Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Robinhood and How to Lose Money

themargins.substack.com

Post reply on HN
Print view View original

161–170 of 209 posts

Re: Robinhood and How to Lose Money

#161

Post by commandlinefan »

timavr wrote: post #136

This is just nuts, people know zilch about risk management. It is just a wealth transfer from people with zero knowledge to professional traders and brokers. Paying of credit cards, maximising your tax return, investing in things you 100% understand, way easier ways to make money. People still might get lucky and make epic money, but it is in the same zip code as driving drunk and not getting into a crash.

> investing in things you 100% understand

Well, most of us (myself included) "invest" in a 401(k) that we don't really understand that well, but common wisdom is that this is still the best way to save for retirement.

Re: Robinhood and How to Lose Money

#162

Post by blahblahblah10 »

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.

While that's definitely true, maybe one should look at this another way.

$400/mo saved in a 0% interest bank account for 40 years = $192,000

$400 * 12/year invested at 10% (incl. inflation) for 40 years = $2.12 million

While $2.12mm in 2020 money is $440,000 in 1980 money (assuming 4% inflation), it's still much better than the alternative.

A couple of other points:

* Investing $400/mo earlier is relatively harder than $400/mo later in the 40-year timeline assuming compensation increased by the inflation rate but one keeps the invested amount ($400 here) constant. This is ignoring factors like salary increases later in one's career (not sure if that even generalizes for lower-income professions).

* I wonder if there's any study done tracking if there's actually a steady increase in spending consistent with the inflation rate for all individuals (with some stochasticity). Or, do people adjust the goods they buy and "outwit" inflation? For e.g., the biggest purchase one makes usually, a house/apartment, doesn't scale with inflation. Similarly, electronics actually get cheaper. So, apart from food, does spending actually track inflation?

Re: Robinhood and How to Lose Money

#163

Post by asdfadsfgfdda »

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.

1. The market cap of SP500 companies is ~30 trillion dollars, significantly larger than the entire stock markets in Japan, China, and Germany combined.

2. SP500 companies earn ~40% of revenue from outside the United States

Re: Robinhood and How to Lose Money

#164

Post by [deleted] »

aka1234 wrote: post #152
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 reven…

[deleted]

Re: Robinhood and How to Lose Money

#165

Post by [deleted] »

vinay427 wrote: post #146
rchaud wrote: post #145

Earlier quoted context omitted.

At this point, I'm inclined to think that the only benefit VC-funded companies provide to the consumer is by subsidizing the price of the service. Uber, WeWork, DoorDash etc are all piling up losses by undercutting competitors to gain market share. That cannot last. At some point, the other shoe will drop. Be ready to jump ship if the benefits no longer exceed the costs (lock-in, bad business practices, sale of perso…

I find this characterization somewhat amusing, in a positive way. This makes it sound like someone implemented (rather poorly) an ambitious wealth gap reduction plan that uses insufficient approximations and no government oversight, leaving a significant number of people behind.

[deleted]

Re: Robinhood and How to Lose Money

#166

Post by CuriouslyC »

Cthulhu_ wrote: post #89
kjksf wrote: post #45

Earlier quoted context omitted.

Here's the appeal: I made 4x return in last 3 years "gambling" on stocks. That's far in excess of 8% return from "just passively investing for the long term". BTW: I gambled on IBKR, not RobinHood (I have RH account but don't use it). I just don't get why RobinHood is so vilified for the crime of making a fast, usable app. I use IBKR but their website is just bad. A security theater that makes logging in slow. Someti…

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…

All investment profit is to some degree luck.

As far as short term investment goes, the market obeys certain dynamics to a first order at any rate, and by being aware of those dynamics and making statistically sound bets you can pretty much be assured of doing better than a simple buy and hold.

The people who lose their shirts don't use statistics, they buy when a stock is going up and sell when it's going down.

Re: Robinhood and How to Lose Money

#167

Post by WalterBright »

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.

$300,000 is a lot better than $0.

Re: Robinhood and How to Lose Money

#168

Post by WalterBright »

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.

It's not that weird. Look at historical returns for the S&P 500 vs European indices. Besides, quite a bit of the S&P 500 consists of global companies.

Re: Robinhood and How to Lose Money

#169

Post by WalterBright »

pjc50 wrote: post #68
WalterBright wrote: post #38

Earlier quoted context omitted.

> Steady investment will never give you that. Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks.

> needs the discipline to not succumb to spending it on a car/house/divorce Apart from the 2008 boom/crash, owning a house has been a great way for the middle class to become asset millionaires. I knew someone in London who was routinely out-earned by the asset appreciation on their own house. Besides, inflation has rather moved the bar for "millionaire" to every middle class couple with a house and two retirement fu…

> Apart from the 2008 boom/crash

Only if you decided to sell then. If you did nothing, you'd have been fine.

Re: Robinhood and How to Lose Money

#170

Post by WalterBright »

abduhl wrote: post #114
WalterBright wrote: post #81

Earlier quoted context omitted.

I don't get a rush from gambling, because I know the math and know I am doomed to lose. Stocks, on the other hand, have an upward bias. Of course, there could be events like losing a war where your portfolio will be vaporized, but in such cases you're going to lose anyway, so there's no point in worrying about such catastrophes.

Alternatively, you don't get a rush from gambling because you have a lack of imagination on how you can beat "the math" and so have never gotten the rush from your plan working out (at least in your small sample size and from your perspective).

> you have a lack of imagination on how you can beat "the math"

I.e. I don't invest in ignorant fantasies.

I recall going to Lake Tahoe once. Buses would pull up to the casinos, disgorging mobs of silver-haired people rushing into the casinos to spend the day losing money.

It's sad.

Post reply on HN