5 ms·

Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes,

Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes, to gamble. And for that purpose, often having the leverage is a good thing. The way I see it, the bets are much more entertaining than those at casinos and with better odds. Maybe it's just me, but I find casinos incredibly boring, but gambling on the market can be quite interesting.

cjslep 9y ago
I think the bigger problem is the erosion of the distinction between "investor" and "speculator", which is often unclear for novices entering the market (for whom Robinhood is significantly lowering the barrier for). Robinhood provides the firing range and a gun but no safety instructions. So I'm willing to bet you view this app very differently than someone who finds it on the App Store in a spur of the moment enticed-by-Wall-Street feeling, where it can be mistakenly thought as a get-rich-quick scheme. There's no education component to Robinhood (This conflation between speculator/investor has been happening for a while, see "The Intelligent Investor" by Benjamin Graham.)
- SEJeff 9y ago
  But even if you pay the $9-$15 for their Gold account, you still can only get on margin the amount of capital you have in the account max ie: if you deposit $5 and have $5 of cash on hand in your robinhood, but own ~$1200 of stocks, you can use < $1200 of "Gold" which is what they call margin money. It is explained quite well here: https://support.robinhood.com/hc/en-us/articles/213262686-Robinhood-Gold-Buying-Power https://support.robinhood.com/hc/en-us/articles/213262686-Ro... Note that I am a robinhood user and do not use gold or any margin investing. I use it for speculation for long term stuff and have the rest in boring index ETFs / funds primarily. I think the entire idea of investing on margin as playing with fire when you lack fireproof gloves.
  - JakeAl 9y ago
    Investing or trading on margin is intended to allow you to trade while you are waiting for previous trades to settle. It's not meant to be a loan, but it is exploited that way by both banks and traders at their own risk. It's simple enough to fix, only allow margin to cover the amount of money waiting to be settled. In other words if a trade hasn't settled then the funds are not available for trading.
    - yellow_postit 9y ago
      I've not heard this history before, is there a source you can point to? I'm interested in the history of financial instruments.
    - charlesdm 9y ago
      Margin can be powerful as a wealth building strategy, when interest rates are low. Risky? Yes. Profitable? Sometimes, if you've done your homework. I don't think you can be a consistent good stock picker, HOWEVER, there are certain companies you just know will do well because they're closely aligned to the industry you work in, for example. "Doubling down" using margin (borrowed at 1-2% per year, not 8-10%) can (maybe, sometimes, not always) be a good strategy.
      - eru 9y ago
        If you can borrow at 1-2% a year, it's almost a no-brainer.
- rtx 9y ago
  As the old saying goes, in the morning two kind of people enter the market. One with money, the other with experience. By evening they exchange positions.
doctorbellario 9y ago
What are returns like on "boring index-tracking ETFs"?
- SEJeff 9y ago
  Ask Jack Bogle... I'm sure he'll have a lesson or 5 for you.
  - StavrosK 9y ago
    What's the lesson?
    - zenlikethat 9y ago
      Index funds (over time) tend to beat most professional money managers, much less amateur speculators.
      - deleted 9y ago
        [deleted]
      - pedrocr 9y ago
        It's worse than that. Over any period of time index funds beat the average actively invested money because they have the exact same returns and less fees: https://web.stanford.edu/~wfsharpe/art/active/active.htm https://web.stanford.edu/~wfsharpe/art/active/active.htm
        eru 9y ago
        Less fees and transaction costs.
  - nommm-nommm 9y ago
    If someone is unfamiliar with the return on index funds they are unlikely to know who Jack Bogle is or what his lessons are.
  - 9y ago

cjslep 9y ago

I think the bigger problem is the erosion of the distinction between "investor" and "speculator", which is often unclear for novices entering the market (for whom Robinhood is significantly lowering the barrier for). Robinhood provides the firing range and a gun but no safety instructions. So I'm willing to bet you view this app very differently than someone who finds it on the App Store in a spur of the moment enticed-by-Wall-Street feeling, where it can be mistakenly thought as a get-rich-quick scheme. There's no education component to Robinhood (This conflation between speculator/investor has been happening for a while, see "The Intelligent Investor" by Benjamin Graham.)

SEJeff 9y ago
But even if you pay the $9-$15 for their Gold account, you still can only get on margin the amount of capital you have in the account max ie: if you deposit $5 and have $5 of cash on hand in your robinhood, but own ~$1200 of stocks, you can use < $1200 of "Gold" which is what they call margin money. It is explained quite well here: https://support.robinhood.com/hc/en-us/articles/213262686-Robinhood-Gold-Buying-Power https://support.robinhood.com/hc/en-us/articles/213262686-Ro... Note that I am a robinhood user and do not use gold or any margin investing. I use it for speculation for long term stuff and have the rest in boring index ETFs / funds primarily. I think the entire idea of investing on margin as playing with fire when you lack fireproof gloves.
- JakeAl 9y ago
  Investing or trading on margin is intended to allow you to trade while you are waiting for previous trades to settle. It's not meant to be a loan, but it is exploited that way by both banks and traders at their own risk. It's simple enough to fix, only allow margin to cover the amount of money waiting to be settled. In other words if a trade hasn't settled then the funds are not available for trading.
  - yellow_postit 9y ago
    I've not heard this history before, is there a source you can point to? I'm interested in the history of financial instruments.
  - charlesdm 9y ago
    Margin can be powerful as a wealth building strategy, when interest rates are low. Risky? Yes. Profitable? Sometimes, if you've done your homework. I don't think you can be a consistent good stock picker, HOWEVER, there are certain companies you just know will do well because they're closely aligned to the industry you work in, for example. "Doubling down" using margin (borrowed at 1-2% per year, not 8-10%) can (maybe, sometimes, not always) be a good strategy.
    - eru 9y ago
      If you can borrow at 1-2% a year, it's almost a no-brainer.
rtx 9y ago
As the old saying goes, in the morning two kind of people enter the market. One with money, the other with experience. By evening they exchange positions.

doctorbellario 9y ago

What are returns like on "boring index-tracking ETFs"?

SEJeff 9y ago
Ask Jack Bogle... I'm sure he'll have a lesson or 5 for you.
- StavrosK 9y ago
  What's the lesson?
  - zenlikethat 9y ago
    Index funds (over time) tend to beat most professional money managers, much less amateur speculators.
    - deleted 9y ago
      [deleted]
    - pedrocr 9y ago
      It's worse than that. Over any period of time index funds beat the average actively invested money because they have the exact same returns and less fees: https://web.stanford.edu/~wfsharpe/art/active/active.htm https://web.stanford.edu/~wfsharpe/art/active/active.htm
      - eru 9y ago
        Less fees and transaction costs.
- nommm-nommm 9y ago
  If someone is unfamiliar with the return on index funds they are unlikely to know who Jack Bogle is or what his lessons are.
- 9y ago