12 ms·

I do not get the appeal of largely gambling with your money on RH instead of just passively investing for the long term. Maybe with some of your money, but not

by dmoy 6y ago

I do not get the appeal of largely gambling with your money on RH instead of just passively investing for the long term. Maybe with some of your money, but not to the extent a lot of people are doing. People want to get rich quick I guess? Even if you do want to do that, why not pick a brokerage which doesn't take as much from you, like IBKR? It's just a surreal situation to me.

renewiltord 6y ago
Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars. The net expected value of the dollar doesn't have to be positive. Losing $2000 over 80 years of your life is certainly worth is a non-factor for many. Add in the fact that RH has reduced barriers to entry to investing. It's way easier to get RH and buy VOOG than to get Vanguard set up. I have enough in both to know.
- toastal 6y ago
  I know a couple of people that did just that. With the lowered barrier to entry (free), people have been able to buy say a single share per paycheck instead of having to hold on for months to get a cost effective amount of cash to make it worth the trade. Not only this, but you can effectively dollar cost average your way into the market to minimize losing to bad timing. The trade fees were always absolute and not a percentage so it just never accessible to a lot of people -- and now, a lot of the big discount brokers went to 0-1¢ fees.
  - JumpCrisscross 6y ago
    > people have been able to buy say a single share per paycheck instead of having to hold on for months to get a cost effective amount of cash to make it worth the trade This is the problem solved by ETFs. Small amounts of money buying lots of diversification.
    - toastal 6y ago
      Not when it's $5 to trade 2 shares of SCHB because that's all the extra you can afford per paycheck.
- tylerhou 6y ago
  > Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars. Is this really true — from a rational perspective, and not one where someone idolizes wealth or being able to purchase "whatever they want?" The utility of anything — including money — diminishes as you have more of it. The utility of the next hundred million dollars is less than the first hundred million. So I don't think a rational actor would take the gamble.
  - hansvm 6y ago
    If a person doesn't see a way out of slaving at or near minimum wage till they retire, even a moderate windfall of a couple million would completely replace their lifetime earnings and give them the freedom to pursue their passions (be it a family, surfing, painting, etc) while they're young and healthy enough to enjoy doing so. I tend to agree with your point for larger sums like a billion dollars, but maybe you're really passionate about the potential for EVs to positively impact our growing climate problem and need an enormous pile of cash to get that off the ground. People are complicated.
  - renewiltord 6y ago
    Utility is a function of the person, the environment, and the thing. There is no 'utility of a dollar'. There is only 'utility of a dollar to me in this circumstance'. So if one idolizes wealth then clearly they have assigned high utility to money in a non-diminishing returns sense. It is then rational for them to match their utility curve. Life is full of threshold systems. Given that, it would be very unusual for utility curves to not be deformed by them. It's easy to construct a few scenarios with locally convex curves: * You're in debt to the mafia and you will die if you don't pay them your $100k debt. You have $10k dollars. Do you spend the $10k to try a long shot of making $100k? * You're poor and make $15/hr. If you save you will have an extra $1000 a year in savings. You will never own a home. You will never have time to study for a better job. The magic of compound interest with contributions is in the regularity, not so much in the amount. Put $1000/yr in a calculator and $998/yr in a calculator (assume it compounds 3% every year) and see the difference you get over 60 years. It is insignificant on a 60 year horizon. $2 will buy you a powerball ticket, and maybe out of this life. * You're an immigrant. You need a few million dollars for your investor visa. Your current visa runs out next year and then you return to a slum.
dlgeek 6y ago
It's entertainment. Especially popular now because much other entertainment is closed.
pjc50 6y ago
Adrenaline? Same motivation as gambling. You can enjoy the hope of the possibility of wealth. Steady investment will never give you that. Of course, this involves a heavy dose of self-delusion, also popular these days.
- WalterBright 6y ago
  > Steady investment will never give you that. Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks.
  - Melting_Harps 6y ago
    > Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks. I think he was referring to the adrenaline rush, not the potential to make life changing amounts of money playing the long game, which clearly doesn't yield the same 'rush' he was referring to but is none-the-less an effective strategy. I'm an unabashed adrenaline junkie: I've been in martial arts, school sports, motorsports, I did regular public speaking engagements for my startup and in academic-based oratory before that, and spent time in high end Kitchens... but with that said, to this day I will never understand the mediocre adrenaline 'hit' you get from gambling. It's really low level stuff to me, like lower than lifting weights or running a mile, something I did regularly at the gym after getting beat up working an 11 hour shift of a busy Dinner service. I used to play $10 buy-in tourneys of Texas-Hold'em (forced into is more like it) hosted in the living room next to my bedroom when I was in my late teens/early 20s in Motorsports and I often got so bored, even when I won, that I failed to stay in if it went longer than an hour and often asked to take a cut on my pot/payout and forfeit to just get some sleep as I had school and work in the morning. By contrast my professional driver friends/roommates were up until 5am and one of them played online for high stakes, the other played the stock market on the side and said it felt like the same 'rush,' as a day at the track but I could never relate to either of them as a track day was way more intense for me. Flash forward to my Bitcoin days and after the initiation you get from from a couple of years in that space with such absurd volatility and all that the drama that follows it is such that nothing really even compares to it anymore, and I wasn't even a day trader, I'm merely an early(ish) adopter so none of this makes any sense to me at all. What I do know is that this was done for gamblers [1] after COVID and is slowly becoming the norm in legal states that have re-opened due to the demand these, quite frankly addicts, create for the Casino Industry. I wonder if something like Neuralink could help mitigate these diseases, as it all seems to stem from a neurological/neurotransmitter stimulation/feedback loop. I'm less concerned with the Matrix-style downloading/AI integration and more focused on what it could do for people with severe Depression, Alzheimer's, Parkinson's, and ALS. 1: https://www.highstakesdb.com/10328-covid-19-friendly-blackjack-or-even-poker-at-a-casino-near-you-soon.aspx https://www.highstakesdb.com/10328-covid-19-friendly-blackja...
rydre 6y ago
The quality of life increase fore mere 8% return is not as much. You'd need much higher returns for many people to make them not use the money now. Losing 1K every month for 5 years for a person who make 200k a year is not much Given the chance to make 100million - billion even if is very little. Think of it as being a indie VC. Most investment will lose, the ones that gain might make you a lot.
- WalterBright 6y ago
  Your odds are still likely better than lottery tickets.
  - rydre 6y ago
    It's not all about the odds. Sure at an aggregate level it might make sense. But instead of looking at it as mere % expected return, look at it as a tiered return. Above 200K I'd need 1M+ a year to improve my life. Above that, I'd need 10M+ a year. Above that 50M, then 500M and then 4B a year etc. The quality of life improvement varies in the income bracket. Not every % increase is equal for individual humans.
  - tinus_hn 6y ago
    Storing money in a sock has better odds than lottery tickets.
kjksf 6y ago
Here's the appeal: I made 4x return in last 3 years "gambling" on stocks. That's far in excess of 8% return from "just passively investing for the long term". BTW: I gambled on IBKR, not RobinHood (I have RH account but don't use it). I just don't get why RobinHood is so vilified for the crime of making a fast, usable app. I use IBKR but their website is just bad. A security theater that makes logging in slow. Sometimes it fails to log me in. Sometimes it fails to show my portfolio. Because, you know, it's only job no 1 of an investing site.
- aggie 6y ago
  It's not inherently bad to make it easy to trade, but they specifically target (among others) people who don't understand the risks they're taking. If you're a hardline believer in individual responsibility, there's nothing wrong with that. But by the same logic you could put cigarette vending machines on every corner.
- mav3rick 6y ago
  Some people always win at the casino. Keep it long enough and we"ll see if you have happy results.
- Cthulhu_ 6y ago
  You got lucky; your post is why people pick Robinhood and day trading over the long-term one. It's survivorship bias. For every success story like yours, there's at least one - probably more - that lost three-quarters of what they put in. If you're thinking of investing, apply the "strong beliefs weakly held" practice; you think you may get high returns, so look for examples to the contrary to challenge your own beliefs.
  - mam2 6y ago
    It's not luck if you make consistent returns over 4 years. "gambling" is the term people use because they don't understand the stock market
    - ivanbakel 6y ago
aggie 6y ago
From the people I've talked to it seems to be mostly a lack of understanding. They often self-describe as people who don't know anything about personal finance beyond earning a paycheck and paying bills. They see trading stocks as a step forward. The concept of diversified risk is not something they are familiar with at all, so they don't see the issue. Many feel comfortable trading consumer company stocks because pop culture and consumer technology are things they have opinions on. And for many it seems like the key to success in trading is finding some insight to bet on, like "everyone loves Netflix, Comcast is doomed," or finding nascent categories like bitcoin or weed. The lack awareness of the complexity of market success makes it harder to grasp why indexes are a more reliable investment strategy.
biql 6y ago
Based on my limited experience, you enter during the bull market, make some easy wins, and start wanting to bet more and more because winning feels so easy. I could totally feel this process when I bought a few option calls that over a few months made 10x. That felt fantastic at first but shortly after I noticed that I started to blame myself for not taking more risk because on the hindsight, it felt so obvious that the price would go up. The market knowledge aside, psychological state is another thing that needs to be kept under control not to let yourself slip into the gambling state. I wouldn't be surprised if the online echo chambers that are set around particular stocks make people unreasonably confident and make them want to take more risk.
- JumpCrisscross 6y ago
  > I started to blame myself for not taking more risk because on the hindsight, it felt so obvious that the price would go up This is a gambler’s mindset. That’s fine. I enjoy playing poker with friends, and when I do so, I reinforce those neural pathways with respect to cards. But I’m risk limited, socially and personally, in that setting. Robinhood is different. There is no social pressure to limit how much money one puts in a trading account. So when the UX pushes one to gamble with thousands of dollars, and to reinforce gambling over investing pathways when it comes to the markets, we end up with a self-destructively trained generation. That’s troubling. Robinhood can be used responsibly. But even taking most of the comments on HN, it seems to make that difficult.
- WhompingWindows 6y ago
  I felt this. I bought a well-known controversial EV stock quite low; my plan was to make at least 33% on it. After a year, I'd made 400%, but I was struggling to click the "Sell" button. Some greed surfaced from somewhere, and it took me a couple of days to cancel the greed and sell the stock, making 12X what I hoped to the year before. The stock has since gone up a lot more, but my dad told me: Buy low, and Sell too soon.
  - Viliam1234 6y ago
    If I made 400% on something, I would probably sell half of it, and keep another half at least for a year. That way, both my safety and greed would be satisfied. (But this is more about psychology than math. For some people this would be the worst option, because if the thing would lose value, they would blame themselves for not selling everything when they had the opportunity, and if it would gain even more value, they would blame themselves for not waiting with everything. So it would be lose/lose from their perspective.)
softawre 6y ago
Do you not understand how people get addicted to gambling and the dopamine rush that pushes them there? This is that for people who consider themselves "gifted".
bob1029 6y ago
I moved from RH to IBKR a few months ago. Going from 5% to ~2% margin fees was a wake up call for me. Their tools are incredible too. For anyone trapped on RH and looking for alternatives, the ACATS transfer process is about as painless as it gets.

by dmoy 6y ago

renewiltord 6y ago

Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars. The net expected value of the dollar doesn't have to be positive. Losing $2000 over 80 years of your life is certainly worth is a non-factor for many. Add in the fact that RH has reduced barriers to entry to investing. It's way easier to get RH and buy VOOG than to get Vanguard set up. I have enough in both to know.

toastal 6y ago
I know a couple of people that did just that. With the lowered barrier to entry (free), people have been able to buy say a single share per paycheck instead of having to hold on for months to get a cost effective amount of cash to make it worth the trade. Not only this, but you can effectively dollar cost average your way into the market to minimize losing to bad timing. The trade fees were always absolute and not a percentage so it just never accessible to a lot of people -- and now, a lot of the big discount brokers went to 0-1¢ fees.
- JumpCrisscross 6y ago
  > people have been able to buy say a single share per paycheck instead of having to hold on for months to get a cost effective amount of cash to make it worth the trade This is the problem solved by ETFs. Small amounts of money buying lots of diversification.
  - toastal 6y ago
    Not when it's $5 to trade 2 shares of SCHB because that's all the extra you can afford per paycheck.
tylerhou 6y ago
> Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars. Is this really true — from a rational perspective, and not one where someone idolizes wealth or being able to purchase "whatever they want?" The utility of anything — including money — diminishes as you have more of it. The utility of the next hundred million dollars is less than the first hundred million. So I don't think a rational actor would take the gamble.
- hansvm 6y ago
  If a person doesn't see a way out of slaving at or near minimum wage till they retire, even a moderate windfall of a couple million would completely replace their lifetime earnings and give them the freedom to pursue their passions (be it a family, surfing, painting, etc) while they're young and healthy enough to enjoy doing so. I tend to agree with your point for larger sums like a billion dollars, but maybe you're really passionate about the potential for EVs to positively impact our growing climate problem and need an enormous pile of cash to get that off the ground. People are complicated.
- renewiltord 6y ago
  Utility is a function of the person, the environment, and the thing. There is no 'utility of a dollar'. There is only 'utility of a dollar to me in this circumstance'. So if one idolizes wealth then clearly they have assigned high utility to money in a non-diminishing returns sense. It is then rational for them to match their utility curve. Life is full of threshold systems. Given that, it would be very unusual for utility curves to not be deformed by them. It's easy to construct a few scenarios with locally convex curves: * You're in debt to the mafia and you will die if you don't pay them your $100k debt. You have $10k dollars. Do you spend the $10k to try a long shot of making $100k? * You're poor and make $15/hr. If you save you will have an extra $1000 a year in savings. You will never own a home. You will never have time to study for a better job. The magic of compound interest with contributions is in the regularity, not so much in the amount. Put $1000/yr in a calculator and $998/yr in a calculator (assume it compounds 3% every year) and see the difference you get over 60 years. It is insignificant on a 60 year horizon. $2 will buy you a powerball ticket, and maybe out of this life. * You're an immigrant. You need a few million dollars for your investor visa. Your current visa runs out next year and then you return to a slum.

dlgeek 6y ago

It's entertainment. Especially popular now because much other entertainment is closed.

pjc50 6y ago

Adrenaline? Same motivation as gambling. You can enjoy the hope of the possibility of wealth. Steady investment will never give you that. Of course, this involves a heavy dose of self-delusion, also popular these days.

WalterBright 6y ago
> Steady investment will never give you that. Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks.
- Melting_Harps 6y ago
  > Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks. I think he was referring to the adrenaline rush, not the potential to make life changing amounts of money playing the long game, which clearly doesn't yield the same 'rush' he was referring to but is none-the-less an effective strategy. I'm an unabashed adrenaline junkie: I've been in martial arts, school sports, motorsports, I did regular public speaking engagements for my startup and in academic-based oratory before that, and spent time in high end Kitchens... but with that said, to this day I will never understand the mediocre adrenaline 'hit' you get from gambling. It's really low level stuff to me, like lower than lifting weights or running a mile, something I did regularly at the gym after getting beat up working an 11 hour shift of a busy Dinner service. I used to play $10 buy-in tourneys of Texas-Hold'em (forced into is more like it) hosted in the living room next to my bedroom when I was in my late teens/early 20s in Motorsports and I often got so bored, even when I won, that I failed to stay in if it went longer than an hour and often asked to take a cut on my pot/payout and forfeit to just get some sleep as I had school and work in the morning. By contrast my professional driver friends/roommates were up until 5am and one of them played online for high stakes, the other played the stock market on the side and said it felt like the same 'rush,' as a day at the track but I could never relate to either of them as a track day was way more intense for me. Flash forward to my Bitcoin days and after the initiation you get from from a couple of years in that space with such absurd volatility and all that the drama that follows it is such that nothing really even compares to it anymore, and I wasn't even a day trader, I'm merely an early(ish) adopter so none of this makes any sense to me at all. What I do know is that this was done for gamblers [1] after COVID and is slowly becoming the norm in legal states that have re-opened due to the demand these, quite frankly addicts, create for the Casino Industry. I wonder if something like Neuralink could help mitigate these diseases, as it all seems to stem from a neurological/neurotransmitter stimulation/feedback loop. I'm less concerned with the Matrix-style downloading/AI integration and more focused on what it could do for people with severe Depression, Alzheimer's, Parkinson's, and ALS. 1: https://www.highstakesdb.com/10328-covid-19-friendly-blackjack-or-even-poker-at-a-casino-near-you-soon.aspx https://www.highstakesdb.com/10328-covid-19-friendly-blackja...

rydre 6y ago

The quality of life increase fore mere 8% return is not as much. You'd need much higher returns for many people to make them not use the money now. Losing 1K every month for 5 years for a person who make 200k a year is not much Given the chance to make 100million - billion even if is very little. Think of it as being a indie VC. Most investment will lose, the ones that gain might make you a lot.

WalterBright 6y ago
Your odds are still likely better than lottery tickets.
- rydre 6y ago
  It's not all about the odds. Sure at an aggregate level it might make sense. But instead of looking at it as mere % expected return, look at it as a tiered return. Above 200K I'd need 1M+ a year to improve my life. Above that, I'd need 10M+ a year. Above that 50M, then 500M and then 4B a year etc. The quality of life improvement varies in the income bracket. Not every % increase is equal for individual humans.
- tinus_hn 6y ago
  Storing money in a sock has better odds than lottery tickets.

kjksf 6y ago

Here's the appeal: I made 4x return in last 3 years "gambling" on stocks. That's far in excess of 8% return from "just passively investing for the long term". BTW: I gambled on IBKR, not RobinHood (I have RH account but don't use it). I just don't get why RobinHood is so vilified for the crime of making a fast, usable app. I use IBKR but their website is just bad. A security theater that makes logging in slow. Sometimes it fails to log me in. Sometimes it fails to show my portfolio. Because, you know, it's only job no 1 of an investing site.

aggie 6y ago
It's not inherently bad to make it easy to trade, but they specifically target (among others) people who don't understand the risks they're taking. If you're a hardline believer in individual responsibility, there's nothing wrong with that. But by the same logic you could put cigarette vending machines on every corner.
mav3rick 6y ago
Some people always win at the casino. Keep it long enough and we"ll see if you have happy results.
Cthulhu_ 6y ago
You got lucky; your post is why people pick Robinhood and day trading over the long-term one. It's survivorship bias. For every success story like yours, there's at least one - probably more - that lost three-quarters of what they put in. If you're thinking of investing, apply the "strong beliefs weakly held" practice; you think you may get high returns, so look for examples to the contrary to challenge your own beliefs.
- mam2 6y ago
  It's not luck if you make consistent returns over 4 years. "gambling" is the term people use because they don't understand the stock market
  - ivanbakel 6y ago

aggie 6y ago

From the people I've talked to it seems to be mostly a lack of understanding. They often self-describe as people who don't know anything about personal finance beyond earning a paycheck and paying bills. They see trading stocks as a step forward. The concept of diversified risk is not something they are familiar with at all, so they don't see the issue. Many feel comfortable trading consumer company stocks because pop culture and consumer technology are things they have opinions on. And for many it seems like the key to success in trading is finding some insight to bet on, like "everyone loves Netflix, Comcast is doomed," or finding nascent categories like bitcoin or weed. The lack awareness of the complexity of market success makes it harder to grasp why indexes are a more reliable investment strategy.

biql 6y ago

Based on my limited experience, you enter during the bull market, make some easy wins, and start wanting to bet more and more because winning feels so easy. I could totally feel this process when I bought a few option calls that over a few months made 10x. That felt fantastic at first but shortly after I noticed that I started to blame myself for not taking more risk because on the hindsight, it felt so obvious that the price would go up. The market knowledge aside, psychological state is another thing that needs to be kept under control not to let yourself slip into the gambling state. I wouldn't be surprised if the online echo chambers that are set around particular stocks make people unreasonably confident and make them want to take more risk.

JumpCrisscross 6y ago
> I started to blame myself for not taking more risk because on the hindsight, it felt so obvious that the price would go up This is a gambler’s mindset. That’s fine. I enjoy playing poker with friends, and when I do so, I reinforce those neural pathways with respect to cards. But I’m risk limited, socially and personally, in that setting. Robinhood is different. There is no social pressure to limit how much money one puts in a trading account. So when the UX pushes one to gamble with thousands of dollars, and to reinforce gambling over investing pathways when it comes to the markets, we end up with a self-destructively trained generation. That’s troubling. Robinhood can be used responsibly. But even taking most of the comments on HN, it seems to make that difficult.
WhompingWindows 6y ago
I felt this. I bought a well-known controversial EV stock quite low; my plan was to make at least 33% on it. After a year, I'd made 400%, but I was struggling to click the "Sell" button. Some greed surfaced from somewhere, and it took me a couple of days to cancel the greed and sell the stock, making 12X what I hoped to the year before. The stock has since gone up a lot more, but my dad told me: Buy low, and Sell too soon.
- Viliam1234 6y ago
  If I made 400% on something, I would probably sell half of it, and keep another half at least for a year. That way, both my safety and greed would be satisfied. (But this is more about psychology than math. For some people this would be the worst option, because if the thing would lose value, they would blame themselves for not selling everything when they had the opportunity, and if it would gain even more value, they would blame themselves for not waiting with everything. So it would be lose/lose from their perspective.)

softawre 6y ago

Do you not understand how people get addicted to gambling and the dopamine rush that pushes them there? This is that for people who consider themselves "gifted".

bob1029 6y ago

I moved from RH to IBKR a few months ago. Going from 5% to ~2% margin fees was a wake up call for me. Their tools are incredible too. For anyone trapped on RH and looking for alternatives, the ACATS transfer process is about as painless as it gets.