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Robinhood was an absolute game changer for me. Outside of my 401k (and a Viacom stock my mom bought me 20+ years ago to teach me about the stock market), my inv

Robinhood was an absolute game changer for me. Outside of my 401k (and a Viacom stock my mom bought me 20+ years ago to teach me about the stock market), my investment portfolio was nil. I now maintain a growing but conservative portfolio of stocks thanks partly to the frictionless UX of Robinhood - but, primarily, to the addition of fractional shares. To pay $1500 for a share of TSLA? When I could put that precious money into my savings account? Pass. But if I can buy 0.1 shares at $150? Now we’re talking. Hey, TSLA went up a bit today. I’ll buy another 0.1 shares. Etc. That, without hyperbole, is truly the beginnings of the democratization of the stock market.

nknealk 6y ago
Mutual funds and ETFs are basically that but you get a sliver of like several hundred high quality companies instead of just one. I’d argue those products did more for democratization because they allowed investors with small sums of money to achieve diversification.
- porkshoulder 6y ago
  The only thing to remember is, as a customer, you’d be paying for that service in really bad execution. I still think this is genuinely democratizing but looks like Fidelity has this also (called the absurd “stock by the slice”)
  - crooked-v 6y ago
    Betterment is extremely painless (outside of their slightly awkward checking accounts), and has fractional shares as an automatic part of diversified portfolios.
platz 6y ago
You can do those things on any brokerage. You can buy options pretty much anywhere. Not seeing where the democratization is coming from that is different from the status quo
- sooheon 6y ago
  Possible != easy, democratization implies it's easy enough for the average person to do.
- grecy 6y ago
  My brokerage will only let me buy options in the standard batch of 100, which means to get anything I'm interested in I need to drop $20k, which isn't going to happen. I only want to spend a couple of hundred on long term options ..
  - JumpCrisscross 6y ago
    > I only want to spend a couple of hundred on long term options Former options market maker. And honest question. Why? Long-term options are tricky because theta and rho, the least intuitive components of the option pricing model, become significant as tenor increases. If you want to take a leveraged bet on the market, a margin account or leveraged ETF is safer.
    - grecy 6y ago
      I have a good portfolio of stocks, and to be honest I want to bet a hundred or so here or there. I never buy lottery tickets or anything like that, but I feel like it's a good chance to take. It has nothing to do with safe, and is about risk v reward.
    - vmception 6y ago
      the market underprices implied volatility on long term options, because it just doesn't know, which is an absolutely awesome.
      - KMag 6y ago
        What do you mean by underprice implied vol? I think what you mean is that vol is underpriced, not implied vol being underpriced. Implied vol is just a function of 4 factors known at at the time of the trade (underlyer spot price, option premium, option strike, time to expiry) and one unknown (risk-free interest rate over the lifetime of the option). Saying they've gotten implied volitility wrong implies they've mis-entimated the risk-free interest rate. I think instead you mean they under-estimate vol, not implied vol.
jesterson 6y ago
That's the problem of RH - in your cases stock is managed because of "frictionless UI" whilst it should be managed due to financial considerations but not because they have made it easy as getting a cup of coffee. You need to understand the model how low cost services like RH operate - they sell all your data to big hedge funds. Guess what happen at certain moment when smart money will decide it's time to cut pigs - massive wealth redistribution with robihooders being cut. It has happened before in history and will happen again since history doesn't really teach majority of us anything at all.
- flattone 6y ago
  Youre saying at some point big HF will say 'a bunch of robin money is in some stock(s)' and make a move to cause losses for the RH folks? >It has happened before in history When?
  - mlyle 6y ago
    Big HF will see event requiring lots of RH people to pull liquidity, and know what equities this will move, and move first. Not to mention that big HFT uses order book data from retail to vacuum away pennies on every transaction.
- chii 6y ago
  how does order-book sales (if it even happens - apparently it's not legal?) affect your existing shares in RH? Unless you are trading, tiny differences in the price at purchase and sale is unlikely going to make a big difference to your final total returns. I would just consider it cost of the transaction.
- renewiltord 6y ago
  This doesn't jibe with what Matt Levine describes as RH's operating model. Unless you're actually informed, this just sounds like Internet urban myth. You actually can get better results because as a retail trader participating with other retail traders you have uncorrelated order flow.
  - 6y ago
crooked-v 6y ago
I don't really see the advantage there over a service like Wealthfront or Betterfront, which offer automatic tax minimization, integrated handling of IRAs, and customizable stock-bond balances, or even just investing in Vanguard target date ETFs directly for similar returns with slightly lower fees.
drevil-v2 6y ago
It just boggles the mind how people were able to invest for hundreds of years without a frictionless UX.
- throwaway1777 6y ago
  No offense, but how old are you? Most parts of life used to have way more friction.
- imtringued 6y ago
  They didn't. The difference between today and a hundred years ago isn't actually in what people did. It's how many people did a certain thing. Back in the day people didn't invest because they were farmers. Nowadays a lot more people live in cities and have a high enough income to invest it and this requires financial services to scale to millions of customers.
  - deleted 6y ago
    [deleted]
  - drevil-v2 6y ago
    I am pretty sure online share trading has been around since early 2000s.
    - asdff 6y ago
      With dumb commission fees and other policies that made it deliberately obtuse and painful for the retail investor. Even today, with any brokerage, you can't freely trade without penalty unless you pass the class based virtue signal of having $25k amassed in your investment account.
      - drevil-v2 6y ago
        If you think robinhood is providing their service out of a sense of Altruism then I have got a beautiful bridge I would like to sell you... Read up on bid/ask spreads and market makers. It’s a pretty profitable business. Even more so than just charging “dumb commission fees” And that $25,000 “class” limit, hahaha that’s like saying that payday loan providers are a community service.
quickthrower2 6y ago
Having not used it, what is special about Robinhood? Online Trading platforms have been around since the 90s. Maybe earlier, but I was seeing them then. There wasn't much friction back then, other than needing to be physically located at home to have an internet connection (no wifi or mobile).
- mrep 6y ago
  They were the first to offer no commission trades. That's why I have an account. Now that vanguard offers that for equities and they default to putting your money in a money market account where you get the interest, I plan to only use vanguard. The Robinhood mobile app though is way better than vanguards. It looks like a native app and even updates prices every few seconds where as the vanguard mobile app is just a mobile website wrapper (or at least looks like it).
  - quickthrower2 6y ago
    Oh right, but you could do "spread betting" (similar to CFDs) back in the early 2000's in the UK. Commission free, but you pay the spread and some interest on borrowed money. I think they structured it as betting rather than investing so that customers would pay no tax on winnings. (Also not many people won!)
tptacek 6y ago
It's the beginning of the democratization of the market because they made it easier and more attractive for you to buy meme stocks?
- romanovcode 6y ago
  Yes
- blaser-waffle 6y ago
  Why would Wallstreetbets lie to me?
KKKKkkkk1 6y ago
Listen to Elon [1]. If you don't have $1,500, don't buy Tesla shares. [1] https://www.cnbc.com/2020/05/01/tesla-ceo-elon-musk-says-stock-price-is-too-high-shares-fall.html https://www.cnbc.com/2020/05/01/tesla-ceo-elon-musk-says-sto...

nknealk 6y ago

Mutual funds and ETFs are basically that but you get a sliver of like several hundred high quality companies instead of just one. I’d argue those products did more for democratization because they allowed investors with small sums of money to achieve diversification.

porkshoulder 6y ago
The only thing to remember is, as a customer, you’d be paying for that service in really bad execution. I still think this is genuinely democratizing but looks like Fidelity has this also (called the absurd “stock by the slice”)
- crooked-v 6y ago
  Betterment is extremely painless (outside of their slightly awkward checking accounts), and has fractional shares as an automatic part of diversified portfolios.

platz 6y ago

You can do those things on any brokerage. You can buy options pretty much anywhere. Not seeing where the democratization is coming from that is different from the status quo

sooheon 6y ago
Possible != easy, democratization implies it's easy enough for the average person to do.
grecy 6y ago
My brokerage will only let me buy options in the standard batch of 100, which means to get anything I'm interested in I need to drop $20k, which isn't going to happen. I only want to spend a couple of hundred on long term options ..
- JumpCrisscross 6y ago
  > I only want to spend a couple of hundred on long term options Former options market maker. And honest question. Why? Long-term options are tricky because theta and rho, the least intuitive components of the option pricing model, become significant as tenor increases. If you want to take a leveraged bet on the market, a margin account or leveraged ETF is safer.
  - grecy 6y ago
    I have a good portfolio of stocks, and to be honest I want to bet a hundred or so here or there. I never buy lottery tickets or anything like that, but I feel like it's a good chance to take. It has nothing to do with safe, and is about risk v reward.
  - vmception 6y ago
    the market underprices implied volatility on long term options, because it just doesn't know, which is an absolutely awesome.
    - KMag 6y ago
      What do you mean by underprice implied vol? I think what you mean is that vol is underpriced, not implied vol being underpriced. Implied vol is just a function of 4 factors known at at the time of the trade (underlyer spot price, option premium, option strike, time to expiry) and one unknown (risk-free interest rate over the lifetime of the option). Saying they've gotten implied volitility wrong implies they've mis-entimated the risk-free interest rate. I think instead you mean they under-estimate vol, not implied vol.

jesterson 6y ago

That's the problem of RH - in your cases stock is managed because of "frictionless UI" whilst it should be managed due to financial considerations but not because they have made it easy as getting a cup of coffee. You need to understand the model how low cost services like RH operate - they sell all your data to big hedge funds. Guess what happen at certain moment when smart money will decide it's time to cut pigs - massive wealth redistribution with robihooders being cut. It has happened before in history and will happen again since history doesn't really teach majority of us anything at all.

flattone 6y ago
Youre saying at some point big HF will say 'a bunch of robin money is in some stock(s)' and make a move to cause losses for the RH folks? >It has happened before in history When?
- mlyle 6y ago
  Big HF will see event requiring lots of RH people to pull liquidity, and know what equities this will move, and move first. Not to mention that big HFT uses order book data from retail to vacuum away pennies on every transaction.
chii 6y ago
how does order-book sales (if it even happens - apparently it's not legal?) affect your existing shares in RH? Unless you are trading, tiny differences in the price at purchase and sale is unlikely going to make a big difference to your final total returns. I would just consider it cost of the transaction.
renewiltord 6y ago
This doesn't jibe with what Matt Levine describes as RH's operating model. Unless you're actually informed, this just sounds like Internet urban myth. You actually can get better results because as a retail trader participating with other retail traders you have uncorrelated order flow.
- 6y ago

crooked-v 6y ago

I don't really see the advantage there over a service like Wealthfront or Betterfront, which offer automatic tax minimization, integrated handling of IRAs, and customizable stock-bond balances, or even just investing in Vanguard target date ETFs directly for similar returns with slightly lower fees.

drevil-v2 6y ago

It just boggles the mind how people were able to invest for hundreds of years without a frictionless UX.

throwaway1777 6y ago
No offense, but how old are you? Most parts of life used to have way more friction.
imtringued 6y ago
They didn't. The difference between today and a hundred years ago isn't actually in what people did. It's how many people did a certain thing. Back in the day people didn't invest because they were farmers. Nowadays a lot more people live in cities and have a high enough income to invest it and this requires financial services to scale to millions of customers.
- deleted 6y ago
  [deleted]
- drevil-v2 6y ago
  I am pretty sure online share trading has been around since early 2000s.
  - asdff 6y ago
    With dumb commission fees and other policies that made it deliberately obtuse and painful for the retail investor. Even today, with any brokerage, you can't freely trade without penalty unless you pass the class based virtue signal of having $25k amassed in your investment account.
    - drevil-v2 6y ago
      If you think robinhood is providing their service out of a sense of Altruism then I have got a beautiful bridge I would like to sell you... Read up on bid/ask spreads and market makers. It’s a pretty profitable business. Even more so than just charging “dumb commission fees” And that $25,000 “class” limit, hahaha that’s like saying that payday loan providers are a community service.

quickthrower2 6y ago

Having not used it, what is special about Robinhood? Online Trading platforms have been around since the 90s. Maybe earlier, but I was seeing them then. There wasn't much friction back then, other than needing to be physically located at home to have an internet connection (no wifi or mobile).

mrep 6y ago
They were the first to offer no commission trades. That's why I have an account. Now that vanguard offers that for equities and they default to putting your money in a money market account where you get the interest, I plan to only use vanguard. The Robinhood mobile app though is way better than vanguards. It looks like a native app and even updates prices every few seconds where as the vanguard mobile app is just a mobile website wrapper (or at least looks like it).
- quickthrower2 6y ago
  Oh right, but you could do "spread betting" (similar to CFDs) back in the early 2000's in the UK. Commission free, but you pay the spread and some interest on borrowed money. I think they structured it as betting rather than investing so that customers would pay no tax on winnings. (Also not many people won!)

tptacek 6y ago

It's the beginning of the democratization of the market because they made it easier and more attractive for you to buy meme stocks?

romanovcode 6y ago
Yes
blaser-waffle 6y ago
Why would Wallstreetbets lie to me?

KKKKkkkk1 6y ago

Listen to Elon [1]. If you don't have $1,500, don't buy Tesla shares. [1] https://www.cnbc.com/2020/05/01/tesla-ceo-elon-musk-says-stock-price-is-too-high-shares-fall.html https://www.cnbc.com/2020/05/01/tesla-ceo-elon-musk-says-sto...