5 ms·

I'm really curious if this is a legitimate growth driver for brokerages and what % of trading volume is represented by a buyer looking to buy < 1 share in a cer

by tempsy 7y ago

I'm really curious if this is a legitimate growth driver for brokerages and what % of trading volume is represented by a buyer looking to buy < 1 share in a certain company. It feels very incremental to me. It also feels like a feature that is representative of something that would only happen at the "top" of the market.

goler 7y ago
I agree. Very incremental and I’d be surprise if it’s a meaningful growth driver. However, it probably has most appeal to new investors who are just starting out which seems on-message for Robinhood. My teenager who got interested in learning about investing this past year has a portfolio comprised almost entirely of single share positions. Fractional shares would interest him.
crazygringo 7y ago
Actually I think this is huge, not for existing investors but precisely for people who aren't. For a teenager who wants to invest $100 to "dip their toes in" when a share of Amazon is over $1,700?!?! And Google over $1,300? Back in the days when stock regularly split it wasn't a big issue. But now that a bunch of companies think it's somehow unfashionable to split their stock (e.g. Amazon and Google), all this does is exclude smaller investors. Fractional shares solves this problem. A single share of stock shouldn't cost more than a MacBook, sheesh.
- skybrian 7y ago
  Do we want to encourage teenagers to buy stock in individual companies? Index funds I could see.
  - tempsy 7y ago
    Why not? Mainstream personal finance advice is pitiful. There's wide consensus that ETFs are a bubble. On the other hand, the notion that buying an individual stock is equivalent to gambling is nonsense.
    - Ambele 7y ago
      2/3rds of hedge fund managers underperform the S&P500 index so it's recommended for all investors to keep some index fund ETFs around (like VTI or VOO) as a benchmark to outperform.
      - tempsy 7y ago
        Yeah not saying that part of your portfolio cannot just be the broad market, but I also often see people suggesting that doing anything other than just buying the index is somehow irresponsible and akin to "gambling".
    - throwaway34241 7y ago
      Can you expand on how index ETFs are a bubble? You say that there's wide consensus, but when I researched it the consensus seemed to be that indexing was the right strategy for most people (and even sophisticated investors like Warren Buffett have instructed his trusts to use an indexing approach). Beating the index is a zero-sum game, for every winner there must be a loser. Of course you can make educated choices based on the fundamentals but the same is true for sports betting too. Unlike sports betting, you are directly competing against a large number of pretty smart people who play this zero-sum game as a full time job. And some of them even have inside information. Not that it's impossible to win of course. I can easily imagine someone with deep expertise in a certain area having a key insight about a specific company that others don't, or someone who analyzes company balance sheets and business fundamentals to come up with an independent valuation being above-average at that. It's hard to imagine that either of these groups represent the average person who will trade fractional shares on Robin Hood though.
      - tempsy 7y ago
        If everyone just buys the index, then the underlying stocks that make up the index are propped up in a way that wouldn't be the case if that individual stock was not a part of said index. (This is not hypothetical it is actually happening)
  - crazygringo 7y ago
    Better for them to learn early on that stocks can fall, with small amounts of money. People need to be allowed to make mistakes with low risk.
  - Ambele 7y ago
    Sometimes learning experiences are worth as much as the money. Also, it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to. How do you perform a valuation on an index fund like you can with a stock? To paraphrase Warren Buffett's investment advice, if you have a high IQ, donate the extra points to someone else because what you need more is a strong stomach (for gut-wrenching volatility).
    - kelnos 7y ago
      > it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to. If emotions are a part of your decision, you've already lost the game. I get that humans are emotional creatures, but if you start making investment decisions based on panic and emotions, it doesn't matter if you've been buying index funds or individual stocks; you're going to perform poorly and likely lose some money either way.
      - Ambele 7y ago
        > If emotions are a part of your decision, you're going to perform poorly. I agree. Hacker News readers are more logic based but the rest of the world is more emotional based. For most people, the emotional half of the brain dominates the logical half of the brain. I think we can agree that being invested in a diverse basket of 20+ stocks with 5% or less of the portfolio invested in each is regarded as a pretty safe bet. I also think we can agree that anyone who invests will do better in the long run than people who don't invest. The news commonly sells convincing chichen-little fear that the sky is falling, the market's gonna crash, and we should all flock to gold. But I know with higher certainty that Amazon will keep shipping packages, Target will keep selling merchandise, Apple will keep selling more iPhones, and VISA cards will keep collecting interchange fees. We can debate though whether it's better to hold an index fund you might panic sell or individual stocks that you plan to hold forever.
        PhantomGremlin 7y ago
        Target will keep selling merchandise, Apple will keep selling more iPhones Once upon a time Sears, Roebuck and Company was the country's largest retailer. Much more recently, Motorola and Blackberry sold millions of phones and Apple didn't. individual stocks that you plan to hold forever. Once upon a time people thought you could own the Nifty Fifty[1] stocks forever. You would probably have been better off putting your money in an index fund. E.g. what's a recent price quote on Eastman Kodak? [1] https://en.wikipedia.org/wiki/Nifty_Fifty https://en.wikipedia.org/wiki/Nifty_Fifty
  - georgeecollins 7y ago
    I set up a small custodial account that my teenager can trade stocks in. Yes, I know it is smarter to invest in ETFs.. Buying an individual stock gives a kid a reason to read balance sheet, a P&L, understand what a dividend is, a share is, and so forth. Also, he learns what risk feels like, that it is really hard to outsmart the market. Better to do these things with small amounts of money. So yeah, I do want to encourage my teenager to buy stock in individual companies. Mostly because he doesn't have a lot of money to lose, and its a great way to learn.
    - travisjungroth 7y ago
      What if he wins? A common thread among gambling addicts is a large win at a young age. It’s not that unlikely that he will beat the market during his most formative years and you will have taught him the opposite of what you intended.
      - Ambele 7y ago
        I can't speak for others but I can share one anecdotal experience by sharing my story. I started investing in middle school when the social studies teacher enrolled all of his classrooms into a virtual stock market simulation. Everyone starts with 100k, must own a minimum of 20 stocks on any given day, and tries to make the most within a set amount of weeks. Short-selling is included. I don't remember how well I did but I got an ornate Dominos Pizza gift certificate (which I never spent because it looked so beautiful) so I must have done well. That was 13 years ago. Today, I have a 40k Robinhood investment account which is enough for a home down payment and I plan to use it to buy a modest ~200k home in a few months. I outperformed significantly in my early 3 years of investing with real money with a 38% return. However I have underperformed in the last 1 year and thus underperformed the market overall with an 18% overall (4-year) return not including dividends. This is because my favorite investment data app, StockGuru Pro, that cost $10 was discontinued and I don't have a suitable replacement (at all). I expect to underperform in the future unless I find a well-priced replacement or cough up the hundreds of dollars for better investment data. The ICE buyout of the NYSE has caused the price of market data to skyrocket which lead to that app's discontinuation. The wins I experienced at a young age were very positive because it gave me a reason to save my money instead of spending it on all the things I wanted. Savings account interest rates of 0.01 to 2% interest isn't motivating at all to save because it takes more than 36 years to double money at that rate. If it weren't for learning to invest at an early age, I'd be just like the rest of the average Americans. The 50th percentile for my age (27) has a net worth of $5000 and I would be average with $5000 too if I didn't have that reason to save! It also provided a good learning experience from which I have formed 5 principles: 1) Take calculated risks 2) Protect your principal but it's okay to risk the interest. (Phrased another way: don't lose money.) 3) Don't put all of your eggs into one basket. Diversify! 4) Don't use margin if you don't know what a margin call is. 5) Options are for viewing, watching, and analysing but not for trading (even if Robinhood makes trading them free). 90% of people lose money trading options. Overall, an anecdotal positive experience here that I'm happy to share but with a small sample size of one.

by tempsy 7y ago

goler 7y ago

I agree. Very incremental and I’d be surprise if it’s a meaningful growth driver. However, it probably has most appeal to new investors who are just starting out which seems on-message for Robinhood. My teenager who got interested in learning about investing this past year has a portfolio comprised almost entirely of single share positions. Fractional shares would interest him.

crazygringo 7y ago

Actually I think this is huge, not for existing investors but precisely for people who aren't. For a teenager who wants to invest $100 to "dip their toes in" when a share of Amazon is over $1,700?!?! And Google over $1,300? Back in the days when stock regularly split it wasn't a big issue. But now that a bunch of companies think it's somehow unfashionable to split their stock (e.g. Amazon and Google), all this does is exclude smaller investors. Fractional shares solves this problem. A single share of stock shouldn't cost more than a MacBook, sheesh.

skybrian 7y ago
Do we want to encourage teenagers to buy stock in individual companies? Index funds I could see.
- tempsy 7y ago
  Why not? Mainstream personal finance advice is pitiful. There's wide consensus that ETFs are a bubble. On the other hand, the notion that buying an individual stock is equivalent to gambling is nonsense.
  - Ambele 7y ago
    2/3rds of hedge fund managers underperform the S&P500 index so it's recommended for all investors to keep some index fund ETFs around (like VTI or VOO) as a benchmark to outperform.
    - tempsy 7y ago
      Yeah not saying that part of your portfolio cannot just be the broad market, but I also often see people suggesting that doing anything other than just buying the index is somehow irresponsible and akin to "gambling".
  - throwaway34241 7y ago
    Can you expand on how index ETFs are a bubble? You say that there's wide consensus, but when I researched it the consensus seemed to be that indexing was the right strategy for most people (and even sophisticated investors like Warren Buffett have instructed his trusts to use an indexing approach). Beating the index is a zero-sum game, for every winner there must be a loser. Of course you can make educated choices based on the fundamentals but the same is true for sports betting too. Unlike sports betting, you are directly competing against a large number of pretty smart people who play this zero-sum game as a full time job. And some of them even have inside information. Not that it's impossible to win of course. I can easily imagine someone with deep expertise in a certain area having a key insight about a specific company that others don't, or someone who analyzes company balance sheets and business fundamentals to come up with an independent valuation being above-average at that. It's hard to imagine that either of these groups represent the average person who will trade fractional shares on Robin Hood though.
    - tempsy 7y ago
      If everyone just buys the index, then the underlying stocks that make up the index are propped up in a way that wouldn't be the case if that individual stock was not a part of said index. (This is not hypothetical it is actually happening)
- crazygringo 7y ago
  Better for them to learn early on that stocks can fall, with small amounts of money. People need to be allowed to make mistakes with low risk.
- Ambele 7y ago
  Sometimes learning experiences are worth as much as the money. Also, it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to. How do you perform a valuation on an index fund like you can with a stock? To paraphrase Warren Buffett's investment advice, if you have a high IQ, donate the extra points to someone else because what you need more is a strong stomach (for gut-wrenching volatility).
  - kelnos 7y ago
    > it's easier to panic sell index funds you aren't attached to than individual stocks you're emotionally attached to. If emotions are a part of your decision, you've already lost the game. I get that humans are emotional creatures, but if you start making investment decisions based on panic and emotions, it doesn't matter if you've been buying index funds or individual stocks; you're going to perform poorly and likely lose some money either way.
    - Ambele 7y ago
      > If emotions are a part of your decision, you're going to perform poorly. I agree. Hacker News readers are more logic based but the rest of the world is more emotional based. For most people, the emotional half of the brain dominates the logical half of the brain. I think we can agree that being invested in a diverse basket of 20+ stocks with 5% or less of the portfolio invested in each is regarded as a pretty safe bet. I also think we can agree that anyone who invests will do better in the long run than people who don't invest. The news commonly sells convincing chichen-little fear that the sky is falling, the market's gonna crash, and we should all flock to gold. But I know with higher certainty that Amazon will keep shipping packages, Target will keep selling merchandise, Apple will keep selling more iPhones, and VISA cards will keep collecting interchange fees. We can debate though whether it's better to hold an index fund you might panic sell or individual stocks that you plan to hold forever.
      - PhantomGremlin 7y ago
        Target will keep selling merchandise, Apple will keep selling more iPhones Once upon a time Sears, Roebuck and Company was the country's largest retailer. Much more recently, Motorola and Blackberry sold millions of phones and Apple didn't. individual stocks that you plan to hold forever. Once upon a time people thought you could own the Nifty Fifty[1] stocks forever. You would probably have been better off putting your money in an index fund. E.g. what's a recent price quote on Eastman Kodak? [1] https://en.wikipedia.org/wiki/Nifty_Fifty https://en.wikipedia.org/wiki/Nifty_Fifty
- georgeecollins 7y ago
  I set up a small custodial account that my teenager can trade stocks in. Yes, I know it is smarter to invest in ETFs.. Buying an individual stock gives a kid a reason to read balance sheet, a P&L, understand what a dividend is, a share is, and so forth. Also, he learns what risk feels like, that it is really hard to outsmart the market. Better to do these things with small amounts of money. So yeah, I do want to encourage my teenager to buy stock in individual companies. Mostly because he doesn't have a lot of money to lose, and its a great way to learn.
  - travisjungroth 7y ago
    What if he wins? A common thread among gambling addicts is a large win at a young age. It’s not that unlikely that he will beat the market during his most formative years and you will have taught him the opposite of what you intended.
    - Ambele 7y ago
      I can't speak for others but I can share one anecdotal experience by sharing my story. I started investing in middle school when the social studies teacher enrolled all of his classrooms into a virtual stock market simulation. Everyone starts with 100k, must own a minimum of 20 stocks on any given day, and tries to make the most within a set amount of weeks. Short-selling is included. I don't remember how well I did but I got an ornate Dominos Pizza gift certificate (which I never spent because it looked so beautiful) so I must have done well. That was 13 years ago. Today, I have a 40k Robinhood investment account which is enough for a home down payment and I plan to use it to buy a modest ~200k home in a few months. I outperformed significantly in my early 3 years of investing with real money with a 38% return. However I have underperformed in the last 1 year and thus underperformed the market overall with an 18% overall (4-year) return not including dividends. This is because my favorite investment data app, StockGuru Pro, that cost $10 was discontinued and I don't have a suitable replacement (at all). I expect to underperform in the future unless I find a well-priced replacement or cough up the hundreds of dollars for better investment data. The ICE buyout of the NYSE has caused the price of market data to skyrocket which lead to that app's discontinuation. The wins I experienced at a young age were very positive because it gave me a reason to save my money instead of spending it on all the things I wanted. Savings account interest rates of 0.01 to 2% interest isn't motivating at all to save because it takes more than 36 years to double money at that rate. If it weren't for learning to invest at an early age, I'd be just like the rest of the average Americans. The 50th percentile for my age (27) has a net worth of $5000 and I would be average with $5000 too if I didn't have that reason to save! It also provided a good learning experience from which I have formed 5 principles: 1) Take calculated risks 2) Protect your principal but it's okay to risk the interest. (Phrased another way: don't lose money.) 3) Don't put all of your eggs into one basket. Diversify! 4) Don't use margin if you don't know what a margin call is. 5) Options are for viewing, watching, and analysing but not for trading (even if Robinhood makes trading them free). 90% of people lose money trading options. Overall, an anecdotal positive experience here that I'm happy to share but with a small sample size of one.