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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

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.

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.