36 ms·

I think what Robinhood is doing with Gold accounts is pretty shady. I'm guessing that the vast majority of people who trade on margin don't fully comprehend the

I think what Robinhood is doing with Gold accounts is pretty shady. I'm guessing that the vast majority of people who trade on margin don't fully comprehend the risks in doing so.

benbowdene 10y ago
I agree. Especially when most of their user base is probably millennials who are < 2 years into trading. A bit scary.
- whitepoplar 10y ago
  It's so bad. If you offered the same people a loan at x% annual interest rate, I bet far fewer of them would bite, but that's exactly what the Gold monthly fee is.
  - charlesdm 10y ago
    At $10/mo (=$120 year), assuming a 1.5% interest rate, you're actually saving money on interest expenses if you invest more than $10k on margin for > 1 year. Doesn't sounds that bad to me?
    - marcell 10y ago
      It's $10/mo to borrow up to $2k. The cost to borrow more goes up.
      - webaholic 10y ago
        It's 100$ pm to borrow 24K$. It is not bad overall.
        mcguire 10y ago
        At least 6% and 5%? Not bad. If you use all of it. Still, I'm predicting margin calls in someone's future.
- Veratyr 10y ago
  Here's scary: https://np.reddit.com/r/RobinHood/comments/5y8cw4/after_making_a_trade_is_there_any_grace_period/ https://np.reddit.com/r/RobinHood/comments/5y8cw4/after_maki... The guy was posting around about consumer law and how he should be able to get a refund.
  - deleted 10y ago
    [deleted]
  - arjie 10y ago
    > I bought Express stock EXPR yesterday. I know a girl who works there and I thought it would make a good conversation piece but now today the stock is going down really fast. That's the one I want to return. I don't want to have to go into the actual store to talk to them about this I was hoping there was an option to do it online. That's someone having a laugh at the expense of a bunch of fools who think they're so much smarter than him.
    - mcguire 10y ago
      "I was banned from [/r/wallstreetbets] for 2 days for linking this thread. Worth it."
nodesocket 10y ago
It's not rocket science, and it is obviously a loan. How is margin shady? This claim that it is somehow predatory or that consumers need to be protected is nonsense. This assumes that people can't do research and due diligence. If you aren't informed to make financial decisions than you probably shouldn't be trading. If you choose to proceed, do so at your own risk. All brokerages offer margin and typically this is how they make their money, not commissions.
- whitepoplar 10y ago
  Margin isn't shady in the form that it takes at every other brokerage. Robinhood's Gold is shady because they make every attempt to market it as a higher membership tier, to young unsophisticated investors. It may not be illegal, but it certainly seems like a dark pattern.
  - bobbington 10y ago
    I think it's more straightforward than margin because u actually see what the margin costs you.
- cwilkes 10y ago
  > If you aren't informed to make financial decisions than you probably shouldn't be trading From what I've read in this thread that seems to be Robinhood's target market.
- mcguire 10y ago
  The 1920s want their arguments back.
- deleted 10y ago
  [deleted]
jopsen 10y ago
What are the risks? Apart from a margin call? Meaning they sell your stocks.. Is there any risk related to avoiding the 3 day settlement? Many amateurs using robinhood do so knowing they could loose their investment. So long as they don't loose more they'll hopefully be fine.
- cheriot 10y ago
  Would they not try to collect like any other loan?
  - mcguire 10y ago
    No. The broker first contacts the investor to allow them to deposit more money to bring up their equity percentage; if thet doesn't work, they sell the borrowed assets to get the percentage up. One feature of margin loans is that you are required to have assets to cover them. A relic of the great depression, IIRC.
    - cheriot 10y ago
      Those collateral assets start out covering the loan, but are often invested in the same assets as the borrowed money and will loose value at the same time. So when the collateral no longer covers the loan, the investor gets a margin call and doesn't have the money... then what? Does the broker have any recourse to credit bureaus or courts?
      - mcguire 10y ago
        The margin requirements don't allow the loan to exceed the collateral assets. See http://www.investopedia.com/terms/m/margincall.asp http://www.investopedia.com/terms/m/margincall.asp (Actually, I'm not sure what would happen if the stock went to zero instantly and was the only asset in the account.)

I think what Robinhood is doing with Gold accounts is pretty shady. I'm guessing that the vast majority of people who trade on margin don't fully comprehend the risks in doing so.

benbowdene 10y ago

I agree. Especially when most of their user base is probably millennials who are < 2 years into trading. A bit scary.

whitepoplar 10y ago
It's so bad. If you offered the same people a loan at x% annual interest rate, I bet far fewer of them would bite, but that's exactly what the Gold monthly fee is.
- charlesdm 10y ago
  At $10/mo (=$120 year), assuming a 1.5% interest rate, you're actually saving money on interest expenses if you invest more than $10k on margin for > 1 year. Doesn't sounds that bad to me?
  - marcell 10y ago
    It's $10/mo to borrow up to $2k. The cost to borrow more goes up.
    - webaholic 10y ago
      It's 100$ pm to borrow 24K$. It is not bad overall.
      - mcguire 10y ago
        At least 6% and 5%? Not bad. If you use all of it. Still, I'm predicting margin calls in someone's future.
Veratyr 10y ago
Here's scary: https://np.reddit.com/r/RobinHood/comments/5y8cw4/after_making_a_trade_is_there_any_grace_period/ https://np.reddit.com/r/RobinHood/comments/5y8cw4/after_maki... The guy was posting around about consumer law and how he should be able to get a refund.
- deleted 10y ago
  [deleted]
- arjie 10y ago
  > I bought Express stock EXPR yesterday. I know a girl who works there and I thought it would make a good conversation piece but now today the stock is going down really fast. That's the one I want to return. I don't want to have to go into the actual store to talk to them about this I was hoping there was an option to do it online. That's someone having a laugh at the expense of a bunch of fools who think they're so much smarter than him.
  - mcguire 10y ago
    "I was banned from [/r/wallstreetbets] for 2 days for linking this thread. Worth it."

nodesocket 10y ago

It's not rocket science, and it is obviously a loan. How is margin shady? This claim that it is somehow predatory or that consumers need to be protected is nonsense. This assumes that people can't do research and due diligence. If you aren't informed to make financial decisions than you probably shouldn't be trading. If you choose to proceed, do so at your own risk. All brokerages offer margin and typically this is how they make their money, not commissions.

whitepoplar 10y ago
Margin isn't shady in the form that it takes at every other brokerage. Robinhood's Gold is shady because they make every attempt to market it as a higher membership tier, to young unsophisticated investors. It may not be illegal, but it certainly seems like a dark pattern.
- bobbington 10y ago
  I think it's more straightforward than margin because u actually see what the margin costs you.
cwilkes 10y ago
> If you aren't informed to make financial decisions than you probably shouldn't be trading From what I've read in this thread that seems to be Robinhood's target market.
mcguire 10y ago
The 1920s want their arguments back.
deleted 10y ago
[deleted]

jopsen 10y ago

What are the risks? Apart from a margin call? Meaning they sell your stocks.. Is there any risk related to avoiding the 3 day settlement? Many amateurs using robinhood do so knowing they could loose their investment. So long as they don't loose more they'll hopefully be fine.

cheriot 10y ago
Would they not try to collect like any other loan?
- mcguire 10y ago
  No. The broker first contacts the investor to allow them to deposit more money to bring up their equity percentage; if thet doesn't work, they sell the borrowed assets to get the percentage up. One feature of margin loans is that you are required to have assets to cover them. A relic of the great depression, IIRC.
  - cheriot 10y ago
    Those collateral assets start out covering the loan, but are often invested in the same assets as the borrowed money and will loose value at the same time. So when the collateral no longer covers the loan, the investor gets a margin call and doesn't have the money... then what? Does the broker have any recourse to credit bureaus or courts?
    - mcguire 10y ago
      The margin requirements don't allow the loan to exceed the collateral assets. See http://www.investopedia.com/terms/m/margincall.asp http://www.investopedia.com/terms/m/margincall.asp (Actually, I'm not sure what would happen if the stock went to zero instantly and was the only asset in the account.)