6 ms·

Maybe, except the college kids who just give all their money to mutual funds will make more money. The day-traders won't "learn how markets work," they'll learn

Maybe, except the college kids who just give all their money to mutual funds will make more money. The day-traders won't "learn how markets work," they'll learn how to lose money by making dumb trades based on less information than their counterparties. They won't learn anything, aaaannnnyyyyything, of actual value.

d0lph 9y ago
I would imagine losing money usually causes people to learn.
bdalgaard 9y ago
Or worse, I assume a lot of beginners aren't losing money in this market which will only fuel Dunning–Kruger effect when they have "real" money.
vervez 9y ago
College kid who started trading in RH a while ago here. After reading some basic investment books from authors like Peter Lynch, Taleb, and What Jim Paul, decided to get some experience in the markets. Invested a little saved and since then made a decent return, better than if that money was in a bank. So far, I'm doing better than the large-company mutual funds after 3 years, but as I've been reading, that's probably good luck. It's been an interesting experiment that gave me incentives to learn more about financial markets, which I otherwise would not have touched. However, I started by reading and knowing a little bit, so I won't touch crypto trading until I know more.
- Lewton 9y ago
  > Invested a little saved and since then made a decent return, better than if that money was in a bank. So far, I'm doing better than the large-company mutual funds after 3 years, but as I've been reading, that's probably good luck. The only thing you should be comparing yourself against is the s&p500, if you haven't beaten that, then you're down. Also, the markets have been in an unprecedented bull run. Everything you've learned will be useless once the tide turns
  - almost_usual 9y ago
    I believe the unprecedented bull run is also a contributor to Robinhood’s success. Most of your mobile app day traders are going to drop off when the market turns bearish.
    - skellera 9y ago
      I think many young people don’t understand this. They just think it’s guaranteed returns at this point with the amazing market and btc, etc.
    - adidar83 9y ago
      I agree. A lot of young people have not seen anything except the economic expansion we have experienced for the past 8 years.
  - sf_rob 9y ago
    >Also, the markets have been in an unprecedented bull run. Everything you've learned will be useless once the tide turns This is the real problem. Easy to beat the markets in a bull run when you're invested in high beta/high risk stocks.
  - vervez 9y ago
    Well, I don't think everything will be useless. Think it was John Maynard Keynes who said "The market can stay irrational longer than you can stay solvent." While that quote concerned shorting a bubble, I'd say the principle holds for determining when a bull market will turn, as well. While I'm 'beating' the S&P by 10% over my puny 3.2 year life, I gained more value from feeling the urge to trade during downturns, but resisting, seeing bad investments fade away (thanks, SolarCity), and effects of global events, such as Brexit and Trump USA. I would recommend trying stocks to people who can afford to do so as a way to really learn what books mean when they say there is an irrational 'fight or flight' instinct that individual investors have, not to mention the herd mentality of institutional investors. Hope that clarifies things.
- oil7abibi 9y ago
  The fact you’re browsing HN and have read all those books probably means you’re not the average user (read more intelligent) of RH. Just read the RH subreddit and looks at all the novice questions the users there ask.
  - vervez 9y ago
    Ha, yea, didn't even know they had a subreddit. I wouldn't go there for financial advice.
ouid 9y ago
if the premise is that you can't make money as a day trader, no matter who you are, because the stock market is essentially efficient, then they aren't making dumb trades with less information, because all information is reflected in the price. What they are doing is accumulating more risk, giving them higher odds of fluctuating out, but the expected value is the same as holding mutual funds, maybe even a little higher, since mutual funds have administrative fees, and robinhood is free. If that is not the premise, then it's not good general advice to tell people to avoid day trading as they won't learn anything. If the market is not efficient, then return on investment is correlated with your amount of information, and they will absolutely learn things of actual value, or at least their experience with trading will contain information about the strength of their hypotheses, regardless of whether they infer that information.
- almost_usual 9y ago
  There are plenty of ways to learn the market without spending money as a day trader on Robinhood. Most financial events are cyclical. Trading really hasn’t changed much since the late 17th century so reading a history book on financial speculation and market cycles would teach you plenty. Another alternative is simulating trades without allocating real liquid to it. Watch how those assets evolve over time.
  - ouid 9y ago
    it's improper to be glib on HN, but did you really just call it "spending"? Regardless, there's a lot to be said for putting actual money down on your beliefs, it has a non-negligible impact on the learning process.
    - almost_usual 9y ago
      If the goal is attaining wealth then “wasting money” is probably a more accurate statement. How someone decides to use their money is up to them. If emotional reinforcement helps them remember something then I suppose day trading is an option. I’m only suggesting there are frugal ways to learn if your ultimate goal is to build wealth.
justincorbett 9y ago
How else do you think people learn? Losing money by making bad trades IS learning something of value- like learning not to touch the hot stove. You certainly don’t learn anything from giving all your money to a mutual fund.

d0lph 9y ago

I would imagine losing money usually causes people to learn.

bdalgaard 9y ago

Or worse, I assume a lot of beginners aren't losing money in this market which will only fuel Dunning–Kruger effect when they have "real" money.

vervez 9y ago

College kid who started trading in RH a while ago here. After reading some basic investment books from authors like Peter Lynch, Taleb, and What Jim Paul, decided to get some experience in the markets. Invested a little saved and since then made a decent return, better than if that money was in a bank. So far, I'm doing better than the large-company mutual funds after 3 years, but as I've been reading, that's probably good luck. It's been an interesting experiment that gave me incentives to learn more about financial markets, which I otherwise would not have touched. However, I started by reading and knowing a little bit, so I won't touch crypto trading until I know more.

Lewton 9y ago
> Invested a little saved and since then made a decent return, better than if that money was in a bank. So far, I'm doing better than the large-company mutual funds after 3 years, but as I've been reading, that's probably good luck. The only thing you should be comparing yourself against is the s&p500, if you haven't beaten that, then you're down. Also, the markets have been in an unprecedented bull run. Everything you've learned will be useless once the tide turns
- almost_usual 9y ago
  I believe the unprecedented bull run is also a contributor to Robinhood’s success. Most of your mobile app day traders are going to drop off when the market turns bearish.
  - skellera 9y ago
    I think many young people don’t understand this. They just think it’s guaranteed returns at this point with the amazing market and btc, etc.
  - adidar83 9y ago
    I agree. A lot of young people have not seen anything except the economic expansion we have experienced for the past 8 years.
- sf_rob 9y ago
  >Also, the markets have been in an unprecedented bull run. Everything you've learned will be useless once the tide turns This is the real problem. Easy to beat the markets in a bull run when you're invested in high beta/high risk stocks.
- vervez 9y ago
  Well, I don't think everything will be useless. Think it was John Maynard Keynes who said "The market can stay irrational longer than you can stay solvent." While that quote concerned shorting a bubble, I'd say the principle holds for determining when a bull market will turn, as well. While I'm 'beating' the S&P by 10% over my puny 3.2 year life, I gained more value from feeling the urge to trade during downturns, but resisting, seeing bad investments fade away (thanks, SolarCity), and effects of global events, such as Brexit and Trump USA. I would recommend trying stocks to people who can afford to do so as a way to really learn what books mean when they say there is an irrational 'fight or flight' instinct that individual investors have, not to mention the herd mentality of institutional investors. Hope that clarifies things.
oil7abibi 9y ago
The fact you’re browsing HN and have read all those books probably means you’re not the average user (read more intelligent) of RH. Just read the RH subreddit and looks at all the novice questions the users there ask.
- vervez 9y ago
  Ha, yea, didn't even know they had a subreddit. I wouldn't go there for financial advice.

ouid 9y ago

if the premise is that you can't make money as a day trader, no matter who you are, because the stock market is essentially efficient, then they aren't making dumb trades with less information, because all information is reflected in the price. What they are doing is accumulating more risk, giving them higher odds of fluctuating out, but the expected value is the same as holding mutual funds, maybe even a little higher, since mutual funds have administrative fees, and robinhood is free. If that is not the premise, then it's not good general advice to tell people to avoid day trading as they won't learn anything. If the market is not efficient, then return on investment is correlated with your amount of information, and they will absolutely learn things of actual value, or at least their experience with trading will contain information about the strength of their hypotheses, regardless of whether they infer that information.

almost_usual 9y ago
There are plenty of ways to learn the market without spending money as a day trader on Robinhood. Most financial events are cyclical. Trading really hasn’t changed much since the late 17th century so reading a history book on financial speculation and market cycles would teach you plenty. Another alternative is simulating trades without allocating real liquid to it. Watch how those assets evolve over time.
- ouid 9y ago
  it's improper to be glib on HN, but did you really just call it "spending"? Regardless, there's a lot to be said for putting actual money down on your beliefs, it has a non-negligible impact on the learning process.
  - almost_usual 9y ago
    If the goal is attaining wealth then “wasting money” is probably a more accurate statement. How someone decides to use their money is up to them. If emotional reinforcement helps them remember something then I suppose day trading is an option. I’m only suggesting there are frugal ways to learn if your ultimate goal is to build wealth.

justincorbett 9y ago

How else do you think people learn? Losing money by making bad trades IS learning something of value- like learning not to touch the hot stove. You certainly don’t learn anything from giving all your money to a mutual fund.