Other companies starting to do 0 dollar trades. Worth it to buy shares on the private market? TC: 500k
Robinhood makes money by getting low information investors to buy complex investment products with market orders (great example: far out of money thinly traded options, which they default to half the ask price (when there are no bids), which is usually set insanely high), and then selling this order flow to HFT firms who are more than happy to take the other side of what is typically a losing trade. In part it achieves this by not providing the services (Eg proper charting tools) that a serious investor would use. Competitors to Robinhood are often more in the customers favor, and so would be less profitable to HFT firms who buy the order flow.
Very interesting. What do you think about their future prospects?
Middle class Americans could definitely invest in the stock market more than they currently do, and Robinhood is currently the easiest option for them. But I don’t really see them being able to become more than an entry level tool. They seem to really want to move into traditional banking, which is a very overcrowded market. But it’s possible that they could offer some sort of service that replaces a traditional bank and automatically invests balances above some figure. There’d be a lot of benefit to that to customers, and they could keep growing their customer base, but it’s has a very low moat.
Why buy private market shares? Those typically are very illiquid and have high commission. How much money do you lose if you buy those shares and sell immediately? There are so many public companies with more transparency and much lower transaction costs.
Fair, not planning to sell immediately though. Public companies wouldn't have as much potential upswing. But I hear you, thanks for replying!
No. Startup land is overvalued. And your shares wouldn't be preferential.
Wouldn’t recommend it *in this market* overall I’m positive on Robinhood but give the economic climate macro factors will dominate and shape the market for equities in the near future. Track and buy if valuation drops though and then hold.
That’s a good question. I’m interested to know what people think about it.