hansvm »

tylerhou wrote: post #103
renewiltord wrote: post #27

Earlier quoted context omitted.

Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars. The net expected value of the dollar doesn't have to be positive. Losing $2000 over 80 years of your life is certainly worth is a non-factor for many. Add in the fact that RH has reduced barriers to entry to investing. It's way easier to get RH and buy VOOG than to get Va…

> Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars. Is this really true — from a rational perspective, and not one where someone idolizes wealth or being able to purchase "whatever they want?" The utility of anything — including money — diminishes as you have more of it. The utility of the next hundred million dollars is…

If a person doesn't see a way out of slaving at or near minimum wage till they retire, even a moderate windfall of a couple million would completely replace their lifetime earnings and give them the freedom to pursue their passions (be it a family, surfing, painting, etc) while they're young and healthy enough to enjoy doing so.

I tend to agree with your point for larger sums like a billion dollars, but maybe you're really passionate about the potential for EVs to positively impact our growing climate problem and need an enormous pile of cash to get that off the ground. People are complicated.

Re: Robinhood and How to Lose Money

#152

Post by aka1234 »

cs702 wrote: post #141

The main point of this article is that Robinhood has brought Silicon Valley-style maximization of user engagement to retail stock-market trading without regard for the psychological, social, and financial consequences to the people who use the service. The author claims that for Robinhood, "maximizing user engagement" translates into blindly optimizing for getting more and more individuals to trade more and more. Tho…

This is why I've always felt Robinhood is evil.

It is trading platform that combines 1.) user engagement/gamification with 2.) targeting a core userbase of young adults that are both financially unstable and inexperienced. It's disgusting and immoral.

This is the epitome of late-stage capitalism. Extract as much money as possible from gullible users. Except we're not maximizing screentime anymore to leverage ad revenue and micro transactions. We're maximizing screen time to drive trade volume while letting people make financial decisions that can literally ruin the rest of their lives.

Well, at least Robinhood's platform hasn't directly led to young adults committing suicide. Oh, it has? Nevermind...

Re: Robinhood and How to Lose Money

#153

Post by mav3rick »

mam2 wrote: post #140
magicnubs wrote: post #139

Earlier quoted context omitted.

It could easily still be luck if they bought Tesla or TECL 3 years ago and that is where their 4x return came from. Regardless, even if you have a strategy that works for now, that doesn't mean it will continue to work forever. Anyone investing that isn't an expert in a particular industry in which they trade is basically just guessing. Any insight they have will almost invariably already be priced in.

Ok but then your whole point is basically "things can change in life". It's true and it's a good thing to be risk adverse but it doesn't bring much to the discussion at the end of the day. The more interesting questions is "can you actually, consistently, make money if you are good and spend a lot of time analyzing the market. In other words "can you actually have an edge on the market". From what I've seen it's so b…

Trading for regular people isn't supposed to be some thrill seeking sport. Millions of dollars are spent on wall street to get "an edge". You really think you can do better ?

Re: Robinhood and How to Lose Money

#154

Post by mmmrk »

onion2k wrote: post #100
asa4akj wrote: post #92

Earlier quoted context omitted.

it's called patience and keep on investing. You only need to put 400$ every month into SP500 in order to reach retirement age with more than a million.

A million in 2060 isn't going to be enough to retire on. I'd be surprised if it was enough to buy a moderate house. If you'd done this 40 years ago, the million dollars you'd have today would have the equivalent purchasing power of $300,000 in 1980. Inflation is a cruel master.

You invest into something like the S&P 500 (maybe better: MSCI World/FTSE Developed World) precisely to outrun inflation. In the OP's example, the million would be worth that million, not 300k. Look up compound interest.

Re: Robinhood and How to Lose Money

#155

Post by BoorishBears »

QuesnayJr wrote: post #65
BoorishBears wrote: post #55

Earlier quoted context omitted.

People keep saying this and all I can say is, have you used Robinhood AND a "real" brokrage platform? Crashes during periods of high volatility at a much higher rate than competitors, puts detailed views of stock market behind a paywall, actively advertises options with asinine strike/expiries for people who don't get options, no full support for spreads are on their mobile app, their general poor handling of multi l…

options with asinine strike/expiries for people who don't get options I've never used Robinhood, so I was curious what you meant by an "asinine" strike. (I know all about options, FWIW.)

Stuff that's just so insanely out of the money, and so close to expiry, that even by "YOLO" standards, it's stupid.

You usually get burned right off the bat because the bid/ask spread is huge, so to even get the order filled, you need a limit order with a really unfavorable price

Re: Robinhood and How to Lose Money

#156

Post by DudeInBasement »

Viliam1234 wrote: post #148
WhompingWindows wrote: post #124

Earlier quoted context omitted.

I felt this. I bought a well-known controversial EV stock quite low; my plan was to make at least 33% on it. After a year, I'd made 400%, but I was struggling to click the "Sell" button. Some greed surfaced from somewhere, and it took me a couple of days to cancel the greed and sell the stock, making 12X what I hoped to the year before. The stock has since gone up a lot more, but my dad told me: Buy low, and Sell too…

If I made 400% on something, I would probably sell half of it, and keep another half at least for a year. That way, both my safety and greed would be satisfied. (But this is more about psychology than math. For some people this would be the worst option, because if the thing would lose value, they would blame themselves for not selling everything when they had the opportunity, and if it would gain even more value, th…

This man knows how to make money consistently.

Re: Robinhood and How to Lose Money

#157

Post by dmoy »

mam2 wrote: post #126
Cthulhu_ wrote: post #89

Earlier quoted context omitted.

You got lucky; your post is why people pick Robinhood and day trading over the long-term one. It's survivorship bias. For every success story like yours, there's at least one - probably more - that lost three-quarters of what they put in. If you're thinking of investing, apply the "strong beliefs weakly held" practice; you think you may get high returns, so look for examples to the contrary to challenge your own beli…

It's not luck if you make consistent returns over 4 years. "gambling" is the term people use because they don't understand the stock market

Respectfully, 4 years is still luck. You need to maintain that for 20-30 years (or be VERY lucky and make enough in a super short time to exit the game).

Re: Robinhood and How to Lose Money

#158

Post by Traster »

GlennS wrote: post #75
JumpCrisscross wrote: post #20

Earlier quoted context omitted.

> stock ownership and investment is unquestionably a good thing, when compared to money sitting in a bank account Agreed. But cash in a day trading account at the hands of an inexperienced trader has a lower expected return than that bank account. Particularly if they’re trading options. The net effect of Robinhood is we’re training a generation of investors with self-destructive habits. It’s possible to use Robinhoo…

> The net effect of Robinhood is we’re training a generation of investors with self-destructive habits. When they lose a lot of money for the first time, won't they unlearn this training?

I think it's unlikely people lose all their money trading on RH and take the lesson "Better trade more responsibly next time", more likely the lesson is either "Next time I've got to be more aggressive" or "I'm never putting money in the stock market again".

Re: Robinhood and How to Lose Money

#159

Post by ryandrake »

mam2 wrote: post #140
magicnubs wrote: post #139

Earlier quoted context omitted.

It could easily still be luck if they bought Tesla or TECL 3 years ago and that is where their 4x return came from. Regardless, even if you have a strategy that works for now, that doesn't mean it will continue to work forever. Anyone investing that isn't an expert in a particular industry in which they trade is basically just guessing. Any insight they have will almost invariably already be priced in.

Ok but then your whole point is basically "things can change in life". It's true and it's a good thing to be risk adverse but it doesn't bring much to the discussion at the end of the day. The more interesting questions is "can you actually, consistently, make money if you are good and spend a lot of time analyzing the market. In other words "can you actually have an edge on the market". From what I've seen it's so b…

It's possible for someone to consistently beat the market just like it's possible for someone out of many to flip a coin heads 20 times in a row.

Everyone who says that they in particular can beat the market consistently year after year, unsurprisingly won't reveal any evidence behind their claim. It's always things like: "Oh, it can be done. Trust me! There are ways! You just don't know them and we market-beaters do! You just have to analyze harder, bro."

Re: Robinhood and How to Lose Money

#160

Post by dmoy »

kiplkipl wrote: post #147
orojackson wrote: post #132

Earlier quoted context omitted.

That's what ETFs like VXUS and IXUS are for. You get international exposure. VT is another good choice if you're lazy and just want to own a slice of the global stock market.

Sure, but he didn't say those, he said S&P 500. It seems like weird American exceptionalism that the internet repeatedly recommends only investing in one nation's index when that would be laughable if you heard a Japanese, Chinese, or German person saying to do the same with their national index.

At this point it's just antiquated advice, but it's an easy and well-described thing to put forward as a general trading theory. Buy an index fund and just wait for decades.

To put it another way - it rolls off the tongue better than "buy a weighted amount of a CSRP (or comparable) US Total Market Index and FTSE (or comparable) Global All Cap ex US Index, where your weighting is probably slightly overweighted to domestic".

Often (usually?) when people say it, they aren't literally advocating to only buy S&P 500. Some people still do recommend this, but I'd wager they're closer to a minority now. Famously I'm pretty sure Warren Buffett is still advocating S&P 500 only, and it takes a long time for voices like Michael Burry to outweigh. Vanguard pushed out a whitepaper years back, and made a very public change in their own corporate 401k to get rid of the s&p500 fund choice.

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