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"Why aren't more millenials financially savvy" "LOL. Look at those dummies trading stocks". I stopped reading when I realized this was a hit piece against Rob

"Why aren't more millenials financially savvy" "LOL. Look at those dummies trading stocks". I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. If anyone is to blame for the amount of dumb stock plays, it is Wall Street Bets (/r/wallstreetbets). --- Also the reason young people flooded the market when the pandemic hit wasn't that we suddenly had time (not entirely at least), it was the many saw the market as overheated and not worth the price. When stocks took a 30%+ dip in March, it was basically free money to buy them combined with the fact we could get in to huge share prices with fractional shares. Once again, I have to say: Millienials and Gen Z are much smarter than they are given credit for. Gen X+ should be asking themselves why they are making choices that Millenials and younger refuse to.

mataug 6y ago
I agree, some of the accusations against Robinhood sound like the accusations against car manufacturers for causing car crashes. Sure, car manufacturers do need to implement safety measures to the best of their ability, and this only occurred after govt introduced regulations requiring it. Similarly we would need regulations for leveling the playing field for fintech apps, but its unfair to place all the blame on just Robinhood.
- madamelic 6y ago
  I am not sure if they always had it but, by default you cannot access options trading. You have to seek it out, read a short document then click "Yes" or something similar. To get margin trading you again have to seek it out and know specifically what you are looking for and pay them $4.99 / month. I am not sure if they always had those behind opt-ins but I can't imagine a platform allowing margin trading on free accounts.
nkozyra 6y ago
I don't think Robinhood had fractional share trading in March, did they?
- madamelic 6y ago
  Hm. I did look this up, I could've sworn they had it longer. It looks like fractional shares released in Dec 2019. https://blog.robinhood.com/news/2019/12/12/fractional-shares-and-more-new-ways-to-invest https://blog.robinhood.com/news/2019/12/12/fractional-shares...
- raziel2701 6y ago
  It was slowly rolled out, some users had it. Now I think everyone gets it.
vsareto 6y ago
>When stocks took a 30%+ dip in March, it was basically free money to buy them In March, people were speculating a world-wide depression due to the pandemic and hoarding toiletries. People who saw it as free money were, uh, incredibly optimistic.
- madamelic 6y ago
  I traded on the thesis of "I don't care, I'll wait". I mean, either money becomes worthless to have or the stock market goes back up. To me, it seems the upside of _not_ trading is much smaller than the upside of betting that the market will go back up eventually like it has every time so far. I have a very tiny (10 shares) amount in cruise lines. The shares were $150 / share pre-COVID, I bought them for $30 / share. So my downside is $300 (minus tax benefits) but my upside is $1,200 (minus taxes). Nothing changed about those companies except having to weather the pandemic. I even made $70 on call options in a week for the same company. Definitely not trying my luck again but it was an education.
  - vsareto 6y ago
    >I mean, either money becomes worthless to have or the stock market goes back up. It could have just remained low for a long period, and you may have been forced to cash out to stay off the street depending on how much you put up. No one was able to predict it in March.
    - ghiculescu 6y ago
      Given he put up $300 I doubt it's a real concern.
      - vsareto 6y ago
        People putting up money they can afford to lose just don't care about the risk, but that risk-free attitude is somehow getting into mainstream investing advice.
- recursive 6y ago
wavefunction 6y ago
You say that the market was overheated but then you say you bought in at the dip because it was free money but what if the market was still overheated at the dip? I wouldn't be so smug about such a simplistic strategy and YOLOing your meager savings away as a generation.
- tarboreus 6y ago
  I bought on the dip, and if it dipped more I would have bought more. I'm not that bullish on cash right now, two dips would actually have been better, but needed to hedge on the eventuality you described.
penagwin 6y ago
So you're saying we shouldn't trade leveraged options on margin based on what side of the yard a dog does it's business on? /s
zarkov99 6y ago
If you can get past being offended by the tone, this is a good article and it is on the side of the younger traders. It is unreasonable to expect 20 year olds, of any generation, to resist gambling disguised as investing, especially in the middle of stock bubble, when the full array of engagement tricks, honed to perfection by the likes of FB, Twitter, etc, is used to keep them trading. Unless you really know what you are doing, and very few do, this is not a domain were low friction is always a good thing.
- mrDmrTmrJ 6y ago
  Do you have data that 'trading' is how the app is being used? Does anyone? I find the article frustrating because it doesn't have data to prove it's core assertion. Full disclosure, I've been using Robinhood, for a several years, to buy small amounts of stocks or ETFs I want, with limit orders, when volatility drives the price down. Everything I buy I intend to hold for a *long time. And I really appreciate that they offer low fees, in % terms, on small orders. So it allows me to gain experience as an investor, not trader.
  - zarkov99 6y ago
    There is only so much order flow they could get if most people did what you do. The fact that the have been down in high volatility days indicates to me there is plenty of trading going on.
tptacek 6y ago
Picking and timing stocks is not "financially savvy".
sharadov 6y ago
Have you seen the Robinhood interface, it's gamified to the extreme, and you expect 20 year olds to be mature enough to resist temptation?
- Miner49er 6y ago
  Yes? I've been using Robinhood since I was 20ish. You really think 20 year olds are that immature? They are just as capable of making smart financial decisions as someone older. Additionally, when you are young, your financial decisions should be riskier. It's actually the smart thing to do.
  - xboxnolifes 6y ago
    I think it should be mentioned that "risker" in this context generally means "a diversified, growth-focused, stock portfolio", and not "all in bets on a few stocks picked from /r/wallstreetbets".
    - Miner49er 6y ago
      I'm not sure I agree. I generally agree with Buffett on it: "diversification is protection against ignorance. It makes little sense if you know what you are doing." If a person is willing to spend time learning some the basics of finance, and learning about different companies, I think they would be fine with just picking a few stocks. They just need to be watched carefully. As they start to have more capital, they should look to diversify and look to take on less risk. Plus, everyone wants different things. Many on /r/wallstreetbets see gambling on the stock market as a way to improve their lives, and I don't think it is the worst option. A risky stock investment is better than wasting money on a sports car or something. In general, I think when you are very young a very risky investment is not a bad thing. As long as the money isn't needed for other things.
      - madamelic 6y ago
        Plus no one says you have to be 100% conservative. I do dumb stock purchases but I also own shares of indexes. There is nothing wrong with a "YOLO" into a stock or option you believe in as long as you can afford losing it.
babyshake 6y ago
It seems that if the response of governments was different in terms of their monetary policy, the outcome could have been a global deflationary crisis. Instead, it appears that the there is instead a global inflationary crisis. But if you think it's good that the stocks go up, then it's not a crisis at all.
m3kw9 6y ago
Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. They point to this double top or flag pattern and say yeah you need to buy now. They get “tips” from someone at a stock board and buy or sell. It’s very very close to what the late 99s look like. Robinhood helped them along for sure but is not all their fault
- nemothekid 6y ago
  >Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. To be fair, that's all of retail trading. Unless you are buying and holding a fund, then any sort of trading is gambling. The talking heads on CNBC are just as insightful as the kids on /r/wallstreetbets.
  - tertius 6y ago
    The word you're looking for is 'speculating'. I.e. gambling...
- ivalm 6y ago
  Eh, the main problem with frequent trading is transaction costs (fees + bid/ask spread), if that cost is low then they are just increasing volatility (if anything) but not changing expectation (relative to a relevant basket of stock they are trading).
nrmitchi 6y ago
> I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. IIRC FINRA has regulations explicitly prohibiting this situation. In this situation Robinhood was either negligent in not verifying a trading regulation that explicitly exists, or was incompetent enough to not know about it. While blaming the user may apply in some way here, it is Robinhood's responsibility.
- chewz 6y ago
  > I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. It might sound terribly naive these days but financial institutions shouldn't offer their clients products that do not suit clients needs. The caveat emptor rule could only be used in relations to other financial institutions not business or retail clients. After 1997 Asian financial crisis some exporters successfully challenged banks for being sold currency options (fairly simple instruments)...
1vuio0pswjnm7 6y ago
What is the correct spelling of "millennial".
UncleMeat 6y ago
I got a recruiting email a while ago from Robinhood. They listed one metric: the number of times per day their typical user uses the app. That means they are optimizing for engagement. Just like how YouTube optimizing for engagement causes problems, so too will a trading platform.

mataug 6y ago

I agree, some of the accusations against Robinhood sound like the accusations against car manufacturers for causing car crashes. Sure, car manufacturers do need to implement safety measures to the best of their ability, and this only occurred after govt introduced regulations requiring it. Similarly we would need regulations for leveling the playing field for fintech apps, but its unfair to place all the blame on just Robinhood.

madamelic 6y ago
I am not sure if they always had it but, by default you cannot access options trading. You have to seek it out, read a short document then click "Yes" or something similar. To get margin trading you again have to seek it out and know specifically what you are looking for and pay them $4.99 / month. I am not sure if they always had those behind opt-ins but I can't imagine a platform allowing margin trading on free accounts.

nkozyra 6y ago

I don't think Robinhood had fractional share trading in March, did they?

madamelic 6y ago
Hm. I did look this up, I could've sworn they had it longer. It looks like fractional shares released in Dec 2019. https://blog.robinhood.com/news/2019/12/12/fractional-shares-and-more-new-ways-to-invest https://blog.robinhood.com/news/2019/12/12/fractional-shares...
raziel2701 6y ago
It was slowly rolled out, some users had it. Now I think everyone gets it.

vsareto 6y ago

>When stocks took a 30%+ dip in March, it was basically free money to buy them In March, people were speculating a world-wide depression due to the pandemic and hoarding toiletries. People who saw it as free money were, uh, incredibly optimistic.

madamelic 6y ago
I traded on the thesis of "I don't care, I'll wait". I mean, either money becomes worthless to have or the stock market goes back up. To me, it seems the upside of _not_ trading is much smaller than the upside of betting that the market will go back up eventually like it has every time so far. I have a very tiny (10 shares) amount in cruise lines. The shares were $150 / share pre-COVID, I bought them for $30 / share. So my downside is $300 (minus tax benefits) but my upside is $1,200 (minus taxes). Nothing changed about those companies except having to weather the pandemic. I even made $70 on call options in a week for the same company. Definitely not trying my luck again but it was an education.
- vsareto 6y ago
  >I mean, either money becomes worthless to have or the stock market goes back up. It could have just remained low for a long period, and you may have been forced to cash out to stay off the street depending on how much you put up. No one was able to predict it in March.
  - ghiculescu 6y ago
    Given he put up $300 I doubt it's a real concern.
    - vsareto 6y ago
      People putting up money they can afford to lose just don't care about the risk, but that risk-free attitude is somehow getting into mainstream investing advice.
recursive 6y ago

wavefunction 6y ago

You say that the market was overheated but then you say you bought in at the dip because it was free money but what if the market was still overheated at the dip? I wouldn't be so smug about such a simplistic strategy and YOLOing your meager savings away as a generation.

tarboreus 6y ago
I bought on the dip, and if it dipped more I would have bought more. I'm not that bullish on cash right now, two dips would actually have been better, but needed to hedge on the eventuality you described.

penagwin 6y ago

So you're saying we shouldn't trade leveraged options on margin based on what side of the yard a dog does it's business on? /s

zarkov99 6y ago

If you can get past being offended by the tone, this is a good article and it is on the side of the younger traders. It is unreasonable to expect 20 year olds, of any generation, to resist gambling disguised as investing, especially in the middle of stock bubble, when the full array of engagement tricks, honed to perfection by the likes of FB, Twitter, etc, is used to keep them trading. Unless you really know what you are doing, and very few do, this is not a domain were low friction is always a good thing.

mrDmrTmrJ 6y ago
Do you have data that 'trading' is how the app is being used? Does anyone? I find the article frustrating because it doesn't have data to prove it's core assertion. Full disclosure, I've been using Robinhood, for a several years, to buy small amounts of stocks or ETFs I want, with limit orders, when volatility drives the price down. Everything I buy I intend to hold for a *long time. And I really appreciate that they offer low fees, in % terms, on small orders. So it allows me to gain experience as an investor, not trader.
- zarkov99 6y ago
  There is only so much order flow they could get if most people did what you do. The fact that the have been down in high volatility days indicates to me there is plenty of trading going on.

tptacek 6y ago

Picking and timing stocks is not "financially savvy".

sharadov 6y ago

Have you seen the Robinhood interface, it's gamified to the extreme, and you expect 20 year olds to be mature enough to resist temptation?

Miner49er 6y ago
Yes? I've been using Robinhood since I was 20ish. You really think 20 year olds are that immature? They are just as capable of making smart financial decisions as someone older. Additionally, when you are young, your financial decisions should be riskier. It's actually the smart thing to do.
- xboxnolifes 6y ago
  I think it should be mentioned that "risker" in this context generally means "a diversified, growth-focused, stock portfolio", and not "all in bets on a few stocks picked from /r/wallstreetbets".
  - Miner49er 6y ago
    I'm not sure I agree. I generally agree with Buffett on it: "diversification is protection against ignorance. It makes little sense if you know what you are doing." If a person is willing to spend time learning some the basics of finance, and learning about different companies, I think they would be fine with just picking a few stocks. They just need to be watched carefully. As they start to have more capital, they should look to diversify and look to take on less risk. Plus, everyone wants different things. Many on /r/wallstreetbets see gambling on the stock market as a way to improve their lives, and I don't think it is the worst option. A risky stock investment is better than wasting money on a sports car or something. In general, I think when you are very young a very risky investment is not a bad thing. As long as the money isn't needed for other things.
    - madamelic 6y ago
      Plus no one says you have to be 100% conservative. I do dumb stock purchases but I also own shares of indexes. There is nothing wrong with a "YOLO" into a stock or option you believe in as long as you can afford losing it.

babyshake 6y ago

It seems that if the response of governments was different in terms of their monetary policy, the outcome could have been a global deflationary crisis. Instead, it appears that the there is instead a global inflationary crisis. But if you think it's good that the stocks go up, then it's not a crisis at all.

m3kw9 6y ago

Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. They point to this double top or flag pattern and say yeah you need to buy now. They get “tips” from someone at a stock board and buy or sell. It’s very very close to what the late 99s look like. Robinhood helped them along for sure but is not all their fault

nemothekid 6y ago
>Most of them are basically gambling, not investing. You talk to enough of them, they can’t tell why a stock goes up or down. To be fair, that's all of retail trading. Unless you are buying and holding a fund, then any sort of trading is gambling. The talking heads on CNBC are just as insightful as the kids on /r/wallstreetbets.
- tertius 6y ago
  The word you're looking for is 'speculating'. I.e. gambling...
ivalm 6y ago
Eh, the main problem with frequent trading is transaction costs (fees + bid/ask spread), if that cost is low then they are just increasing volatility (if anything) but not changing expectation (relative to a relevant basket of stock they are trading).

nrmitchi 6y ago

> I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. IIRC FINRA has regulations explicitly prohibiting this situation. In this situation Robinhood was either negligent in not verifying a trading regulation that explicitly exists, or was incompetent enough to not know about it. While blaming the user may apply in some way here, it is Robinhood's responsibility.

chewz 6y ago
> I stopped reading when I realized this was a hit piece against Robinhood when they brought up the leverage bug. It wasn't Robinhood's fault, it's not like they told the user to do it. It might sound terribly naive these days but financial institutions shouldn't offer their clients products that do not suit clients needs. The caveat emptor rule could only be used in relations to other financial institutions not business or retail clients. After 1997 Asian financial crisis some exporters successfully challenged banks for being sold currency options (fairly simple instruments)...

1vuio0pswjnm7 6y ago

What is the correct spelling of "millennial".

UncleMeat 6y ago

I got a recruiting email a while ago from Robinhood. They listed one metric: the number of times per day their typical user uses the app. That means they are optimizing for engagement. Just like how YouTube optimizing for engagement causes problems, so too will a trading platform.