
Robinhood now valued at $11.2B with new fund backing - JumpCrisscross
https://www.bloomberg.com/news/articles/2020-08-17/robinhood-now-valued-at-11-2-billion-with-sundheim-fund-backing
======
GhostVII
Robinhoods advertising is disgusting. Encouraging people who make very little
money to gamble that money on the stock market is just taking advantage of
those who don't know any better - do you really expect to compete with the
investors paying 20k for a Bloomberg terminal, who get all the news 15 minutes
before you can even hear about it?

If they had been advertising about how low their fees are, and how you can
invest your savings in ETFs or something I would have no problem with it since
that is a reasonable thing to do. But suggesting that the average low income
person should be day trading is just predatory.

I even saw an ad (not 100% sure if it was Robinhood but a similar product)
that was telling a story about how someone was in tens of thousands of dollars
in debt, and day traded until they were out of debt. All these trading apps
seem to be targeted at people who will almost certainly lose money, and who
generally don't have much to lose. I mean I have no problem with an app
advertising an easy way to do day trading, just don't act as if it is anything
other than gambling.

~~~
erulabs
I'm not sure I can say I'm disgusted by assuming hourly workers are
intelligent.

Why is it that investing is gambling only for the poor? Is the implication the
poor people are less informed and less intelligent?

> do you really expect to compete with the investors paying 20k for a
> Bloomberg terminal, who get all the news 15 minutes before you can even hear
> about it?

Not if you're day trading, of course not. But letting someone who stocks sodas
all day buy a couple Pepsi shares seems highly legitimate. The stock market
will be more intelligent with more opinions in the pool, not less.

~~~
GhostVII
Stock picking is gambling for pretty much everyone, even professionals don't
beat the market most of the time.

Income is somewhat correlated with intelligence, but thats not the issue I
have with marketing to lower income people, since as you said there are lots
of very smart people at all income levels. The problem is that lower income
people have less to lose, and are less able to recover from losses, so I am
more concerned with them loosing money than if a well paid professional looses
their bonus or something in the market. Also lower income people are more
likely to try more risky methods of getting money, and are more likely a
member of a vulnerable demographic (ex. pyramid schemes have a lot of success
targetting recent immigrants without much income).

I think there is a lot of value in letting someone who stocks sodas all day
buy some Pepsi stock if they have some money free to play around with. I've
done some day trading, it's a little fun (and a lot stressful, so no more).
The problem I have is when Robinhood tries to convince that person stocking
sodas that they have some special insight that will let them beat the market
and make money investing. That's how you get people investing and loosing more
than they can afford.

~~~
lowdose
> even professionals don't beat the market most of the time.

Most professionals beat the market all the time but is diminished after the
cost deduction of the pro. The pro always gets paid.

------
brundolf
There's some discussion here about how destructive/unwise trading services
like Robinhood can be.

If you're looking for an alternative, I've had a great experience with "robo-
advisers" (Betterment, specifically). Many of the same advantages as something
like Robinhood: $0 account minimum, 100% digital (create and manage your
account through the website/app, no paperwork, no representatives), easy to
cash-out with just a couple days' notice. The difference is that they
automatically allocate a diversified portfolio for you and let you control
simple things like the stocks/bonds percentage you want to have (a proxy for
risk-tolerance). They do general investment accounts (analogous to index
funds), as well as IRAs and savings. Fees are modest and automatically
deducted from your growing balance. Dividends and gains are automatically re-
invested in a tax-efficient way.

For several years now I've put all of my excess money into Betterment aside
from some basic emergency savings. If you want a minimal-effort way to make
your money grow and/or don't have much to invest, I highly recommend it.

Also: I promise I'm a real person and this isn't a shill :)

~~~
kjksf
Tell us how well Betterment did for you.

I highly doubt it beats S&P 500 so you can do better by using Robinhood and
invest into S&P 500 tracking stock like IVV. And the risk is more or less the
same. It's not like Betterment would do well if S&P 500 tanks.

I used Wealthfront for a while and I switched to trading stocks.

The idea of roboadvisor sounded nice but their returns are sub-par because
their allocation strategy is, by necessity, very risk averse. They put a lot
of your money into bonds and similar sub-2% investements while in the last 50
years S&P returned 8% on average.

That 8% return is about as risk free as you can get and paying Betterment fees
to do worse than that makes no sense to me.

BTW: if you invest in FAANGT (FAANG + Tesla) equal-weight portfolio, you'll do
several times better than S&P 500 with very little risk. At lest for the next
few years.

~~~
atombender
The S&P isn't risk-free! The only risk-free asset is US Treasury bonds,
because we assume US Treasury can't default on payments.

The goal of a robo advisor, for most people, is not to beat the S&P, but to
balance risk and reward according to the individual's time horizon and risk
profile _without any manual intervention_.

Beating the S&P is a fun game for people who want to spend time on it, but
this isn't for the general populace.

If you want to beat the S&P and you're okay with above-average risk, but also
want a completely hands-off approach, I would suggest 100% PSLDX [1]. It's a
hybrid active/passive mutual fund that uses buy derivatives (futures and
swaps), collateralized by bonds, to boost S&P returns. The high (1.01%) fee
only looks high until you look at the returns; most years, it does 20-30%. Its
return in 2019 was 52%. In theory, it should do only slightly worse than the
S&P in a bad year.

Another interesting futures-based fund is NTSX [2]. It's pretty new, but it's
consistently beat the S&P since inception, and did very well in the March dip.

[1]
[https://www.morningstar.com/funds/xnas/psldx/quote](https://www.morningstar.com/funds/xnas/psldx/quote)

[2]
[https://www.morningstar.com/etfs/arcx/ntsx/quote](https://www.morningstar.com/etfs/arcx/ntsx/quote)

~~~
nojito
A fund like psldx magnifies in both directions.

It’s easy to get enamored when the market is doing well.

~~~
atombender
I would say that PSLDX has proven itself. Max drawdown since inception (2008)
is about the same as VFINX, less than VTIAX/VGTSX. Return in 2008 was -33%,
compared to -37% for the S&P 500. In March, it dipped more than the S&P, but
not terribly so. The only year it didn't significantly outperform the S&P was
2013.

------
x87678r
America is great. Online gambling is illegal but you can have an app to punt
the market all day. Options might as well be roulette for most people.

~~~
outworlder
> America is great. Online gambling is illegal but you can have an app to punt
> the market all day

Not all day. If you have less than 25k you are subject to pattern day trading
restrictions.

I guess, if you have money, anything goes.

~~~
sl1ck731
Isn't that only with non-cash accounts?

~~~
outworlder
Indeed.

But now you need to wait for the cash to settle, which takes about two days.

~~~
quickthrowman
Options trades settle the following day, not +2 like shares.

~~~
outworlder
TIL

Thanks!

------
sna1l
Regardless of how you feel about their marketing practices, it is clear that
investors are investing in the customer base.

As Robinhood continues to grow, they can/will offer more and more products
(mortgages, bonds, DAFs, etc), eventually becoming a one-stop shop for
millennials/zoomers/whatever.

For example, currently if you want to invest in a crowdsourced real estate
fund, you need to use something like Cadre/Crowdstreet. If RH can eventually
support all these possible investment avenues, they will have a lot of room to
grow in the retail space.

Given their current laissez-faire approach to investor
education/responsibleness, the question will become whether this level of
investing ease is good or bad.

~~~
fossuser
There’s a lot that can be better here and Robinhood’s approach to getting a
foothold has been smart.

I use Fidelity for everything, but their software is mediocre at best. I hear
vanguard is worse.

The regular banks are ten times worse than fidelity for basic actions.

Other startups that have tried to make this better (Simple Bank comes to mind,
but there are a couple of others) typically sell out or only focus on basic
banking which is not helpful.

Robinhood has better software and is positioning themselves to be a serious
player long term.

~~~
subsubzero
I would choose Schwab over Robinhood any day of the week. I used robinhood and
its data/metrics with stocks was extremely lacking and un-sophisticated. In
addition order fulfilled timing was slow, I would never trade large amounts of
stock with the app. Its all showy UI and bright colors. Which is fine as it
seems to be getting alot of users using that method and the idea of "why use
your Dads/Moms trading stock trading platform"?

~~~
outworlder
> I would choose Schwab over Robinhood any day of the week

Don't you have to prove to them that you actually know something about options
before they let you trade? Robinhood... you check a box.

~~~
wtf_is_up
Not really. You ask for level 1-4 options trading and they have you select
from a dropdown how many years experience you have. It gets approved quickly.
I've done this on TDA, IBKR, Merrill Edge.

------
kanobo
I think it's great to lower the barrier of entry to financial services and
such but one thing I feel is lacking is the education component. There's not
enough explanation, warnings, and documentation in the UI or on their site
because of the effort of getting people to invest as quickly as possible.

~~~
mrep
For anyone that hasn't used it, they literally have a discover tab for options
with things like "I think it's staying the same" with the recommendation to
create an iron condor and some possible positions you can open [0]. Although
they may have changed it as my app only shows learn more now and does not
directly show you positions you can open.

[0]:
[https://old.reddit.com/r/wallstreetbets/comments/9bw90v/robi...](https://old.reddit.com/r/wallstreetbets/comments/9bw90v/robinhood_added_the_option_for_training_wheels/)

~~~
outworlder
> with the recommendation to create an iron condor

Have you tried? The interface is good if all you want to do is buy or sell a
single option. If you try an iron condor, with 4 options, it's difficult to
get a picture of what you are doing. Max profit, max loss, greeks for the
combined options, etc.

Some other platforms allow you to setup an iron condor with a single click,
then move strikes around and see the numbers change.

Heck, even the greeks for a single option are kinda hidden before you buy.
Many people don't even know you can see them before buying. It is also
difficult to compare greeks between different options.

Spreads in general are not very visible in RH(and are a 'higher level'). It
should encourage people to use them more to minimize risk.

~~~
llbeansandrice
It's like 10 clicks to go from seeing the greeks for one option to seeing the
greeks for another. You have to go all the way to the page where you're
choosing how many contracts to buy/sell before you can click to see them.

It's really weird.

------
synaesthesisx
We're going to see some really interesting things happen once Robinhood files
for IPO and goes public (and options on Robinhood are available for trading
for hungry WSB users). I would not put it past them to send Robinhood stock to
unimaginable heights (and possibly swallow the entire market in a black hole
in the process). Unlikely, but again this is 2020...

------
H8crilA
With the obscene amount of speculation going on their platform and the losses
that are likely to follow - the irony of the name Robinhood will not be lost
on the historians of financial markets. Devil take the hindmost.

~~~
ignoramous
If the outlook was this ominous, why would VCs invest? It doesn't make sense.
Surely they see something in the pitch deck?

~~~
stu2b50
I believe they meant losses to Robinhood users, not Robinhood.

~~~
H8crilA
Yup. They already installed bulletproof glass at the Robinhood headquarters
because of disgruntled "customers".

------
afterwalk
It’s surprising to see that Robinhood doesn’t have an Roth IRA account
offering. It seems like it would be a good thing to nudge the new generation
of investors towards.

------
JamesLeonis
As of this writing, their Website is still broken. Try to pull up any stock or
ETF and it's stuck infinitely loading. But if you log out, they work.

Compare this logged in, vs logged out.

[https://imgur.com/tLztAxa](https://imgur.com/tLztAxa)

[https://robinhood.com/stocks/SPY](https://robinhood.com/stocks/SPY)

------
bob1029
I personally enjoyed most of my experience with Robinhood.

I used them for ~3 years but was recently forced to move to an alternative
when it became clear that maintaining any sizable margin account with them was
going to become cost prohibitive. The 5% APY they are charging is a slap to
the face when you start discovering rates between 1-2% elsewhere. I also
wanted a brokerage that could service IRA accounts and other more complex
items.

One area where Robinhood could have improved for me (not related directly to
the market) is in their web interface. I noticed performance issues when
trying to review history and other large data sets, regardless of browser
vendor. On a few occasions I was forced to switch to my mobile app in order to
verify a transaction. It feels like they just need to rewrite this thing to be
server rendered. There's absolutely no reason I need 5+ megabytes of
javascript framework on my client in order to display a 4 column table of
basic financial figures.

~~~
x87678r
> start discovering rates between 1-2% elsewhere

There is only one retail broker that offers this. Everywhere else is more
[https://www.schwab.com/margin/rates](https://www.schwab.com/margin/rates)

~~~
bob1029
IBKR offers similar rates and is what I moved to.

~~~
x87678r
Yeah that is the "only one retail broker"

------
subsaharancoder
My first foray into buying stocks in the U.S. was with Robinhood, nothing
about the app screamed "gamble away your hard earned money" or "make poor
financial decisions" so I'm baffled how people label it as some kind of stock
casino and absolve people of personal responsibility, but that's just me..YMMV

------
mycentstoo
My investing strategy has always been to just allocate a certain amount of
money per pay period to high growth mutual funds through a Morningstar 5-star
rated fund. I wonder what I'm missing out on with things like this.

~~~
abfan1127
the excitement of losing your money...

------
JMTQp8lwXL
Sounds like another SoftBank deal. Private Equity capturing all the equity,
only for it to be dumped on the public market and have its value decline
precipitously.

Etrade's market cap: $11.8 billion. Charles Schwab: $44.66 billion.

~~~
lykr0n
Robinhood's has only two things going for it.

1\. It has a massive userbase that most likely doesn't have exposure to the
larger financial world

2\. They have a large enough user base, where they can route orders through
dark pools and HFTs. It's good for the user because contracts have a narrower
spread and they can give the user the price they saw when they sold it (vs
Schwab, which gives you direct access to the market so you need to set limits)

3kinda. Their App is quite good compared to Schwab.

I'm not sure if either 1 or 2 makes them worth 12 billion, but they did get me
free trades on Schwab which was nice.

EDIT. Removed misleading example

~~~
afrojack123
This is wrong. People (Citadel) buy for only one reason. They can make money
off of it.

Take a look at this link. Trade execution improved in the UK when they made
PFOF illegal. [https://www.cfainstitute.org/en/advocacy/policy-
positions/pa...](https://www.cfainstitute.org/en/advocacy/policy-
positions/payment-for-order-flow-in-the-united-kingdom)

Robhinhood cancels decision to enter UK.
[https://www.cnbc.com/2020/07/21/robinhood-scraps-launch-
of-i...](https://www.cnbc.com/2020/07/21/robinhood-scraps-launch-of-its-
investing-app-in-the-uk.html)

~~~
gruez
>This is wrong. People (Citadel) buy for only one reason. They can make money
off of it.

That doesn't mean they're making money at your expense. Random hn comment that
explained it better than I could:
[https://news.ycombinator.com/item?id=23774476](https://news.ycombinator.com/item?id=23774476)

~~~
afrojack123
No, they are stop hunting.

~~~
gruez
Care to elaborate?

~~~
afrojack123
Sure. The trading is done in lower volume assets like non S&P 500 and Options
market. This is actually the orders where Robinhood gets most of its money.
Say you put up trades and stop loss and trailing stop loss. These orders are
sent to and purchased by Robinhoods customers (Citadel and Virtu). Citadel and
Virtu act like dealers. They take the opposite side of your trade and also
know where your stop losses are. Because these are lower volume stocks, they
can push prices around, force you to sell at a loss and then prices go back to
where they were a few moments ago.

[https://www.jstor.org/stable/2962317?seq=1](https://www.jstor.org/stable/2962317?seq=1)

This link describes what is going on.

This happens all the time in forex markets. During lower volume periods, they
go after the stop losses. Only market where this doesn't really happen is
futures because all trades occur on a centralized exchange.

My recommendation switch to a broker like Tradestation and route your trades
through the IEX exchange to avoid getting duped.

~~~
tcbawo
Customer orders are tagged in the market (thus available to all participants)
due to laws governing market participant behavior. These orders are
essentially static, while all other institutional orders with direct market
access are fluid. Customer orders are profitable _in aggregate_ in the same
way playing professional poker is profitable: a constant stream of less
equipped/informed money.

------
yalogin
Until Robinhood came along I thought transaction fee was how brokerages make
money. It really was a surprise to me when these guys made it zero. I still
don't understand how they make money though.

On a different note, I don't think they are in anyway different from the other
brokerages, the only reason these guys became popular is because of the zero
transaction fee trick. It was a good one but there might not be more tricks
left for new entrants. The software is written from scratch in 2018/19 so
obviously it will take the shape of that time, nothing great about that.

~~~
ttymck
> I still don't understand how they make money

I implore you to look into it [1]

[1] [https://fortune.com/2020/07/08/robinhood-makes-millions-
sell...](https://fortune.com/2020/07/08/robinhood-makes-millions-selling-your-
stock-trades-is-that-so-wrong/)

------
wpdev_63
Why would anybody trade on their platform after them going down during a key
day[0]? It's obvious they can't be trusted.

[0]:[https://www.cnbc.com/2020/03/09/robinhood-app-down-again-
dur...](https://www.cnbc.com/2020/03/09/robinhood-app-down-again-during-
another-historic-trading-day.html)

------
bitxbit
Might be an unpopular opinion but I think RH is great for financially literate
retail users. Zero commission especially on options is incredible. They need
to work on trading workflow or at least have an alternative for experienced
users.

------
neonate
[https://archive.is/Kbk8s](https://archive.is/Kbk8s)

------
skinnymuch
Wish there could be a way or culture of raises like this that are a mere 1.7%
equity didn’t count.

------
mas3god
Some real safety police in this comment section, since when was advertising
honest?

------
Havoc
Think they'll do well...but I really don't want my money anywhere near them -
as investor or investee. Move fast & break things isn't the way to go in large
scale finance. The debacle about their service being down during key moments
proved that pretty conclusively

------
ykevinator
Why can't they generate cash?

------
humbleMouse
Turns out frontrunning retail trades is profitable, who would have guessed?!

~~~
marketgod
I'm retail and if someone was front running me they would be broke by now. A
lot of the brokers have terms where they trade against your position.

------
afrojack123
Horrible company. If its free, your the product. People (Citadel, Virtu) only
buy for one reason, they can make more money from it.

Payment for order flow (PFOF) is illegal in the UK and investors have seen
better execution rates. Robinhood is illegal in the UK.

Links to CFA report stating order execution improvement after canceling PFOF
and Robinhood canceling UK launch.

[https://www.cfainstitute.org/en/advocacy/policy-
positions/pa...](https://www.cfainstitute.org/en/advocacy/policy-
positions/payment-for-order-flow-in-the-united-kingdom)

[https://www.cnbc.com/2020/07/21/robinhood-scraps-launch-
of-i...](https://www.cnbc.com/2020/07/21/robinhood-scraps-launch-of-its-
investing-app-in-the-uk.html)

To be fair, TD Ameritrade is just as bad. TD Ameritrade and TD clearing
combined have 606 reports slightly worse than Robinhood.

Its amazing what you can learn from looking at other countries that are
specialists in an industry. For example, Tesla, hydrogen fuel cells, and Japan
but that is a story for another day.

~~~
kiplkipl
>If its free, your the product.

Like my bank account?

You don't need to sell order flow to make money when people are letting you
hold their billions. Trading 212 already offer commission-free trading in the
UK.

~~~
afrojack123
Your trades. They don't make most of their money from S&P 500 trades but
outside of that and mainly option trades are big money maker for them.

