8 ms·

> bad idea about personal finance Such as?

by kinkrtyavimoodh 8y ago

matte_black 8y ago
Crypto, options, and margin investing for the unwary masses.
- liveoneggs 8y ago
  impulse/app-driven day trading? selling spread as "free"?
Swquenzer 8y ago
Idk why this was downvoted, but I would like to know as well. I feel like a know a decent amount about personal finance, and Robinhood is amazing. Primarily, I can trade stocks with zero fees. The app is easy to use. It's not outwardly pushing me to make bad decisions as far as I can tell. If there are issues on the business side, that's a separate concern(?)
- vec 8y ago
  Offering stock trades with zero fees is pushing you to make a bad decision. The vast, vast majority of investors should be making as few trades as is humanly possible, and the small fraction who should be making frequent trades are essentially by definition working with large enough sums of money that the brokerage fees are negligible. This isn't to say you can't make money as an individual by day trading, but it is to say that the median day trader would have made more money by buying an index fund and sitting on it for a decade.
  - wuliwong 8y ago
    I don't know. It seems like mental gymnastics to say that zero fees hurts someone without a lot of money. It sounds more like you believe that people with access to limited capital can't understand the markets as well as people with access to large amounts of capital. If you didn't believe that I think you would conclude lowering the fees for trading opens up the possibility for less wealthy people to participate in methods previously only afforded the rich.
    - vec 8y ago
      I do believe that people with limited access to capital can't understand the markets as well as institutional investors, and you should too. It's not about intelligence, it's about access. The rich have more current information about state of the market than you do and can act on that information sooner than you are able to, which allows them to systematically make slightly better trades than you can. Stock trades aren't instantaneous, and they're not guaranteed to resolve in the order they were submitted. Wealthy traders can throw money at a combination of locating their servers physically closer to the exchanges and just straight up purchasing preferential treatment from them in order to ensure that their trades will always resolve ahead of yours. Moreover, the "price" of a stock is essentially the rolling average of all the buy and sell offers currently in open. When you "buy" a stock from Robin Hood, what you're actually doing is creating an offer to purchase at or below a specified price point. One of Robin Hood's main sources of revenue is providing access to that stream of trade offers to investment firms who can use it to "predict the future" in ways that will systematically erode your profit margins. There are any number of ways this happens, but probably the easiest one to understand is that after they see you place a buy offer they can use their position near the front of the queue to accept the cheapest available sell offers ahead of you and immediately resell them to you at your offered price, pocketing the difference. That's the catch with normal humans trying to play the stock market. You can't actually participate in the same way that wealthy institutional investors do, because you can't afford to pay to be near the front of the queue. In fact, the way you participate essentially guarantees that, no matter how well you do, the institutional investors will be able to do slightly better. One way to work around this is for normal humans to pool their resources so that they can collectively act as a wealthy institutional investor too. That's essentially what index funds are.
      - guelo 8y ago
        This is elitist bullshit. I don't have a huge amount of money save but I use about a dozen index funds to stay well diversified, stocks, bonds, international, domestic. And I periodically rebalance my portfolio to stay within my diversification targets. I appreciate not paying a couple hundred dollars a year for my trades.
- thesausageking 8y ago
  There's no such thing as "zero fees". Robinhood is making money by giving your trade orders to hedge funds who then front run them, so you end up paying for it by getting worse prices for your trades.
scrumper 8y ago
Single stock trading sold as an investment product to the low-end of the retail market (i.e. people like me who's limited investment dollars should be dumped into passive, diversified funds.)
- kinkrtyavimoodh 8y ago
  As a user of RobinHood I have not felt any specific push for buying single stocks. A lot of people just buy index funds on RobinHood. If RH had made it more difficult to buy those compared to single stocks, your claim might have some weight...
  - eclipticplane 8y ago
    Push notifications around a pre-defined 'watch list'? Notifications of major stock movements? Showing 'popularity' of a stock? 'Most Popular Under $25'? Gifting people free stock for referrals?
    - dunpeal 8y ago
      Right. It would be strange if RobinHood didn't encourage active single-stock trading, since that's how they made their money. If all RobinHood users followed sound "buy diversified ETF and hold" investing advice, my understanding is that they'd go bankrupt.
    - tomnipotent 8y ago
      I had a good laugh at this. I expect a certain level of professionalism from financial businesses, and this sort of fluff marketing / gamification makes my skin crawl... mostly because it tells you about the rest of the maturity of the organization if the product and marketing team is sending out this kind of amateur crap.
      - ryandrake 8y ago
        Just wait for really fun stuff, like the huge "Buy Stock" button with a tiny "Maybe later..." 8pt link below it. Or "Let us scan your photos and location and have AI generate a TOTALLY LIT suggested portfolio for you!" Or even better: "5 of your friends are currently pumping NVDA! Tap here to write a few naked puts!"
jahewson 8y ago
Good advice: Normal folks should put their money in index funds - not individual stocks and certainly not options.
- C1sc0cat 8y ago
  Depends on how well off normal folks are and how long they have been doing it. I started at £120 a month and it was ten years before I started now my minimum buy is £2000 and I only do the occasional single stock even now 20+ years later.
- rootusrootus 8y ago
  For anybody who isn't comfortable learning a small amount about diversification, index funds are probably the easiest way to guarantee an average return. Probably a good choice. Still not a panacea, course. What was the ROI on the S&P 500 between, say, 1997 and 2009? Ouch. We've been on a beautiful bull run for the last decade, at least up until a month or so ago. I wonder what the next decade or two will look like.
jartelt 8y ago
The vast majority of people should just be maxing out their 401k and investing in index funds. They shouldn't be using Robinhood to buy individual stocks, buy cryptocurrency, or do options trading.
- jldugger 8y ago
  I just use Robinhood to buy ETFs for SP500 and AGG without trading fees. I don't have that much left over after maxing out all my tax advantaged options, so trade fees aren't insignificant. But people like me should recognize that the people using Robinhood to trade individual stocks, buy cryptocurrency, trade options or trade on margin are effectively subsidizing those who do. Along with the participants of Robinhood's funding rounds, I guess.
  - jkqwzsoo 8y ago
    But you could buy those same ETFs with the same $0 fee on Vanguard (or Fidelity and a couple other platforms now), a substantially more established financial firm, and you could keep your residual cash in well established money market funds like VMMXX, also with $0 fee, or VMSXX for tax-exempt growth. The only real reason to have money in RH, IMO, is if you're gambling with <$1000 on penny stocks and options-cum-lottery tickets.
    - te0x 8y ago
      I buy Vanguard ETFs and many other index funds (that Vanguard doesn't offer) on Robinhood. The user interface is 100x better, and why wouldn't I want to keep it all in 1 place? They just need an IRA product and most people would be set.
      - jkqwzsoo 8y ago
        What index funds doesn't Vanguard offer?
        stickfigure 8y ago
kgwgk 8y ago
https://news.ycombinator.com/item?id=16757437 https://news.ycombinator.com/item?id=16757437

> bad idea about personal finance Such as?

matte_black 8y ago

Crypto, options, and margin investing for the unwary masses.

liveoneggs 8y ago
impulse/app-driven day trading? selling spread as "free"?

Swquenzer 8y ago

Idk why this was downvoted, but I would like to know as well. I feel like a know a decent amount about personal finance, and Robinhood is amazing. Primarily, I can trade stocks with zero fees. The app is easy to use. It's not outwardly pushing me to make bad decisions as far as I can tell. If there are issues on the business side, that's a separate concern(?)

vec 8y ago
Offering stock trades with zero fees is pushing you to make a bad decision. The vast, vast majority of investors should be making as few trades as is humanly possible, and the small fraction who should be making frequent trades are essentially by definition working with large enough sums of money that the brokerage fees are negligible. This isn't to say you can't make money as an individual by day trading, but it is to say that the median day trader would have made more money by buying an index fund and sitting on it for a decade.
- wuliwong 8y ago
  I don't know. It seems like mental gymnastics to say that zero fees hurts someone without a lot of money. It sounds more like you believe that people with access to limited capital can't understand the markets as well as people with access to large amounts of capital. If you didn't believe that I think you would conclude lowering the fees for trading opens up the possibility for less wealthy people to participate in methods previously only afforded the rich.
  - vec 8y ago
    I do believe that people with limited access to capital can't understand the markets as well as institutional investors, and you should too. It's not about intelligence, it's about access. The rich have more current information about state of the market than you do and can act on that information sooner than you are able to, which allows them to systematically make slightly better trades than you can. Stock trades aren't instantaneous, and they're not guaranteed to resolve in the order they were submitted. Wealthy traders can throw money at a combination of locating their servers physically closer to the exchanges and just straight up purchasing preferential treatment from them in order to ensure that their trades will always resolve ahead of yours. Moreover, the "price" of a stock is essentially the rolling average of all the buy and sell offers currently in open. When you "buy" a stock from Robin Hood, what you're actually doing is creating an offer to purchase at or below a specified price point. One of Robin Hood's main sources of revenue is providing access to that stream of trade offers to investment firms who can use it to "predict the future" in ways that will systematically erode your profit margins. There are any number of ways this happens, but probably the easiest one to understand is that after they see you place a buy offer they can use their position near the front of the queue to accept the cheapest available sell offers ahead of you and immediately resell them to you at your offered price, pocketing the difference. That's the catch with normal humans trying to play the stock market. You can't actually participate in the same way that wealthy institutional investors do, because you can't afford to pay to be near the front of the queue. In fact, the way you participate essentially guarantees that, no matter how well you do, the institutional investors will be able to do slightly better. One way to work around this is for normal humans to pool their resources so that they can collectively act as a wealthy institutional investor too. That's essentially what index funds are.
    - guelo 8y ago
      This is elitist bullshit. I don't have a huge amount of money save but I use about a dozen index funds to stay well diversified, stocks, bonds, international, domestic. And I periodically rebalance my portfolio to stay within my diversification targets. I appreciate not paying a couple hundred dollars a year for my trades.
thesausageking 8y ago
There's no such thing as "zero fees". Robinhood is making money by giving your trade orders to hedge funds who then front run them, so you end up paying for it by getting worse prices for your trades.

scrumper 8y ago

Single stock trading sold as an investment product to the low-end of the retail market (i.e. people like me who's limited investment dollars should be dumped into passive, diversified funds.)

kinkrtyavimoodh 8y ago
As a user of RobinHood I have not felt any specific push for buying single stocks. A lot of people just buy index funds on RobinHood. If RH had made it more difficult to buy those compared to single stocks, your claim might have some weight...
- eclipticplane 8y ago
  Push notifications around a pre-defined 'watch list'? Notifications of major stock movements? Showing 'popularity' of a stock? 'Most Popular Under $25'? Gifting people free stock for referrals?
  - dunpeal 8y ago
    Right. It would be strange if RobinHood didn't encourage active single-stock trading, since that's how they made their money. If all RobinHood users followed sound "buy diversified ETF and hold" investing advice, my understanding is that they'd go bankrupt.
  - tomnipotent 8y ago
    I had a good laugh at this. I expect a certain level of professionalism from financial businesses, and this sort of fluff marketing / gamification makes my skin crawl... mostly because it tells you about the rest of the maturity of the organization if the product and marketing team is sending out this kind of amateur crap.
    - ryandrake 8y ago
      Just wait for really fun stuff, like the huge "Buy Stock" button with a tiny "Maybe later..." 8pt link below it. Or "Let us scan your photos and location and have AI generate a TOTALLY LIT suggested portfolio for you!" Or even better: "5 of your friends are currently pumping NVDA! Tap here to write a few naked puts!"

jahewson 8y ago

Good advice: Normal folks should put their money in index funds - not individual stocks and certainly not options.

C1sc0cat 8y ago
Depends on how well off normal folks are and how long they have been doing it. I started at £120 a month and it was ten years before I started now my minimum buy is £2000 and I only do the occasional single stock even now 20+ years later.
rootusrootus 8y ago
For anybody who isn't comfortable learning a small amount about diversification, index funds are probably the easiest way to guarantee an average return. Probably a good choice. Still not a panacea, course. What was the ROI on the S&P 500 between, say, 1997 and 2009? Ouch. We've been on a beautiful bull run for the last decade, at least up until a month or so ago. I wonder what the next decade or two will look like.

jartelt 8y ago

The vast majority of people should just be maxing out their 401k and investing in index funds. They shouldn't be using Robinhood to buy individual stocks, buy cryptocurrency, or do options trading.

jldugger 8y ago
I just use Robinhood to buy ETFs for SP500 and AGG without trading fees. I don't have that much left over after maxing out all my tax advantaged options, so trade fees aren't insignificant. But people like me should recognize that the people using Robinhood to trade individual stocks, buy cryptocurrency, trade options or trade on margin are effectively subsidizing those who do. Along with the participants of Robinhood's funding rounds, I guess.
- jkqwzsoo 8y ago
  But you could buy those same ETFs with the same $0 fee on Vanguard (or Fidelity and a couple other platforms now), a substantially more established financial firm, and you could keep your residual cash in well established money market funds like VMMXX, also with $0 fee, or VMSXX for tax-exempt growth. The only real reason to have money in RH, IMO, is if you're gambling with <$1000 on penny stocks and options-cum-lottery tickets.
  - te0x 8y ago
    I buy Vanguard ETFs and many other index funds (that Vanguard doesn't offer) on Robinhood. The user interface is 100x better, and why wouldn't I want to keep it all in 1 place? They just need an IRA product and most people would be set.
    - jkqwzsoo 8y ago
      What index funds doesn't Vanguard offer?
      - stickfigure 8y ago

kgwgk 8y ago

https://news.ycombinator.com/item?id=16757437 https://news.ycombinator.com/item?id=16757437