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Robinhood stock trading app confirms $110M raise at $1.3B valuation

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Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#311

Post by beezle »

webninja wrote: post #234
beezle wrote: post #193

Their margin rates are very high at best and potentially usury at worst. They are counting on you not using the full amount of margin on the tier you paid for and further, counting on you being too lazy to downgrade to a lower (or no) tier when you no longer need it. There was nothing I could find in the FAQ about them automatically dropping the tier as your use declined. For comparison - and I have no vested interes…

My Robinhood margin rate for $6,000 is only 5%/year. It also provides extended pre-market trading, after-market trading, and instant deposits. Interactive brokers charges commissions on trades. Also you don't have to use margin with Robinhood, it's not required.

That 5% rate only applies if you fully utilize the margin for the entire year. If you do not, and do not drop out of the gold tier when not using the margin, your effective rate sky rockets.

As to IB, again my point was there is a trade off between paying nothing for commissions and overpaying for margin vs paying a low commission and getting a market margin rate that only kicks in when in use.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#312

Post by nerfhammer »

bradleyjg wrote: post #287
kfrzcode wrote: post #267

Earlier quoted context omitted.

Thanks for this, can you explain the others the parent mentions?

VYM is an index fund that tracks the FTSE High Dividend Yield Index invests in global equities (excluding REITs) with high dividend yields. About 1/3 of the current index is in 10 stocks all US: Microsoft Corp., Exxon Mobil Corp., Johnson & Johnson, JPMorgan Chase & Co., Wells Fargo & Co., General Electric Co., AT&T Inc., Procter & Gamble Co., Pfizer Inc. and Chevron Corp. QYLD is even more exotic. It seeks to track…

BND is composed very heavily (~66%) of US Government bonds. It's largely effectively like just buying treasury bonds. Worth considering to instead get a corporate bond index fund + muni bond fund.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#313

Post by randomizor22 »

rl3 wrote: post #2

Nice, now hopefully they can deliver on a public API, short selling, and a desktop app.

Not sure exactly what you're looking for in a Robinhood API, but I work for a company that provides a brokerage API (the sort of API that would power a Robinhood-type product). Might be relevant: https://www.thirdparty.com

We've got quite a few things on the roadmap that exceed Robinhood's offering.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#314

Post by randomizor22 »

lend000 wrote: post #115
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

Not sure exactly what you're looking for in a Robinhood API, but I work for a company that provides a brokerage API (the sort of API that would power a Robinhood-type product). Might be relevant: https://www.thirdparty.com

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#315

Post by mbesto »

lend000 wrote: post #115
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

> I just wish they would expose a better API

IIRC Robinhood just uses another service's API to transact a trade (can't remember the name), so you'd be leaving pennies on the table when you could just go straight to the source.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#316

Post by mbesto »

guiomie wrote: post #224
pembrook wrote: post #110

Enticing millenials to "trade" individual stocks is quite possibly the most anti- Robinhood thing I can think of. The only thing more ironic would be to encourage them to take on margin...which as it turns out is literally Robinhood's business model. 99% of users on the platform will ulimately end up participating in a direct transfer of their own wealth to a more sophisticated trader or algo (i.e. The banks and hedg…

Out of my own ignorance on the subject of "buy some index funds": what happens when 50%, 75% or 90% of the market buys index funds? How will stocks be priced properly if no one is trading them directly?

Oh man - just read Matt Levine's stuff: https://www.bloomberg.com/view/articles/2015-07-22/index-fun...

Good question - this is an on-going topic in the market actually. The correct answer, like a lot of financial economic theory goes, is that no one actually really knows.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#317

Post by mbesto »

pembrook wrote: post #110

Enticing millenials to "trade" individual stocks is quite possibly the most anti- Robinhood thing I can think of. The only thing more ironic would be to encourage them to take on margin...which as it turns out is literally Robinhood's business model. 99% of users on the platform will ulimately end up participating in a direct transfer of their own wealth to a more sophisticated trader or algo (i.e. The banks and hedg…

> If you are reading this, for your own finacial future I beg of you, please take your money to Vanguard instead and buy some index funds.

Yup, even Warren Buffet tells his rich friends to do so too:

http://www.berkshirehathaway.com/letters/2016ltr.pdf

Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion.

I believe, however, that none of the mega-rich individuals, institutions or pension funds has followed that same advice when I’ve given it to them. Instead, these investors politely thank me for my thoughts and depart to listen to the siren song of a high-fee manager or, in the case of many institutions, to seek out another breed of hyper-helper called a consultant.

That professional, however, faces a problem. Can you imagine an investment consultant telling clients, year after year, to keep adding to an index fund replicating the S&P 500? That would be career suicide. Large fees flow to these hyper-helpers, however, if they recommend small managerial shifts every year or so. That advice is often delivered in esoteric gibberish that explains why fashionable investment “styles” or current economic trends make the shift appropriate.

The wealthy are accustomed to feeling that it is their lot in life to get the best food, schooling, entertainment, housing, plastic surgery, sports ticket, you name it. Their money, they feel, should buy them something superior compared to what the masses receive.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#318

Post by Gustomaximus »

AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

> Even if you are a professional trader you'll take a bath on margin over the long run.

Id say not. Say your borrowing at 7%, markets tend to average around 10-14% return a year. So if you were doing some passive investing on margin you'd be likely to increase earning. The issue is it heightens risk and the speed of losses for those that invest badly, but being margin it should largely avoid losses greater than the principle invested which is better than other speculative investments so not all that bad.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#319

Post by minimax »

SEJeff wrote: post #295
nolok wrote: post #122

Earlier quoted context omitted.

Unless I misunderstood him, he's not complaining that people can make their own decisions with their money, aka that anyone can use this service even if they're not well versed in that field, he's complaining that Robinhood entire business model is based on pushing the very users who don't know how to use it in a sane way, to do it anyway. That will be the company's lifeline, as its way to make money. I can see the b…

However, they still sell their client order flow to the bank that pays them the most to execute their trades. This isn't illegal and was a HUGE point of Michael Lewis's hack-n-slash book on electronic trading "Flash Boys". If my Robinhood trades of 100 lots or more execute at a few pennies higher than the price when I place the order, I think that is entirely fine. Why? Because it costs 5-10 to trade from Etrade or m…

If my Robinhood trades of 100 lots of more execute at a few pennies higher than the price when I place the order

They're not really allowed to do that and I don't think they are doing that. Robinhood (or whatever wholesaler they route your order too) is required to execute your order within the nbbo. They can't just e.g. fill your buy orders a few cents above the national best offer because they want to make some extra money. The regulations don't work that way...

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#320

Post by Gustomaximus »

tekromancr wrote: post #235
duren wrote: post #170

I have a modest amount of money in Robinhood. I love the app and they way it has encouraged me to learn about markets. I started in March of 2016. I was naïve and I made a lot of silly mistakes early on, but I was able to learn a lot of fundamentals when the stakes were low. I view it more as a gaming app than investing — it's a supplement, not a replacement for investing and asset management.

Absolutely! The app lives in my phone's "games" folder. I have a relatively small amount of money, just enough that it would sting a bit if I lost it all. I find that even having a tiny stake in things makes learning about investing and finance actually interesting, whereas the majority of my invested assets are all "Vanguard, take the wheel"

+ This. I keep a similar smaller trading account where I effectively gamble with stock picking. I do this as I enjoy researching and understanding businesses and find things more interesting, and you see opinions more honestly when I put money where my mouth is. And it helps you stay engages with your reading. I leave the 'retirement' investments elsewhere.
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