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OK, let's just be super conservative and say only 50% of Robinhood's accounts are funded. So they are valued at 3,500 per funded account. Let's assume you're right and that ETrade's accounts are all funded. So they would be valued at 3,081 per funded account.

Would you pay 13.5% more per account for a company that's growing at least 5x, if not 10x as fast? I know I would in a heartbeat, all else being equal.

Now, not all else is equal, so you can make an argument either way, but I wouldn't call Robinhood's valuation "insane."

> OK, let's just be super conservative and say only 50% of Robinhood's accounts are funded

I mean, we're all just guessing here but 50% seems _super generous_ to me. It's really easy to sign up for a Robinhood account. I'd love to know what the real numbers are :)

Yeah, and of those accounts that are funded I'd guess that many don't have more than $100. Personally I know my Robinhood account only has a couple of bucks in it and I just haven't bothered to close it. I use TD Ameritrade and M1 Finance for the bulk of my actual shares.

Just curious, why don't you though? I thought Robinhood would be more economical

If you're buying non-trivial amounts of stock and holding it, paying a couple dollars a trade isn't a relevant concern.

> If you're buying non-trivial amounts of stock and holding it, paying a couple dollars a trade isn't a relevant concern.

What becomes more relevant in that case?

Also I thought the fees are more like $7 rather than $2... have they decreased?

I use an old school brokerage and haven't paid trading fees in many years, and most of the ancillary fees have also evaporated over time. The race to the bottom was going on long before Robinhood.

But the OP's point is correct: even with trading fees, the cost is below the noise floor. Brokerages can make quite a bit of money off of how they structure trade execution, so the top-line trade cost isn't everything.

I was reading an article recently about Charles Schwab from the point of view of an investor in SCHW and it argued that Robinhood is not that great of a threat, because Schwab already makes most of their money from things other than commissions. Therefore if they have to cut commissions to zero to compete, so be it. Brokers can make money from loaning stock to short sellers, and from interest on customer cash balances. Not to mention selling order flow - getting paid by markets to give them customer orders to execute. Schwab is trying a tactic where they encourage you to use an automated "robo-advisor" that tells you how to invest, and the advice includes a significant portion of cash, which allows them to collect the interest.

Yes, commission has decreased, there has been a fee war going on lately and as a result fees have been going down substantially across the board for the major players. Fidelity doesn't even charge for wire transfers anymore.



Huh, I Googled ETrade fee and saw $7 as of 2018 so didn't think they'd be lower. Cool! Guessing they must've lost a lot of customers to Robinhood...

Do I trust this brokerage to exist in 10 years? 20? Are they going to be convicted of fraud? If I have a problem, is there a phone number that I can call to speak to a knowledgeable agent that can solve my problem?

A sampling of things that differentiate brokerages for me, price per trade is so far down my list since I buy rarely but hold for a long time.

Wait, if the brokerage goes broke do your stocks go away with it? I thought your stocks belong to you? What could (legally) happen to the stocks?

With normal brokers, your stocks are protected by SIPC insurance in that case. It plays a similar role to FDIC insurance on your bank account. This should generally apply to Robinhood too. They state that it does.

The reason I would have some doubts is they were talking recently about providing checking and savings features like a bank, only tied to a brokerage account, and they said cash therein would be SIPC insured and the SIPC had to contradict them publicly and say "nuh-uh".

This doesn't indicate your stocks aren't safe per se, but it suggests that Robinhood may not always verify that something is 100% ok with regulators before doing it, or think about all the implications, and some day we might find out "oops" they didn't do something crucial that traditional brokers do, because they were being disruptive, moving fast and breaking things.

Another point is that while Robinhood Financial appears to be a more or less normal broker that is a member of FINRA and SIPC, Robinhood Crypto is not. This isn't exactly surprising, but again, it could make a person slightly nervous that there could be drastically different consequences someday to trusting different entities that are all called "Robinhood". Maybe people will get used to trusting both of them and someday there will be a new "Robinhood XYZ" and it will not be regulated the way people expect. Or what if when Robinhood Crypto is hacked and loses their customers assets, it turns out there is some linkage that causes problems for Robinhood Financial, even though it wasn't supposed to work that way.


Order execution. If you're buying a lot of stock, then small differences in the executed price start swamping the trade fee.

Oh whoa interesting. Do you mean for market price trades? In what way does the choice of exchange affect the execution price?

Even market price trades still require a counterparty’s inverse order to execute the trade against. Thus the exchange that an order is routed to affects execution price because it depends on the available orders on the exchange, on both sides of the transaction: when and what price your order executed depends on both (e.g. if you are buying) orders placed by other buyers on the same exchange (higher bids will execute first) and the volume of sellers (if your buy order completely fills a sell order at a given price, the price will slip against you because your order will partially fill at the next higher priced sell order).

To avoid this effect one can use a limit order instead of a market order (you are setting the price instead of ‘taking’ the market price), but then it may take longer for your order to execute, and it may not execute at all if the price moves away from your limit price.

I can only speak for myself but I don't have more than ~$20 in Robinhood because the ETFs I buy are commission free at Fidelity and I simply prefer to use Fidelity. Fidelity is a better experience, I use websites on a desktop, I don't really use "apps" very much and last I knew Robinhood was only an "app" and didn't have a web interface. I basically only signed up for Robinhood for the $10 referral.

EDIT: apparently they have a web interface now.

Most online brokerages have at least a set of low-fee ETFs that you can trade for free.

TD Ameritrade offers free trading on most ETFs and M1 Finance offers free trading on all stocks and ETFs.

Yeah, but it used to have $1000s in it.

I have a Robinhood account. They gave me a free share of some stock to create an account. I just have that one share.

I don't even have the app installed on my phone.

Is it not safe to assume that VCs wouldn't be investing huge sums of money it they weren't convinced of the metrics?

It is safe to say that VCs wouldn't be investing huge sums if they didn't see a remote chance of a huge takeoff; they are VCs, not value investors.

i would not say it is a safe, honestly.

No, I wouldn’t. Because I’d guess that etrade’s average account size is likely 25-50x that of Robinhood. I don’t think encouraging young adults to gamble beer money on the stock market is a long term viable business model.

You are missing the point. The number of accounts is not an important metric. I am not saying your conclusion is false, just that you do not provide relevant facts to support your claim. Assets under management is much more important, and not necessarily strongly correlated with number of accounts.

Oof. 50% funded? I’d go for 5% and feel I’m closer to the mark.

50% is “super conservative”?? By what reasoning? How is that more appropriate than 5% or .5% or .05%? Either you have a justification for that estimate or you’re just making something up, which doesn’t mean squat.

etrade does serious business too. Some actual companies, like Apple, use them to give employees stock.

50% is not super conservative. My guess is 10% is closer to the actual number than 50%.

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