Many investors have been switching from Robinhood to M1 Finance but maybe this announcement is intended to slow the flow.
Fractional Shares
51–60 of 99 posts
Re: Fractional Shares
#52FYI, Folio has been offering fractional shares for over a decade. They're terrible at marketing and don't have as slick an app, but they control their full stack down to the DTCC. They cover their traces in patents, so I'm not sure Robinhood is doing the same thing as Folio has battle-tested https://www.folioinvesting.com/folioinvesting/brokerage-feat... (I do not work for Folio)
M1 Finance already has fractional shares too. They're newer than Robinhood but they're built to be more of a long-term investing platform. Robinhood's UI feels more like a gambling platform to trade hourly on IMO. M1's "Pies" feature is very compelling. https://www.m1finance.com/how-it-works/invest/pies
(I do not work for either. I've used Robinhood for 4 years.)
Re: Fractional Shares
#53Earlier quoted context omitted.
Or perhaps more importantly, if Robinhood fails do you actually get to keep the shares like with a traditional broker or do "your" fractional shares disappear with the company?
It's possible SIPC insurance steps in and provides cash value, with your fractional ownership relinquished.
Doesn't that rely on you being the actual owner of the shares? If your shares only exist in Robinhood's database, I don't think SIPC would apply.
EDIT: After some Googling it appears that SIPC does protect securities that weren't actually purchased due to fraud or mismanagement. IANAL so I don't know if that would apply to this specific situation, but they have protected other non-owners before like in the case of Bernie Madoff.
Re: Fractional Shares
#54Earlier quoted context omitted.
It's possible SIPC insurance steps in and provides cash value, with your fractional ownership relinquished.
Doesn't that rely on you being the actual owner of the shares? If your shares only exist in Robinhood's database, I don't think SIPC would apply. EDIT: After some Googling it appears that SIPC does protect securities that weren't actually purchased due to fraud or mismanagement. IANAL so I don't know if that would apply to this specific situation, but they have protected other non-owners before like in the case of Be…
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Re: Fractional Shares
#55Here's hoping this prompts Schwab to do the same. They've already made a public statement saying it would be in the works.
Re: Fractional Shares
#56Earlier quoted context omitted.
Actually I think this is huge, not for existing investors but precisely for people who aren't . For a teenager who wants to invest $100 to "dip their toes in" when a share of Amazon is over $1,700?!?! And Google over $1,300? Back in the days when stock regularly split it wasn't a big issue. But now that a bunch of companies think it's somehow unfashionable to split their stock (e.g. Amazon and Google), all this does…
Do we want to encourage teenagers to buy stock in individual companies? Index funds I could see.
Sometimes learning experiences are worth as much as the money. Also, it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to. How do you perform a valuation on an index fund like you can with a stock?
To paraphrase Warren Buffett's investment advice, if you have a high IQ, donate the extra points to someone else because what you need more is a strong stomach (for gut-wrenching volatility).
Re: Fractional Shares
#57Ah, shares of shares. Through Robinhood no less. Sounds like a great plan for the platform which has had how many comically massive mistakes over the past few months? Are they going to let r/wsb leverage these 100x as well? Don't get me wrong, I love some of what they're doing....I just don't trust them with my money.
I've been with Robinhood for over 3 years and I have had zero issues with my portfolio or any features around managing my account day-to-day. The only thing that tripped me up was the transition from Apex to their own clearing house, so I had some extra paperwork to file w/ the IRS during that transition year. I see a lot of people saying things like "I don't trust Robinhood with my money". I am curious what scenario…
Not the parent you're replying to, but I don't think I'd say I wouldn't trust Robinhood with my money. As you say, they're a SIPC-insured, regulated entity.
What I would say is that I just don't trust Robinhood as a company. They feel scummy to me, and their marketing and UX pushes practices that I would not consider good investment advice. I can only assume that pushing frequent trading (and poorly-described options trading) on unsophisticated investors makes more money for them. But it's likely at the expense of those investors. Even if I "know better" and could just take advantage of the platform as-is, I don't care to support that behavior.
Take that and pile that on top of -- for example -- their misleading and factually incorrect announcement about their quickly-pulled cash management product last year... yeah, no thanks, I'll pass.
Re: Fractional Shares
#58Earlier quoted context omitted.
It's possible SIPC insurance steps in and provides cash value, with your fractional ownership relinquished.
Doesn't that rely on you being the actual owner of the shares? If your shares only exist in Robinhood's database, I don't think SIPC would apply. EDIT: After some Googling it appears that SIPC does protect securities that weren't actually purchased due to fraud or mismanagement. IANAL so I don't know if that would apply to this specific situation, but they have protected other non-owners before like in the case of Be…
Even with full shares they are held in street name - that is the brokerages name. So the story isn't much different than it is today.
Re: Fractional Shares
#59Ah, shares of shares. Through Robinhood no less. Sounds like a great plan for the platform which has had how many comically massive mistakes over the past few months? Are they going to let r/wsb leverage these 100x as well? Don't get me wrong, I love some of what they're doing....I just don't trust them with my money.
I don't have an especially high opinion of Robinhood, and I'll grant you that they've leaned into the "move fast and break stuff" mindset, and they've certainly made some comical mistakes.
On the other hand, I still feel like it's a big jump to go from there to "...and so I don't trust them with my money". Have they lost anyone's money? Do you think they're in some real danger of shutting down and taking people's money with them? "These idiots keep failing to properly calculate margin requirements" is a pretty damning thing to say about a brokerage, but....
Brokerages are pretty heavily regulated. Why do you think your money wouldn't be safe?
Re: Fractional Shares
#60Earlier quoted context omitted.
Do we want to encourage teenagers to buy stock in individual companies? Index funds I could see.
Sometimes learning experiences are worth as much as the money. Also, it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to. How do you perform a valuation on an index fund like you can with a stock? To paraphrase Warren Buffett's investment advice, if you have a high IQ, donate the extra points to someone else because what you need more is a strong stomach…
> it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to.
If emotions are a part of your decision, you've already lost the game. I get that humans are emotional creatures, but if you start making investment decisions based on panic and emotions, it doesn't matter if you've been buying index funds or individual stocks; you're going to perform poorly and likely lose some money either way.