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Robinhood and How to Lose Money

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Re: Robinhood and How to Lose Money

#181

Post by asdff »

drevil-v2 wrote: post #15
dlivingston wrote: post #5

Robinhood was an absolute game changer for me. Outside of my 401k (and a Viacom stock my mom bought me 20+ years ago to teach me about the stock market), my investment portfolio was nil. I now maintain a growing but conservative portfolio of stocks thanks partly to the frictionless UX of Robinhood - but, primarily, to the addition of fractional shares. To pay $1500 for a share of TSLA? When I could put that precious…

It just boggles the mind how people were able to invest for hundreds of years without a frictionless UX.

Everything was still frictionless when the world was you dictating your thoughts into a nearby phone/ear while someone else made all the magic happen. In pure friction terms, robin hood with their lag and issues filling orders is probably still a big step down vs. calling your broker in a panic and dictating trades.

Re: Robinhood and How to Lose Money

#182

Post by asdff »

drevil-v2 wrote: post #72
imtringued wrote: post #67

Earlier quoted context omitted.

They didn't. The difference between today and a hundred years ago isn't actually in what people did. It's how many people did a certain thing. Back in the day people didn't invest because they were farmers. Nowadays a lot more people live in cities and have a high enough income to invest it and this requires financial services to scale to millions of customers.

I am pretty sure online share trading has been around since early 2000s.

With dumb commission fees and other policies that made it deliberately obtuse and painful for the retail investor. Even today, with any brokerage, you can't freely trade without penalty unless you pass the class based virtue signal of having $25k amassed in your investment account.

Re: Robinhood and How to Lose Money

#184

Post by timavr »

hansvm wrote: post #149
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.

> 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. The rest of your post notwithstanding, this is a moderately common misconception. Most drunk driving does not result in crashes, and that's part of the danger -- after dozens of successful trips you might delude yourself into thinking you're somehow able to overcome the reduced reflexes an…

That was my point.

Re: Robinhood and How to Lose Money

#185

Post by WalterBright »

orojackson wrote: post #175
WalterBright wrote: post #170

Earlier quoted context omitted.

> 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.

Or taking a different view that concurs with yours: investing in index funds or broad ETFs lets me match or beat most long-term investors with nearly zero effort. There's no need for me to waste my time reading "financial news" or developing super fancy HFT algorithms like some posters here have done. I just need to buy those index funds at my desired asset allocation and I'm good to go. Repeat until retirement. Very…

I never really understood the "rebalancing" thing. It requires selling your winners. One thing about winners - they tend to keep winning!

Some people call it "locking in your gains". I call it "minimizing your returns".

Re: Robinhood and How to Lose Money

#186

Post by sizzle »

pjc50 wrote: post #22
dmoy wrote: post #11

I do not get the appeal of largely gambling with your money on RH instead of just passively investing for the long term. Maybe with some of your money, but not to the extent a lot of people are doing. People want to get rich quick I guess? Even if you do want to do that, why not pick a brokerage which doesn't take as much from you, like IBKR? It's just a surreal situation to me.

Adrenaline? Same motivation as gambling. You can enjoy the hope of the possibility of wealth. Steady investment will never give you that. Of course, this involves a heavy dose of self-delusion, also popular these days.

Adrenaline + dopamine reward center of the brain strengthening the neural pathway until it becomes an addiction/craving.

Re: Robinhood and How to Lose Money

#187

Post by marketgod »

mav3rick wrote: post #153
mam2 wrote: post #140

Earlier quoted context omitted.

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 ?

This is the mentality that needs to be checked. All those people trade huge money they don't care about some tiny trader moving $100k per trade. So yes you can do better as you have less capital to invest.

Re: Robinhood and How to Lose Money

#188

Post by zigzaggy »

kjksf wrote: post #45
dmoy wrote: post #11

I do not get the appeal of largely gambling with your money on RH instead of just passively investing for the long term. Maybe with some of your money, but not to the extent a lot of people are doing. People want to get rich quick I guess? Even if you do want to do that, why not pick a brokerage which doesn't take as much from you, like IBKR? It's just a surreal situation to me.

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…

I’ve had a good experience with RH too. I started out small, learned about stocks first. I gradually started into options and learned some strategies there. Then I started learning about volatility and other derivatives. And of course I’ve learned all about ETFs etc.

My first year was hard; and it was emotional. I was too excitable and got hooked a little. But I steered my way through it with a very small loss. I considered it the cost of my education.

But I really started getting the hang of it my second year. I started swing trading and learning the mathematics and psychology of the market. I didn’t break the bank with profit but I did make a few % points.

I’m in my 3rd year and I’m a decent hobby trader now. I’ve been consistently beating the market in my “spare time” (I have a full time job and a side hustle). I don’t really get too excited anymore. I’m very methodical and pretty u emotional.

To be clear: my trading account is not my retirement and it’s not my savings. It’s “mad money” and I use the post-tax proceeds for vacation etc.

But yeah, I’ve had a decent experience with RH, learned a lot, made a few $$$ and had a good time.

Re: Robinhood and How to Lose Money

#189

Post by drevil-v2 »

asdff wrote: post #182
drevil-v2 wrote: post #72

Earlier quoted context omitted.

I am pretty sure online share trading has been around since early 2000s.

With dumb commission fees and other policies that made it deliberately obtuse and painful for the retail investor. Even today, with any brokerage, you can't freely trade without penalty unless you pass the class based virtue signal of having $25k amassed in your investment account.

If you think robinhood is providing their service out of a sense of Altruism then I have got a beautiful bridge I would like to sell you...

Read up on bid/ask spreads and market makers. It’s a pretty profitable business. Even more so than just charging “dumb commission fees”

And that $25,000 “class” limit, hahaha that’s like saying that payday loan providers are a community service.

Re: Robinhood and How to Lose Money

#190

Post by renewiltord »

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…

Utility is a function of the person, the environment, and the thing. There is no 'utility of a dollar'. There is only 'utility of a dollar to me in this circumstance'.

So if one idolizes wealth then clearly they have assigned high utility to money in a non-diminishing returns sense. It is then rational for them to match their utility curve. Life is full of threshold systems. Given that, it would be very unusual for utility curves to not be deformed by them.

It's easy to construct a few scenarios with locally convex curves:

* You're in debt to the mafia and you will die if you don't pay them your $100k debt. You have $10k dollars. Do you spend the $10k to try a long shot of making $100k?

* You're poor and make $15/hr. If you save you will have an extra $1000 a year in savings. You will never own a home. You will never have time to study for a better job. The magic of compound interest with contributions is in the regularity, not so much in the amount. Put $1000/yr in a calculator and $998/yr in a calculator (assume it compounds 3% every year) and see the difference you get over 60 years. It is insignificant on a 60 year horizon. $2 will buy you a powerball ticket, and maybe out of this life.

* You're an immigrant. You need a few million dollars for your investor visa. Your current visa runs out next year and then you return to a slum.

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