381–390 of 394 posts
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> take your money to Vanguard instead and buy some index funds Why Vanguard? Why not buy SPY through Robinhood? Same index fund, except no commission.
Vanguard lets you buy Vanguard funds and ETFs without a commission in their accounts.
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> I just looked up margin interest rates, for loans of 10 000 or less (which is what we are likely talking about with robin hood) the interest rate is Base Rate + 1.25% which is 8.50% interest. Is that from Robin Hood? If so it's a travesty specific to them. You can borrow from Interactive Brokers for 2.4%, which is a lot easier to overcome even with straight broad-market ETFs. [0] [0] https://www.interactivebrokers.…
No it wasn't robin hood, it was just basic rates charged by another firm. I figured robin hood is going to charge the industry standard. But that 2.4 % interest rate is being charged daily on those loans so that's even scarier.
This makes it easier to compare loans even if they have different terms. The fine print will usually provide the daily interest rate, for example 2.00% APR is 2/365 = 0.005479% per day interest.
Often interest is compounded continuously in which case calculus can be used to compute the exact interest, but it ends up as a famous formula in investing, FV = PV * e^(R*T). In practice, it ends up being very close to daily compounding, but it allows banks to advertise an ever-so-slightly higher APY (annual percentage yield) which is why everybody does it this way for interest paid on deposit accounts.
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The loan is secured by the assets purchased, it's not unsecured.
They're offering 2x margin, if I read the article correctly. So it's at best 1/3 secured, and probably a lot less than that if you need to make a margin call and try to collect. The gigantic risk to Robin Hood isn't that they'll have problems collecting occasionally. They can make up for that by fiddling with their fees to come ahead in the average case. It's that some big market move busts everyone at once and they…
From http://www.investopedia.com/terms/m/minimummargin.asp:
"When you buy on margin, there are key levels - as governed by the Federal Reserve Board's Regulation T - that must be maintained throughout the life of a trade. The minimum margin, which states that a broker can't extend any credit to accounts with less than $2,000 in cash (or securities) is the first requirement. Second, an initial margin of 50% is required for a trade to be entered. Third, the maintenance margin says that you must maintain equity of at least 25% or be hit with a margin call."
i dont use gold for the leverage, but for access to execute trades after hours... do i automatically fall into dumb millennial trading on margin?
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from the link >IB accrues interest on a daily basis and posts actual interest monthly on the third business day of the following month. from investopedia >Interest accrues on loans, such as a mortgage, or on savings accounts and investments. Daily accrual means interest amounts are added to the account balance every day. Interest can accrue on any time schedule; common periods include daily, monthly and annually it w…
A little knowledge is dangerous. You found the right terms but totally missed the meaning. Daily accrual means that your interest for that day is calculated daily. It doesn't mean the interest rate is 2.4% a day. Did you even think about this logically? 2.4% a day would be 876% a year. That's obviously insane.
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They're offering 2x margin, if I read the article correctly. So it's at best 1/3 secured, and probably a lot less than that if you need to make a margin call and try to collect. The gigantic risk to Robin Hood isn't that they'll have problems collecting occasionally. They can make up for that by fiddling with their fees to come ahead in the average case. It's that some big market move busts everyone at once and they…
Question: if they do go bankrupt then you still own your stocks, right? Do customers lose anything?
Of course, should Robinhood go under, don't expect easy access to your assets, until some other brokerage takes it over.
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There aren't actually any transactions fees to absorb. Wholesale brokers (think Citadel) pay retail brokers (think Robin Hood) for the privilege of executing their orders.
Why?
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Typical margin rates for professional traders are far below 5%. See https://www.interactivebrokers.com/en/index.php?f=1595 . And IB is basically the most expensive professionally focused brokerage. If you've got a million bucks you can probably get Fed Funds + 50 basis points.
> And IB is basically the most expensive professionally focused brokerage. Uh, IB is not a professionally-focused brokerage. It's the most professional retail brokerage though. On what basis are you calling it most expensive though? It's much cheaper than any other brokerage I know when you look at fees holistically.
It's sort of in the middle. They have plenty of retail customers for sure, but they also have hedge fund and proprietary trader accounts. I doubt you would find a single hedge fund among Etrade customers.
> On what basis are you calling it most expensive though? It's much cheaper than any other brokerage I know when you look at fees holistically.
It's much cheaper than most retail brokerages. It's more expensive than firms that cater to professionals; for the most part those firms don't put their pricing on their website because they're individually negotiated with each customer. Some example firms: all the big banks, Apex Clearing, eRoom Securities, TJM Institutional Services. For the banks you're probably looking at a minimum $20 million account size just for them to accept you as a customer. The smaller players require $1-$5 million for decent rates, but might accept smaller account sizes.
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> And IB is basically the most expensive professionally focused brokerage. Uh, IB is not a professionally-focused brokerage. It's the most professional retail brokerage though. On what basis are you calling it most expensive though? It's much cheaper than any other brokerage I know when you look at fees holistically.
> Uh, IB is not a professionally-focused brokerage. It's the most professional retail brokerage though. It's sort of in the middle. They have plenty of retail customers for sure, but they also have hedge fund and proprietary trader accounts. I doubt you would find a single hedge fund among Etrade customers. > On what basis are you calling it most expensive though? It's much cheaper than any other brokerage I know whe…
Ah, I see what you meant now. Yeah, I was just comparing it to most retail brokerages since I see the others (Apex, etc.) as in a different category. IB is something which the average HN user could actually use.
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I've been retargeted by Personal Capital on FB for several months now. Are you recommending the "free financial tools" from Personal Capital? I sort of assumed the "free" was just there to entice you into paying for their wealth management services which look like every other robo but with higher fees. Are the tools actually good? Several low-cost robos (Wealthfront and Betterment) now have fairly good retirement pla…
They very politely try to upsell you on their wealth management "call and speak with our professional advisers today!" services, which I simply decline. Their ability to track investments seems superior to mint for the things I want to do, but to each their own. If you just use the free tier, it is great. I simply use it to make sure I don't need to do much rebalancing of my investments every year based on my investm…