7 ms·

While that's true, it may only be part of the story. There is a clear tension between "democratize X" (for Robinhood X is "finance for all") and offering a whit

by gip 5y ago

While that's true, it may only be part of the story. There is a clear tension between "democratize X" (for Robinhood X is "finance for all") and offering a white glove service, including stellar support for everyone. It simply won't scale. Democratizing X also means commoditizing X by offering a minimum acceptable solution that will become what people are taught to expect. I am not sure there is a way around this to be honest.

stouset 5y ago
Schwab and Vanguard are completely free if you're not trading individual stocks, which in complete bluntness virtually no retail consumers should be doing. Robinhood has gotten their position by invisibly and dramatically increasing the amount of risk assumed by their customers' life savings. Everybody's a savvy investor in a record-breaking bull market.
- smabie 5y ago
  Saying no retail investor should be buying stocks is like saying no one should ever start a company.
  - stouset 5y ago
    The level of effort and personal commitment necessary to commit your life savings toward starting your own business vs. putting it all into meme stocks isn’t even remotely comparable. One of these can be done in ten minutes from your couch while stoned with a handful of clicks. I’ll leave you to guess which of the two it is, but suffice it to say that’s the one I think should have some additional guard rails.
    - TeMPOraL 5y ago
      Agreed. And perhaps it's getting too philosophical, but one could argue that a big role of a government is to protect its citizens from everything that has a high risk of incurring sudden and effectively unbounded losses. Whether it's mandating installation of actual guard rails through health and safety regulations, or regulating away business models that tend to make regular people broke by accident.
    - imgabe 5y ago
      You can buy individual stocks without yoloing your entire life savings into meme stocks. The movement to limit the most profitable investments only to “experienced” i.e. already wealthy investors is one thing that prevents average people from accumulating wealth. If an average person is allowed to walk into Vegas and put their whole life savings on black, or spend it on lottery tickets why shouldn’t they be able to buy a stock? Less nanny state, please not more.
      - stouset 5y ago
        > The movement to limit the most profitable investments only to “experienced” i.e. already wealthy investors is one thing that prevents average people from accumulating wealth. This is ridiculous. High-quality, virtually zero-cost index funds that track the market (or various subsectors of the market) are available to essentially every American and have been for decades. These investments have produced returns well in excess of the average performance of the overwhelming majority of investment professionals. Further, their risk-adjusted returns have been second to none. Throwing novice investors into the deep end of the pool with the consolation that some small fraction of them will beat the market and some minute fraction will win the lottery doesn't help "average people" accumulate wealth. Every available metric we've tracked has repeatedly shown that "average people" have the best performance from low-cost index funds with a long-term buy-and-hold strategy. Every other strategy has demonstrably worse performance on average. > If an average person is allowed to walk into Vegas and put their whole life savings on black, or spend it on lottery tickets why shouldn’t they be able to buy a stock? Less nanny state, please not more. It is wild to me that every single person detracting from my comments seems to believe that "retail investors should not be investing in individual stocks" is some sort of call to have the government step in and prohibit individuals from investing in $TSLA. Nobody is asking for that. We're saying that Robinhood is playing an extremely dangerous game with their clients' well-being by promoting risky and irresponsible decision-making around their livelihoods. This has been a successful strategy for them so far, but it has relied entirely on the unprecedented bull market we've found ourselves in. I'd bet large sums of money that their internal metrics show their customers perform significantly worse on average than the market overall, and I'll double that bet that their customers will fare amongst the worst when the next correction hits.
    - gip 5y ago
      I agree, but I would also not compare investing in stocks and starting a company. Starting a company is not for everyone. It's a calling. Being able to invest and get competitive returns should be democratized. It is a known fact that the richest have historically been able to invest their money and get high returns while the rest of us had to settle for savings accounts (0.5% return currently). And the trend is accelerating[0], inequality is growing. This is not sustainable and should be addressed. [0] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
      - stouset 5y ago
        > I agree, but I would also not compare investing in stocks and starting a company. Neither did nor would I. > Being able to invest and get competitive returns should be democratized. It is a known fact that the richest have historically been able to invest their money and get high returns while the rest of us had to settle for savings accounts (0.5% return currently). It is already democratized, and your last statement isn't even remotely true. Low-cost, whole-market index funds have been available to Joe Public for nearly fifty years now, and in those intervening years have represented essentially the optimum in terms of risk-adjusted returns. Robinhood has not democratized investing, they've democratized day trading. It's like praising Harrah's for removing the rake (the casino's cut) from their poker games and promoting Hold Em to complete novices. Sure, some of their new customers will make it rich. And there are plenty of highly skilled poker players who've made a career out of it. But that's not the norm; the net result is just bringing more chum for the sharks to feed on. As I said elsewhere, if Robinhood had figured out a way to get people to buy and hold boring-as-shit index funds through gamification and meme culture, it would be an achievement of immeasurable benefit. Unfortunately that's not what they've done. They've rebranded day trading as investing and brought a heaping mass of fresh, unsuspecting victims to be exploited by financial professionals with entire teams of researchers backing their plays. The only reason the whole thing hasn't completely disintegrated is because of an unprecedented, once-in-a-lifetime bull run where it's been virtually impossible not to make money. There's no way this works out in their customers' favor in the long run.
- WalterBright 5y ago
  > virtually no retail consumers should be doing Yeah, well, I regularly read on HN about how retail consumers are locked out of investing in stocks, that only rich people can. Robinhood blew that argument out of the water. I've been a retail consumer stock investor my entire adult life, and would be pretty unhappy if regulations locked me out of that.
  - stouset 5y ago
    > Yeah, well, I regularly read on HN about how retail consumers are locked out of investing in stocks, that only rich people can. Vanguard and Schwab already did that decades ago. They just didn't gamify their products or benefit from meme culture. > I've been a retail consumer stock investor my entire adult life, and would be pretty unhappy if regulations locked me out of that. "Retail consumers should not be [trading individual stocks]" is not a claim that individuals should be barred from putting their life savings into belly button lint futures if that's what want to do. It's simply stating that by and large, individuals should be encouraged towards sensible defaults and not simply whatever the latest meme investment is. Veering from those defaults for non-trivial sums of money should involve increasing levels of warning and resistance proportionate to the estimated change in risk. And that goes in both directions. Just as retail consumers should be given additional levels of resistance for investing in individual stocks, investing in recently-memed stocks, buying put options, and buying on margin, they should also meet resistance when putting their entire balance into cash positions as happens to far too many investors that don't realize the error.
    - WalterBright 5y ago
      > Vanguard and Schwab already did that decades ago. I know that. I didn't say the HN comments were correct! Heck, even in the 1920's there's that famous story of the elevator boy talking about the stocks he was trading. Let adults be adults and invest the way they want to. The government shouldn't be treating them like children.
      - stouset 5y ago
        $ cat stouset.comments | grep -i "government" $
3np 5y ago
Nobody was calling for stellar support and white-glove service, though? Just any support.

by gip 5y ago

stouset 5y ago

Schwab and Vanguard are completely free if you're not trading individual stocks, which in complete bluntness virtually no retail consumers should be doing. Robinhood has gotten their position by invisibly and dramatically increasing the amount of risk assumed by their customers' life savings. Everybody's a savvy investor in a record-breaking bull market.

smabie 5y ago
Saying no retail investor should be buying stocks is like saying no one should ever start a company.
- stouset 5y ago
  The level of effort and personal commitment necessary to commit your life savings toward starting your own business vs. putting it all into meme stocks isn’t even remotely comparable. One of these can be done in ten minutes from your couch while stoned with a handful of clicks. I’ll leave you to guess which of the two it is, but suffice it to say that’s the one I think should have some additional guard rails.
  - TeMPOraL 5y ago
    Agreed. And perhaps it's getting too philosophical, but one could argue that a big role of a government is to protect its citizens from everything that has a high risk of incurring sudden and effectively unbounded losses. Whether it's mandating installation of actual guard rails through health and safety regulations, or regulating away business models that tend to make regular people broke by accident.
  - imgabe 5y ago
    You can buy individual stocks without yoloing your entire life savings into meme stocks. The movement to limit the most profitable investments only to “experienced” i.e. already wealthy investors is one thing that prevents average people from accumulating wealth. If an average person is allowed to walk into Vegas and put their whole life savings on black, or spend it on lottery tickets why shouldn’t they be able to buy a stock? Less nanny state, please not more.
    - stouset 5y ago
      > The movement to limit the most profitable investments only to “experienced” i.e. already wealthy investors is one thing that prevents average people from accumulating wealth. This is ridiculous. High-quality, virtually zero-cost index funds that track the market (or various subsectors of the market) are available to essentially every American and have been for decades. These investments have produced returns well in excess of the average performance of the overwhelming majority of investment professionals. Further, their risk-adjusted returns have been second to none. Throwing novice investors into the deep end of the pool with the consolation that some small fraction of them will beat the market and some minute fraction will win the lottery doesn't help "average people" accumulate wealth. Every available metric we've tracked has repeatedly shown that "average people" have the best performance from low-cost index funds with a long-term buy-and-hold strategy. Every other strategy has demonstrably worse performance on average. > If an average person is allowed to walk into Vegas and put their whole life savings on black, or spend it on lottery tickets why shouldn’t they be able to buy a stock? Less nanny state, please not more. It is wild to me that every single person detracting from my comments seems to believe that "retail investors should not be investing in individual stocks" is some sort of call to have the government step in and prohibit individuals from investing in $TSLA. Nobody is asking for that. We're saying that Robinhood is playing an extremely dangerous game with their clients' well-being by promoting risky and irresponsible decision-making around their livelihoods. This has been a successful strategy for them so far, but it has relied entirely on the unprecedented bull market we've found ourselves in. I'd bet large sums of money that their internal metrics show their customers perform significantly worse on average than the market overall, and I'll double that bet that their customers will fare amongst the worst when the next correction hits.
  - gip 5y ago
    I agree, but I would also not compare investing in stocks and starting a company. Starting a company is not for everyone. It's a calling. Being able to invest and get competitive returns should be democratized. It is a known fact that the richest have historically been able to invest their money and get high returns while the rest of us had to settle for savings accounts (0.5% return currently). And the trend is accelerating[0], inequality is growing. This is not sustainable and should be addressed. [0] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
    - stouset 5y ago
      > I agree, but I would also not compare investing in stocks and starting a company. Neither did nor would I. > Being able to invest and get competitive returns should be democratized. It is a known fact that the richest have historically been able to invest their money and get high returns while the rest of us had to settle for savings accounts (0.5% return currently). It is already democratized, and your last statement isn't even remotely true. Low-cost, whole-market index funds have been available to Joe Public for nearly fifty years now, and in those intervening years have represented essentially the optimum in terms of risk-adjusted returns. Robinhood has not democratized investing, they've democratized day trading. It's like praising Harrah's for removing the rake (the casino's cut) from their poker games and promoting Hold Em to complete novices. Sure, some of their new customers will make it rich. And there are plenty of highly skilled poker players who've made a career out of it. But that's not the norm; the net result is just bringing more chum for the sharks to feed on. As I said elsewhere, if Robinhood had figured out a way to get people to buy and hold boring-as-shit index funds through gamification and meme culture, it would be an achievement of immeasurable benefit. Unfortunately that's not what they've done. They've rebranded day trading as investing and brought a heaping mass of fresh, unsuspecting victims to be exploited by financial professionals with entire teams of researchers backing their plays. The only reason the whole thing hasn't completely disintegrated is because of an unprecedented, once-in-a-lifetime bull run where it's been virtually impossible not to make money. There's no way this works out in their customers' favor in the long run.
WalterBright 5y ago
> virtually no retail consumers should be doing Yeah, well, I regularly read on HN about how retail consumers are locked out of investing in stocks, that only rich people can. Robinhood blew that argument out of the water. I've been a retail consumer stock investor my entire adult life, and would be pretty unhappy if regulations locked me out of that.
- stouset 5y ago
  > Yeah, well, I regularly read on HN about how retail consumers are locked out of investing in stocks, that only rich people can. Vanguard and Schwab already did that decades ago. They just didn't gamify their products or benefit from meme culture. > I've been a retail consumer stock investor my entire adult life, and would be pretty unhappy if regulations locked me out of that. "Retail consumers should not be [trading individual stocks]" is not a claim that individuals should be barred from putting their life savings into belly button lint futures if that's what want to do. It's simply stating that by and large, individuals should be encouraged towards sensible defaults and not simply whatever the latest meme investment is. Veering from those defaults for non-trivial sums of money should involve increasing levels of warning and resistance proportionate to the estimated change in risk. And that goes in both directions. Just as retail consumers should be given additional levels of resistance for investing in individual stocks, investing in recently-memed stocks, buying put options, and buying on margin, they should also meet resistance when putting their entire balance into cash positions as happens to far too many investors that don't realize the error.
  - WalterBright 5y ago
    > Vanguard and Schwab already did that decades ago. I know that. I didn't say the HN comments were correct! Heck, even in the 1920's there's that famous story of the elevator boy talking about the stocks he was trading. Let adults be adults and invest the way they want to. The government shouldn't be treating them like children.
    - stouset 5y ago
      $ cat stouset.comments | grep -i "government" $

3np 5y ago

Nobody was calling for stellar support and white-glove service, though? Just any support.