Robinhood stock trading app valued at $1.3B with big raise from DST • Hacker News Board

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#171

Post by mcguire » Sun, Apr 02, 2017, 1:03 PM UTC

cheriot wrote: post #165

mcguire wrote: post #132

Earlier quoted context omitted.

No. The broker first contacts the investor to allow them to deposit more money to bring up their equity percentage; if thet doesn't work, they sell the borrowed assets to get the percentage up. One feature of margin loans is that you are required to have assets to cover them. A relic of the great depression, IIRC.

Those collateral assets start out covering the loan, but are often invested in the same assets as the borrowed money and will loose value at the same time. So when the collateral no longer covers the loan, the investor gets a margin call and doesn't have the money... then what? Does the broker have any recourse to credit bureaus or courts?

The margin requirements don't allow the loan to exceed the collateral assets. See http://www.investopedia.com/terms/m/margincall.asp

(Actually, I'm not sure what would happen if the stock went to zero instantly and was the only asset in the account.)

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#172

Post by astrange » Mon, Apr 03, 2017, 4:53 AM UTC

walshemj wrote: post #86

toomuchtodo wrote: post #48

Earlier quoted context omitted.

Yeah, but that'd show Robinhood's user base there is no need for the product.

And TBH if you don't have the finances to be able to hit a $1k minimum buy investing in individual stocks is probably something you should leave for a few years.

I agree, but if you're saving you should contribute a little each paycheck and it's nice to do it $50 at a time instead of $1000!

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#173

Post by investorgator » Mon, Apr 03, 2017, 2:11 PM UTC

polack wrote: post #93

selectodude wrote: post #91

Earlier quoted context omitted.

They really do sell flow and use margin. There just isn't any way they're profitable doing just that.

They could be making a good chunk of money from stock lending, like zero cost index funds are doing.

Can an introducing broker participate in stock-lending programs?

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#174

Post by investorgator » Mon, Apr 03, 2017, 2:14 PM UTC

astrange wrote: post #45

HoyaSaxa wrote: post #41

Earlier quoted context omitted.

Yes, they receive payment for routing their order flow to specific market makers. KCG (Knight Capital) and Citadel are the two players that typically get the vast majority of the retail order flow. Two Sigma is starting to get in the business as well. The exact amount Robinhood receives is going to vary considerably, but it primarily depends on if the order takes liquidity(market orders + marketable limit orders) or…

> 1) Build a well diversified portfolio (30+ companies) This is sensible but Robinhood doesn't have fractional shares (it would cost something if it did), so you're really raising the bar on minimum investments here. If you just bought one Vanguard ETF and did nothing else, that'd be a great plan.

DriveWealth, Motif and Folio offer fractional shares, but they are not free.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#175

Post by sushid » Mon, Apr 03, 2017, 6:46 PM UTC

prostoalex wrote: post #61

sushid wrote: post #13

Earlier quoted context omitted.

True, but only if you don't use Turbo Tax. My first year after graduating (and dabbling in stocks/ETFs) I had a painful time filling it out manually on H&R Block. Last year, Robinhood's integration made it so easy that I was both simultaneously pissed that I'm pretty much locked into Turbo Tax and amazed that it's so nice with all its integrations (e.g. also works on Lending Club, Wealthfront, etc).

Did H&R Block software not support your specific brokerage? Pulling in consolidated 1099s from major brokerage houses seems to be a relatively well-solved problem in tax prep world.

A bit late, but no. I don't recall if I had Interactive Brokers at the time, but it didn't support Wealthfront or Robinhood.