Robinhood is a “Commission-free trading platform” which is fairly user friendly, especially with phone applications. Since its inception, it has been surrounded by a lot of controversy. The idea of commission free trading brings up the question “how are they making money?” Their level of service has been spotty (at best) and at key moments, the site has shut down or not let people make trades which may have cost them significant money. They’ve had a lot of legal issues as well, further confusing the issue.
The solution to many of these issues is a simple one. As laid out by the Motley Fool, the solution is to use the application to invest, not the try and time the market (i.e. don’t use it to day trade). Robinhood plays up its ease of trading, but its performance in quick trades has been poor. However, its ability to make stock trading easier to start is laudable.
I was thinking about this after reading an article by evidence investor about “Why most robinhood traders get lousy returns.” The article pretty much lays out that people are using it to day trade, not invest for the long-haul, and are thus using having their emotions drive their investing decisions. It’s a good article and worth a read.
I personally don’t use Robinhood. Most of my investments are in mutual funds/ETFs. I gave up stock picking (I sucked at it) and chose just to stick with those. I’ve heard it said that it really doesn’t matter that much getting the optimum return – its getting started with regular investing and sticking with it. In that sense, if Robinhood gets you to do that, it can be a worthwhile option.
Hope your holidays are going well!
Mr. 39 Months