Robin Hood: investing on the go

giphy-downsized (3)

Launched in March of 2015, the mobile investing platform Robinhood has quickly gained a usership of over 3 million individuals and has completed stock trade transactions in the billions of dollars. The company was created by Biju Bhatt and Vladimir Tenev with the goal of giving young adults a platform in which they could participate in trading on the financial markets in an inexpensive, fast, and dead simple way. In a recent interview, Bhatt told Business Insider, “We have done $75 billion in transactions so far. And we recently hit 2 million users (updated Nov. 1, 2017). We also have saved customers $500 million in commissions.”¹ The Venture Capital firm DST Global definitely believes in the business platform, investing a $110 Million Series C round, giving the start up a $1.3 Billion dollar valuation in April of 2017. While major trading platforms from the leading market players, i.e. E-Trade, TD Ameritrade, and Charles Schwab were charging close to $10 per trade, Robinhood has completely changed the game by offering $0 dollar trades on the major U.S. stock markets.Screen Shot 2017-11-14 at 1.38.32 PM.png

While there are clear limits on the types of trades one can execute commision free, see commision chart, for the average new investor, the major US markets present more than ample opportunities to become experienced in trading and yes, make money. Clearly, there are steep transaction fees for foreign trades, yet the premise of the platform, which as of today is totally mobile based, is to be a simple and easy to use for an uninitiated investor, who would not need access to foreign markets.

When I was first exposed to Robin Hood, I was extremely skeptical and the first question I asked was, “How do they make money?” The answer is simple, Robin Hood Gold.Screen Shot 2017-11-14 at 1.47.20 PM.png The pricing structure is clearly laid out on their website, which simply states with the more money deposited an increasing monthly fee is charged. This is somewhat different from classic trading platforms, many of whom will not charge a monthly fee but rather charge on a per trade basis, as I have highlighted previously. Buying power is increased, with an individual being able to choose which level of buying power they would like to utilize and then being charged on a 30 day basis for the level they desire. I feel that based on their target market, young professionals, that their monthly Gold pricing is extremely reasonable. An individual that is interested in Gold level buying power that deposits $3,000 and chooses to have buying power of $1,500 would be charged $9 dollars per month. One would be able to complete numerous trades in that period for the cost of a single trade on a competitor’s platform.

Image-1-1.jpgThe layout and design is extremely user friendly, winning the Apple Design Award. Bhatt notes, “When young people are investing in the stock market, their behaviors are much closer to how people navigate products like Spotify or Amazon, rather than traditional investing products.” The stock charts are extremely familiar to the Apple Stocks App making it familiar to use. All your necessary tools are right at your fingertips including connecting or transferring to your bank account, looking up stocks, and executing trades. The trading screen is very intuitive, allowing you to process multiple order types and instantly calculating the market price and estimated cost based simply on the number of shares selected.  I was have been very impressed by the security of the app, which requires you to use fingerprint scanner every time you re-look at the app, even if it is opened in you iPhone queue and you switch to another app then return to it. The Robin Hood Help center is an simple page that clearly explains differences between Robin Hood basic and Gold, states the advantages of both, and walks users through using the platform to begin trading.

Image-1-2.jpgWhile the current platform is only available on mobile apps available in the App Store and Google Play, Robin Hood is planning to release its full web platform that will be available on full computers early in 2018.

While the accessibility to $0 trading seems like great opportunity to introduce individuals to the financial markets, Robin Hood has not been without criticism. Critics worry that allowing individuals with zero knowledge to buy and sell at will is a risky bet for millennials that are already strapped for cash. Personally, I feel individuals should be free to spend their money as they please, and the notion that one is interested in learning about the financial markets in order to create wealth is something that should be fostered rather than fretted over. (Personal Bias)

I have just recently begun to utilize Robin Hood as a platform and I have been impressed by the ease of use and I really think it’s awesome that each trade is free based off the relatively small amount of money I am using to trade. Let me know in the comments below if you have any familiarity in using the Robin Hood Platform, if you like it, or if you would be willing or not to try it out?

(All screenshots were taken from Robin Hood website or the App)

8 comments

  1. Nice post. One student did a presentation on Robin Hood a few years ago and it sounded interesting (must have been soon after launch). Glad to hear they are still around!

  2. Great, informative post! I’d be willing to try out Robin Hood! It seems like a good way to ease into investing with the commission free proposition. Their use of the monthly “subscription” model is unique in their space but I think it makes a lot of sense. I personally like the look and feel of the app, too, which makes me more inclined to try it.
    I’m really interested in the plans for their web platform. There seems to be some indication that the web version will have more tools and helpful guidance for first-time investors or those who want to do a little more research before investing. Tearsheet reports that it will feel more like a social network than an investing platform. I think this falls right in line with millennials tendency to socialize tasks and strive for community in all sectors.

  3. Matt- Thank you for sharing! It was very clearly explained and after reading, I definitely would be interested in trying this out. I am currently in a Woods School class called Personal Money: Your Money and How to Use It. If you can’t already tell from the title, I need all the financial planning/managing help I can get so this app seems like a great place to start. One of the biggest problems I have with investing, etc. is how complicated or complex it seems and so this UI is very very inviting and hopefully beginner friendly! Excited to try- thanks again for sharing!

  4. Great post Matt. I’ve been using Robinhood for a while now, and I have really enjoyed the interface. It tells you basic financial ratios like P/E, your total return on each stock, and even how diversified your portfolio is in a very simplified and clean layout. And I think the most valuable feature of this app is it’s news and notifications section – Robinhood lays out the top gainers and losers of the day, and also brings you interesting news on stocks straight from Business Insider. When the price of one of the stocks I own changes drastically, I even receive a notification on my iPhone. I agree with you that individuals should be free to use their money as they please. I am very satisfied with the app so far, and I think it is a great platform that allows young investors to learn and invest in the financial markets at a low cost.

  5. Cool post Matt. I think I first heard about the Robinhood app my sophomore year and I was also extremely skeptical because I wasn’t sure how they could make money. Do they also make money off of interest on uninvested balances? You can definitely see that these types of apps have made some impact on the investment industry since popular investment companies (TD AmeriTrade, etc) have dropped their fees from ~$10 per trade to ~$5, a huge difference.

  6. This is super interesting. Taking the investing process onto an app is such great idea, but I had never heard about this app before the post. I wonder what their marketing efforts have been. I agree with your point that people should be able to spend their money as they choose, and bringing more opportunities to invest to millennials through a new digitized platform is a great way to keep the generation involved in the economy. I’d definitely be willing to try it out, but there seems to be a risk associated with using the platform – what happens if you have invested through Robinhood and Robinhood tanks? Something to think about.

  7. Great post, Matt. Some of my roommates use this app (I’m traditional and have a Fidelity account) and have had nothing but good things to say about it. It’s target at younger investors (who will eventually become larger, more profitable investors) has clearly been successful because of how useful and easy the software is to do basic trading and portfolio management. I wonder how many free users actually graduate to the higher paid tiers of service. Since this is where they make most of their money, I’d assume it has to be a good amount of people given that they’re still around today after two years. Thanks for sharing!

  8. Robinhood is great, actually they are now going to web based trading, and the platform will be coming out soon. Also, Robinhood Gold is just a new things, out this year. So before they weren’t making money on that. it would be interesting to know how they made money at the beginning? Did they play with your liquid money (cash) you had in your account? Did they sell data?
    I liked your personal opinion. At the end you can use your money however you want. And I wouldn’t believe young or millennial people would invest without knowing just to have the app. If you trade you should know.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: