Robinhood Is In Trouble
Alex Moschina|July 11, 2020
Rob the… Poor?
Oh boy. Looks like Robinhood is in trouble…
After sparking a trading revolution that generated thousands of new investors, the infamous app has attracted the ire of The New York Times.
Here’s this week’s big headline:
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Uh oh… that’s not good.
The Moneymoon Is Over
We’ve touted the virtues of Robinhood in the past. When the app first launched in 2013, it really shook things up with its “crazy” notion of commission-free trading.
Seven years later, commission-free trading is the norm. Online brokers offer free trades on a growing number of investments.
As a result… Robinhood’s sheen is starting to wear off.
To keep its users engaged – and trading – the company has leaned on the same tactics used by its Silicon Valley peers… the social media giants we love to hate.
Think of the Children!
“The ease of trading has turned [Robinhood] into a cultural phenomenon and a Silicon Valley darling… But at least part of Robinhood’s success appears to have been built on a Silicon Valley playbook of behavioral nudges and push notifications, which has drawn inexperienced investors into the riskiest trading,” writes The New York Times.
The author includes this chart to illustrate the point:
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As you can see, during the first quarter, the number of options contracts traded at Robinhood, per customer, was more than five times the amount traded at TD Ameritrade, E-Trade and Charles Schwab… combined.
Options, the Times reasons, are risky. And Robinhood is putting folks in danger.
The Real Problem?
If you read Manward Digest, you know our thoughts on options. They’re like any tool. If used correctly, they can make life a whole lot better… If used wrong, folks run the risk of injuring themselves.
It’s that simple.
And it’s why, in our mission to spread Know-How, Manward published a free four-part options series.
But instead of fussing over Robinhood’s sneaky tactic of sending push notifications to its users (again, the same sneaky tactic that keeps folks clicking into their Facebook and Amazon apps), here’s a bold idea…
Hear Us Out
What if we considered that the problem isn’t Robinhood?
Dare we cast blame at our society that doesn’t educate its youth on how basic financial instruments work?
Or at politicians who demonize investors while stumping for free income… free college… free child care… and free healthcare?
Just think…
If this next generation understood the proper way to build wealth instead of just taking it from the folks who earned it, it could improve the lives of not just individuals but also generations to come.
It could strengthen the broad economy.
And it could help to eliminate folks’ dependence on Uncle Sam.
Oh wait. Now we see the problem…. The government is involved.
Alex Moschina
Alex Moschina is the associate publisher of Manward Press. A gifted writer, editor and financial researcher, Alex’s career in publishing began more than a decade ago when he worked at one of the world’s leading providers of academic research and reference materials. Alex first cut his teeth in the realm of investing when he joined the team at White Cap Research in 2010. There he was charged with covering emerging market trends and investment opportunities. A stint as senior managing editor and editorial director at the prestigious Oxford Club followed. A frequent speaker at conferences and events, Alex has led educational workshops across the U.S. and Canada.
