
Robinhood and How to Lose Money - asaramis
https://themargins.substack.com/p/robinhood-and-how-to-lose-money
======
hftrader998
I work in the industry and these kind of articles are always full of bad
information about order routing.

* Robinhood order flow is informed and toxic like all other brokerages. Taking the opposing side of all Robinhood trades would cause a broker-dealer to lose all of their capital very quickly.

* The "bad prices" the "novices" are trading at, are in fact, the same market price that all participants trade at (at or inside the bid/offer). If the prices were obviously bad, there is free money available to the author here by simply quoting inside the spread.

* Recall that the majority of trades on lit exchanges are from professional or institutional investors. For this reason, spreads are wide because providing liquidity means you will likely get run over. Robinhood orders do not exhibit as much short term momentum, and so trading against them is safer for broker-dealers because there is less risk. This risk profile is valuable, and you might wonder what's a fair way to allocate that value. One option is to not capture it, and send all Robinhood orders directly to the market. The author implies this makes sense (a gravy-free approach), but it does not, the retail customer actually ends up worse off. Another option, the one that occurs in practice now is for the value to get split between the counterparty taking on risk (Citadel, in the form of less toxicity on orders), the customer (the Robinhood client, in the form of price improvement over the national bid/offer), and Robinhood themselves for sourcing the flow (a commission or payment).

~~~
JumpCrisscross
> _Taking the opposing side of all Robinhood trades would cause a broker-
> dealer to lose all of their capital very quickly_

Why? This is literally the definition of order flow purchasing and market
making. Flow amidst spreads creates profits.

The non-cynical explanation for Robinhood’s flow being attractive is in the
law of large numbers. Robinhood’s trades are tiny. That means buying their
flow gives one lots of small, idiosyncratic exposures. Institutional flow, on
the other hand, is lumpy, which can leave one with a few giant positions.

~~~
totalZero
To add to what you're saying about less chunky risk...people in the market-
making industry also prefer to cross with retail customers because there is
less negative selection bias. Retail customers are generally less
sophisticated traders and they are less likely to trade fast alphas, insider
information about pending news, etc.

That said, there's money to be made in providing liquidity on chunky trades,
as long as the price is right.

------
cs702
The main point of this article is that Robinhood has brought Silicon Valley-
style _maximization of user engagement_ to retail stock-market trading without
regard for the psychological, social, and financial consequences to the people
who use the service.

The author claims that for Robinhood, "maximizing user engagement" translates
into blindly optimizing for getting more and more individuals to trade more
and more. Those individuals are not paying for the product; they are the
product. More precisely, they are the raw material for generating as much
order flow as possible for sale to Wall Street firms.

Robinhood, in other words, is in the business of MANUFACTURING as much order
flow as possible from its raw material, retail investors.

This is probably Not a Good Thing™ for retail investors.

~~~
rchaud
At this point, I'm inclined to think that the only benefit VC-funded companies
provide to the consumer is by subsidizing the price of the service. Uber,
WeWork, DoorDash etc are all piling up losses by undercutting competitors to
gain market share. That cannot last. At some point, the other shoe will drop.

Be ready to jump ship if the benefits no longer exceed the costs (lock-in, bad
business practices, sale of personal information), etc.

~~~
vinay427
I find this characterization somewhat amusing, in a positive way. This makes
it sound like someone implemented (rather poorly) an ambitious wealth gap
reduction plan that uses insufficient approximations and no government
oversight, leaving a significant number of people behind.

~~~
jmalicki
Is this a wealth gap reduction scheme? After all, the ultimate investors
(outside of sovereign wealth funds at least) are usually pension funds, which
tend to be pretty middle class. The beneficiaries of VC here are usually the
upper middle class for both actual employees of these firms, and a lot of the
beneficiaries of Uber, AirBNB, etc.

This could be wrong, but I think the direction of wealth transfer is worth
considering - is this wealth redistribution, or is it the rich and powerful
looting the middle class?

------
dmoy
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.

~~~
kjksf
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. Sometimes it fails to log me in. Sometimes it fails to show
my portfolio. Because, you know, it's only job no 1 of an investing site.

~~~
Cthulhu_
You got lucky; your post is why people pick Robinhood and day trading over the
long-term one. It's survivorship bias. For every success story like yours,
there's at least one - probably more - that lost three-quarters of what they
put in.

If you're thinking of investing, apply the "strong beliefs weakly held"
practice; you think you may get high returns, so look for examples to the
contrary to challenge your own beliefs.

~~~
mam2
It's not luck if you make consistent returns over 4 years. "gambling" is the
term people use because they don't understand the stock market

~~~
magicnubs
It could easily still be luck if they bought Tesla or TECL 3 years ago and
that is where their 4x return came from.

Regardless, even if you have a strategy that works for now, that doesn't mean
it will continue to work forever. Anyone investing that isn't an expert in a
particular industry in which they trade is basically just guessing. Any
insight they have will almost invariably already be priced in.

~~~
mam2
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 but
most people don't believe it.

~~~
mav3rick
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 ?

~~~
marketgod
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.

~~~
mav3rick
That makes no sense ? They're not actively trying to crush individuals, they
just have more resources to access information before you.

~~~
mam2
they only focus on automatic trades.. you can spend time analyzing penny
stocks for example

------
vmception
> In the first three months of 2020 ... [Robinhood users] also bought and sold
> 88 times as many risky options contracts as Schwab customers, relative to
> the average account size

> And let’s remember that options are far more illiquid and opaque than
> standard equities.

Okay, first of all the growth of the options market is AMAZING, and their
utility increases the more liquid the market is.

So massive new groups of traders with a low barrier of entry make options much
more liquid, and this is amazing.

There used to only be one series of options that expired once per quarter and
had 5 cent ($5) bid and ask spreads, and strikes only every $5 or $10 dollars.

Now there are 20 series trading at once and pretty much all indice constituent
companies, let alone the index itself, alongside strikes every $1 - $2.5
dollars, even $.50 cents sometimes.

There are so many strategies that were unviable because the spreads were too
wide, the strikes were too few and far between, and the commissions structure
was prohibitive.

That's all changed now, and that's the other perspective.

Robinhood is also still handicapping users, as the regulations allow for much
greater amounts of leverage and margin capabilities, which Robinhood doesn't
offer yet, which TD Ameritrade and others have offered all along. So all the
surprise and angst directed at Robinhood is as ignorant as the speculators
that you are worried about.

This is an education problem, not an access problem. They _are_ mutually
exclusive.

To the people not using options for what they were made for:

 _" Just avoid holding it in that way."_ \- Steve Jobs

~~~
raverbashing
If only we had learned something from 2008... But apparently not

(For those who aren't aware) The problem with options is that your liability
with them can get bigger than your equity. You buy 10 shares of Newthing.js
for $1000 ($100/share), the maximum you're losing is $1000

You shortsell NTJS because they use JS instead of Ruby, but guess what NTJS
rose to $200 per share and at the time of selling you need to cover the
difference.

(Edit: had conflated put options with shortselling,
[https://www.investopedia.com/articles/trading/092613/differe...](https://www.investopedia.com/articles/trading/092613/difference-
between-short-selling-and-put-options.asp) ), as the article says "Because of
its many risks, short selling should only be used by sophisticated traders
familiar with the risks of shorting and the regulations involved. "

~~~
vmception
Learnings from 2008:

\- banning short selling during a market sell off irreparably harms the
options market, exacerbating market dysfunction.

\- the tail wags the dog. although equities/asset prices should dictate
options prices as an afterthought, options activity often can dictate
equities/asset prices.

\- options market should not be ignored in policy decisions and should be made
more efficient to ensure better price discovery in both options and their
underlying assets.

\- options market hours should be extended

\- big data challenges across broker dealer firms hamper the immediate rollout
of all possibilities regarding improving options contracts, the solution being
incremental rollout of series and smaller quotes

~~~
bananaface
Why would anyone assume equity price dictates options price? If there's
arbitrage between the two instruments, they'll both exert a force on one
another and the larger market (options) will exert the larger force.

~~~
vmception
options pricing formulas are not settled and the predominant formula was made
by a firm that blew up using it

its not really about arbitrage between markets, it’s the varying motives
within the options market and varying prices others are willing to pay.
Although this can be influenced by arbitrage between markets for some people.

the formulas are based on stock prices, and at least 5 other things, but a
small options market was ignorable, while a big options market shouldn’t be

~~~
JumpCrisscross
> _options pricing formulas are not settled and the predominant formula was
> made by a firm that blew up using it_

Options arbitrage between equity and options via BSM variants is settled
science. As is put-call parity, an arbitrage between put and call pricing. The
latter is a perfect arbitrage—it is riskless. The former is not, there is
risidual risk that must be continuously managed. (That management is another
transmission mechanism for information between the markets.) When mismanaged,
it blows you up. But it still enforced a tight, arbitrabgeable relationship
between equity prices and options.

What _does_ blow people up is thinking options models are B.S. and then going
and trading options. They’re likely the reason my options-trading hedge fund
stakes have been doing so well.

------
ab_testing
I think that title of this article is click bait. The author himself
acknowledges that Robinhood is not the only firm that sells order flow data.
Infact all the well known so called discount brokerages sell order flow data
and have done so for many years before Robinhood came along. In addition to
that, all these firms were selling the order flow data and still charging
their customers $7 per trade. That practise would have continued unabated had
Robinhood or some other startup not come along and provided free trading
platform.

Also from a real world perspective, I have tried Robinhood and Schwab market
orders and they are very close to each other (most of the times - same price
down to the penny). So I am not sure why Robinhood is geting paid more for
their order flow, compared to the other discount brokerages.

Also Robinhood is great for buy and hold investment.

~~~
JumpCrisscross
> _all the well known so called discount brokerages sell order flow_

The order flow selling is sensationalised. Everyone does it.

But Robinhood’s order flow being so much more valuable than competitors’ is
interesting. And the difference cannot be explained solely by small order
size. The market is betting Robinhood trades are profitable to trade against.
Given how the UX encourages over-trading and complex trading, I’m inclined to
agree.

------
dlivingston
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 money into my
savings account? Pass. But if I can buy 0.1 shares at $150? Now we’re talking.
Hey, TSLA went up a bit today. I’ll buy another 0.1 shares. Etc. That, without
hyperbole, is truly the beginnings of the democratization of the stock market.

~~~
jesterson
That's the problem of RH - in your cases stock is managed because of
"frictionless UI" whilst it should be managed due to financial considerations
but not because they have made it easy as getting a cup of coffee.

You need to understand the model how low cost services like RH operate - they
sell all your data to big hedge funds. Guess what happen at certain moment
when smart money will decide it's time to cut pigs - massive wealth
redistribution with robihooders being cut. It has happened before in history
and will happen again since history doesn't really teach majority of us
anything at all.

~~~
renewiltord
This doesn't jibe with what Matt Levine describes as RH's operating model.
Unless you're actually informed, this just sounds like Internet urban myth.
You actually can get better results because as a retail trader participating
with other retail traders you have uncorrelated order flow.

~~~
jesterson
> You actually can get better results because as a retail trader participating
> with other retail traders you have uncorrelated order flow.

Hedge funds will get even better results knowing what's robinhooders are
betting upon with much better precision.

~~~
kjksf
That doesn't negate his point (that RobinHood can fill your order just as
well, or better, than eTrade or Fidelity).

If you're trying to out-hedge hedge funds then the only way to win is to not
play.

You can (and should) use stop limit prices to guarantee a desirable price in
which case there's nothing a hedge fund can do to bump you.

And if you're sensitive to 0.1% differential in price then you're trading, not
investing.

~~~
qes
> use stop limit prices to guarantee a desirable price in which case there's
> nothing a hedge fund can do to bump you

This is VERY misleading - not sure if you just worded it poorly or if you
believe this - but a stop limit is NOT a guarantee that your stock will be
sold.

Someone has to take the other side of that trade for it to fill. If there's no
one there to take the trade - which is common when the price moves quickly -
it will not execute.

------
ping_pong
I don't think Robinhood is doing anything wrong. They are making things easy,
which it should be. They still need to use the NBBO price, so it's not like
they are making things more expensive for traders.

But I've seen this exact same pattern during the dot com boom. Lots of people
making a ton of money day trading. This usually culminates in a heavy crash
and many people are completely wiped out.

/r/wallstreetbets is hand-in-hand with Robinhood and wsb more than RH is
really making a huge game out of this, and it's crazy. I know people that have
gotten sucked in by wsb and started buying crazy amounts of options just to
lose all their money. If there is a big crash, I hope RH ends up IPO'ing
before this, otherwise all their investors and employees will be holding onto
worthless stock as trading volumes goes to zero, like it did after the dotcom-
bust.

~~~
totalZero
Their platform has had outages during periods of extreme market volatility,
and they allow unsophisticated traders to take option risk that they may not
readily understand.

/r/wallstreetbets doesn't have any fiduciary responsibility to anyone. RH
does.

~~~
NovemberWhiskey
Is RH actually acting as an investment adviser in these transactions, or just
a discount brokerage? If the latter, generally not a fiduciary, I think?

~~~
totalZero
You are correct. I should have used the term "suitability."

What I was trying to communicate is that RH could be liable in a situation
where it approves people for margin or L2 options accounts who have no
business accessing those kinds of products. RH may benefit from increased
order flow, but is not permitted to cultivate order flow that is clearly
inappropriate for its clients.

------
timavr
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.

~~~
hansvm
> 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 and
whatnot, but as soon as anything atypical hits the road (like a family
crossing) you probably won't be able to respond adequately.

~~~
timavr
That was my point.

------
system2
What's the reason of this article showing RH as an evil corp? People also
gamble in Las Vegas, no one is stopping them.

It is a good tool, thought me a lot about stocks and options. I am not
investing heavily, but overhead of my investments would be far more higher
with other competitors.

The other trading companies literally asked my lifestory, bunch of scans and
very long process of acceptance. Let alone their extremely cumbersome software
would possibly (I am certain) lose more money because of the mistakes I would
make.

~~~
BoorishBears
People keep saying this and all I can say is, have you used Robinhood AND a
"real" brokrage platform?

Crashes during periods of high volatility at a much higher rate than
competitors, puts detailed views of stock market behind a paywall, actively
advertises options with asinine strike/expiries for people who don't get
options, no full support for spreads are on their mobile app, their general
poor handling of multi leg options strategies _resulted in the suicide of
person wrongly shown to owe millions in their account_ , terrible for tracking
P/L, terrible fills on orders, the asinine fake chat bot system and lacking
support in general

Robinhood as a trading platform is deeply flawed, you say your commissions
would outweigh your investments, but a) now zero fee trades is not a
differentiator, and b) you're paying commissions on every RH trade with subpar
fills, both on time taken to fill and prices, those add up over time, and are
why RH could even afford commission free trades in the first place

~~~
kjksf
Yes, I do use IBKR, which is one the "real" brokerage platforms.

Your portrayal of RobinHood is a caricature.

Crashes? It happened a few times. I'm not an active trader, so I don't use
IBKR all the time, but even in my light usage when I couldn't log in because
their security-theater activation code never arrives.

Often IBKR can't show the value of my portfolio because, apparently, they
can't load the data.

The whole web app is slow, switching between different parts is slow.

They don't even bother to send you an e-mail immediately after fulfilling the
order.

The way RobinHood show option pricing makes way more sense than IBKR's view.

"Terrible fills on order" \- you're just making stuff up. Care to show
evidence that some other brokerage can fill your order faster or at better
price than RobinHood.

"IB's trading system had a defect that prevented clients from selling any WTI
Futures at negative prices, which caused IB's clients over $100 million in
losses." [https://finance.yahoo.com/news/sadis-hired-investigate-
inter...](https://finance.yahoo.com/news/sadis-hired-investigate-interactive-
brokers-140000848.html)

I'm sure there were people who lost money and committed suicide and were
customers of "real" brokerage platforms.

RobinHood is just a better app. Why do people think it's a bad thing is beyond
me.

~~~
BoorishBears
> I'm sure there were people who lost money and committed suicide and were
> customers of "real" brokerage platforms.

Let's start with the suicide because that alone should have been the end of
Robinhood...

This person did NOT lose their money.

Normally to sell an option you need the underlying equity (unless you're
selling naked options, but RH won't let you do that)

A spread is when you use options to get the right to buy the underlying equity
on a given day, then use _that_ to sell an option on the same day.

So your sold option is covered by your bought option

Robinhood erroneously disregarded the option the person had bought, and told
them they were on the hook for millions of dollars worth of shares. They had
no access to leverage that would have let them owe that much money.

They committed suicide not because they lost their money, but because they
thought they owed millions on an account worth hundreds...

THIS IS STILL A BUG! Someone killed themselves over this, and this is
literally still happening!

-

The rest of your complaints are either off base, or just deflections unrelated
to things I said

Like, no one is complaining RH having a good UI is a bad thing, come off that.

RH sends emails for orders, I'm guessing you turned it off because you felt
they were "asking for your life story"

RH's fills are legendarily bad, I'm sorry I can't do a research study for you,
but you're free to search this yourself

If we're just trading bug stories, are we going to ignore RH has completely
broken two leap years in a row? I mean I don't want to stoop to that, that's
why I specifically mentioned a scenario where it keeps happening, periods of
high volatility

All platforms strain doing those, but RH keeps breaking in the same ways, and
it doesn't seem to phase them

Your portfolio value example is actually my favorite...

IB gets that your portfolio value could have an effect on your trading habits
and mental state... so it doesn't load a value

Robinhood _every single period of increased volatility_ will start showing
randomly wrong amounts for my portfolio value!

There've been times when I sold out of positions because RH showed portfolio
wide losses only for me to realize it was literally making up a number...

Imagine what happens if it shows you owing millions of dollars

-

Robinhood's option views deserve their own article.

Do you mean "Discover" where they show you those asinine positions (asinine
even for a Yolo mind you, some of them have no volume or open interest, so
even if the spike by some miracle, you can't even sell)

Or the normal view where the most important information, like _Volume_ and the
Greeks is buried under a sub heading?

Or the mobile app, which previously won't let you do spreads outside the
discover view, and still randomly doesn't show spreads for some tickers for
those using the Discover view

Not to mention the insanity that the "Discover" view exists. Because it shows
strike expiry but doesn't explain that if there's no Volume that doesn't
matter, doesn't explain Theta

Now before you complain "That's just sandbagging people who want to trade
options!!!"

This is stuff you can literally explain in 2 sentences! "The closer to
expiring this option we're showing you is, the less it's worth" and "Volume
and Open Interest represent if anyone will actually buy this thing we saddled
you with before expiry"

IB is showing you all this annoying stuff to sandbag you that just happens to
actually be incredibly simple if you take 10 minutes to look it up.

Now if we were talking about using a new OS I'd be totally with all the people
saying "wow they want you to read an instruction manual, crappy UX"

But here it's your actual money, and 10 minutes really is 10 minutes to learn
stuff that exists no matter what platform you use.

------
enilakla
Lol...They can sell my order flow all they want as long as I’m still earning

Edit: Downvote all you want. That all brokers (well, not all, depending on
your account) sell your flow to Citadel et el is well discussed, and RH has an
even better client base to ‘sell out’...

The point I’m making is that for some users they don’t really care it it
currently ‘works well enough’ for whatever they’re doing.

------
jtdev
Nothing prevents one from taking a more passive “buy and hold” approach on
Robinhood - these articles critical of Robinhood seem to conflate Robinhood as
a brokerage platform and poor investing discipline... it has nothing to do
with the brokerage and everything to do with the investor.

------
tleite
People that complain Robinhood is too easy and "the people can't handle it"
are akin to the Catholic church in the dark ages forbidding the translation of
the bible from Latin.

------
porkshoulder
That debate at the end over how the NYT portrayed how much money is made off
of the order flows is interesting.

Is it reasonable for the NYT journalist to use total payment order flow
revenue / average dollar amount per account instead of diving by total number
of accounts? The latter seems like it would be a cleaner way to say "this is,
on average, how much they're making off of each person"

Whatever it is - Robinhood is cleaning up. Wish I was invested in the company
instead of just using it.

~~~
IAmEveryone
The "value" of order flow is not "per person". Ordinarily, it should correlate
with order volume, but RH is getting far more than expected on (something
close, but not exactly) that measure. I wonder if RH customers maybe trade far
more than those of other brokerages? Maybe that data isn't publicly available,
requiring them to use average account value as a proxy?

Anyway, the point here is to stoke anger from RH customers by calling them
stupid (making bad trades). Dividing their revenue by number of accounts would
tell a different story, one that would also anger customers because, again, it
paints them in a bad light. But this time their stupidity would manifest
itself by allowing RH to profit so much more than other brokerages.

~~~
JumpCrisscross
> _if RH customers maybe trade far more than those of other brokerages?_

I believe this is true. The metric, revenue per mean dollar, is used in the
industry as a measure of how productively customers’ assets are being
monetised. It lets bank managers compare _e.g._ trading and wealth management.
Given a lot of compliance costs scale with accounts and assets, not volumes,
the measure makes sense.

------
AznHisoka
I love Robinhood as a product (simple, easy to use) but agree it’s advantages
also can lead to recklessness.

For me, I simply delete the mobile app for my phone and use another app to set
price alerts. This prevents me from overtrading and obsessing over the markets
everyday.

~~~
p7hwfizeONj
Do you have a recommendation for price alerts? Both E-Trade and Robinhood
don't notify me immediately when a price target or percentage change is hit. A
90 day limit order does execute quickly enough but it isn't exactly what I'm
looking for because there might be new information that would have made me not
want to buy.

~~~
AznHisoka
I use Fidelity. You can probably open an account there with nothing in it, and
get price alerts for any security.

------
mam2
It's only "gambling" for the losers who don't understand how the stock market
works and lose their money.

They see the ones winning and say "oh, this MUST be luck"

------
xondono
I’ve started to learn about options, but for now I’m staying with long term
stock investment.

Maybe I’m not understanding the language, but I thought RH and eToro and the
like made money through enabling high frequency trading against their
customers. My guess/intuition is that this would increase volatility but
reduce the expected returns of their users when compared to trading stocks
through a broker. Am I terribly lost here?

------
anonu
The SEC and finra need to regulate this gambling platform immediately.

------
jasonv
I was looking at trading platforms lately, and noticed "robo-trading", but
don't see it as part of the discussion here. Is it a reasonable alternative to
trading on your own?

------
simonebrunozzi
> in investing, more than probably any other area of life, assume everyone is
> at least partially lying.

This sounds quite true.

------
jeffrallen
Here's a rule of thumb that has served me well: If you're not paying someone
to manage your portfolio, you're paying too much.

But: it has only served me well because the person I pay is trustworthy beyond
reproach, and has earned that trust from my family over decades.

This is, unfortunately, not a scalable solution.

~~~
mrep
What fees do they charge and what rate of return have you gotten?

Your manager may be lucky or exceptional but most people on average will get
better returns avoiding those fees and just buying index funds.

------
aripickar
I disagree with the premise of the article, since it takes the POV of an
experiences trader, but that isn’t necessarily the whole story. The
alternative for a lot of Robinhood traders wasn’t / isn’t trading on e trade
or another platform, it’s not investing at all. If the market is going to be
growing, which is the assumption of any economic theory, it should follow that
people want to get money into the market in order to grow their wealth.
Options are unlikely to convey on any platform, but stock ownership and
investment is unquestionably a good thing, when compared to money sitting in a
bank account.

~~~
JumpCrisscross
> _stock ownership and investment is unquestionably a good thing, when
> compared to money sitting in a bank account_

Agreed. But cash in a day trading account at the hands of an inexperienced
trader has a lower expected return than that bank account. Particularly if
they’re trading options.

The net effect of Robinhood is we’re training a generation of investors with
self-destructive habits. It’s possible to use Robinhood responsively. But its
UX is antagonistic to that use pattern.

~~~
GlennS
> The net effect of Robinhood is we’re training a generation of investors with
> self-destructive habits.

When they lose a lot of money for the first time, won't they unlearn this
training?

~~~
Traster
I think it's unlikely people lose all their money trading on RH and take the
lesson "Better trade more responsibly next time", more likely the lesson is
either "Next time I've got to be more aggressive" or "I'm never putting money
in the stock market again".

