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Robinhood is a predatory lending scheme. The vast majority of its users should not be trading anything other than indexes.
by QuackingJimbo 7y ago
Robinhood is a predatory lending scheme. The vast majority of its users should not be trading anything other than indexes.
- iscrewyou 7y agoI have a couple of shares on the app for a company. Just for anecdotal data. It’s fun to see. I would never put large amounts of my money in there.
- QuackingJimbo 7y agoGood for you. (Not sarcasm —- this is what individual stock investing should be for retail. For fun, to have a tiny bit of skin in the game.) But many people let it get out of control, either because they lack this self discpline, or because they randomly see positive results and then think they’re good traders.
- filoleg 7y agoThose people can freely lose all of their money through a lack of self-control with any other brokers as well. Just because Robinhood has a good UI/UX that makes it easy to navigate doesn’t really qualify it as “predatory” or puts it at fault more than any other brokerage service.
- levosmetalo 7y agoCare to elaborate? I was under the impression that Indexes are treated the same way as stocks.
- QuackingJimbo 7y agoAmateur investors are best off buying indexes and holding forever. Robinhood entices them to trade in and out of individual stocks (or worse).
- mrep 7y ago> Amateur investors are best off buying indexes and holding forever. And you can do so on robinhood by buying ETFs while potentially saving money on transaction fees if you were to use a traditional brokerage (I say potentially because vanguard lets me buy their etfs without a transaction fee when I use their brokerage account).
- AznHisoka 7y agoCan't you say the same thing about everyone using any other retail brokerage?
- QuackingJimbo 7y agoNo. Upstanding retail brokerages (such as Interactive Brokers) don’t make interest on their customers’ balances.
- notyourday 7y agoHuh? That's just not how this works. There's always a spread between the cash interest that the custodial firm gets on the balances it holds and the interest it pays to the customers.
- usmannk 7y agoWoah that is totally untrue. Brokerages make a lot of money by investing your balance. In particular, IB makes 49% of its revenue this way. https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
- benj111 7y agoInteractive Brokers makes 49% of revenues from customer balances. https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
- Youden 7y agoTo add an even clearer source to the other replies: https://www.interactivebrokers.com/en/index.php?f=1595 https://www.interactivebrokers.com/en/index.php?f=1595 IB is abundantly clear that it makes money from cash balances. I'm not sure where you got this idea from.
- gtfratteus 7y agoAssuming that's true, how would that make RobinHood a predatory lending scheme?
- benj111 7y agoLending? What makes them worse than than anyone that charges a fee?
- QuackingJimbo 7y agoThe ones who charge a fee don’t make interest on your balances.
- benj111 7y agoYes they do. " 57% of Schwab’s revenues are from net interest" https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
- pertymcpert 7y agoNo, no, no.
- almost_usual 7y agoIt's everyone's right to shoot themselves in the foot with dumb financial decisions. Robinhood isn't doing anything egregious here, they're only reducing friction and fees. I've used the app sparingly in the past with "fun money" but haven't done serious investing with it.
- elliekelly 7y ago> It's everyone's right to shoot themselves in the foot with dumb financial decisions. The industry regulations would indicate otherwise. Generally, the “dumber” the money, the more regulatory protections that will apply. At their core, financial regulators are consumer protection entities.
- almost_usual 7y agoNothing is stopping anyone from putting their life savings into a legal dumb investment. Regulators and the government sure won't stop you from liquidating your 401k early. At some point common sense comes into play and you need to be smart with your money.
- mywittyname 7y agoThe US SEC has accredited investor requirements specifically to keep people from being fooled into making "dumb" investments.
- almost_usual 7y ago>US SEC has accredited investor requirements specifically to keep people from being fooled into making "dumb" investments What stops me from liquidating my 401k and investing all of my money into a company that misses their earning goals this week? Where does the US SEC come into play here?
- deleted 7y ago[deleted]
- zinclozenge 7y agoThey make it abundantly clear that options are risky.
- paxys 7y agoSo Robinhood is now loaning money to helpless people at exorbitant interest rates? Or did you just make up a new definition for "predatory lending"?