It's everyone's right to shoot themselves in the foot with dumb financial decisions. Robinhood isn't doing anything egregious here, they're only reducing friction and fees.

I've used the app sparingly in the past with "fun money" but haven't done serious investing with it.

> It's everyone's right to shoot themselves in the foot with dumb financial decisions.

The industry regulations would indicate otherwise. Generally, the “dumber” the money, the more regulatory protections that will apply. At their core, financial regulators are consumer protection entities.

Not really - the regulations are more or less in place to try to soften the impact of the dumb decisions (when they do happen), not to remove the freedom to make said dumb decisions.

Nothing is stopping anyone from putting their life savings into a legal dumb investment. Regulators and the government sure won't stop you from liquidating your 401k early. At some point common sense comes into play and you need to be smart with your money.

The US SEC has accredited investor requirements specifically to keep people from being fooled into making "dumb" investments.

>US SEC has accredited investor requirements specifically to keep people from being fooled into making "dumb" investments

What stops me from liquidating my 401k and investing all of my money into a company that misses their earning goals this week? Where does the US SEC come into play here?

How is robinhood any different than all the other online brokers, except that they charge less?

Do other brokers let you trade on margin?

Absolutely

Yes

You can still legally bet your whole life savings on one spin of the roulette wheel. Here’s a guy that did just that:

https://youtu.be/zGCdBsOIKYA

Doesn’t mean you should though. Also Vegas doesn’t have the reputation for capital preservation and growth that brokerages have.

So Robinhood is now loaning money to helpless people at exorbitant interest rates? Or did you just make up a new definition for "predatory lending"?

Last I checked, their margin rates were ridiculous. So that description isn't as far off as you might think.

Wait, how so? Robinhood's margin is 5%.

Most (fidelity, etrade, etc.) have margin rates around ~10%. IB has ~3-4% but they're an outlier in this regard.

Can't you say the same thing about everyone using any other retail brokerage?

No. Upstanding retail brokerages (such as Interactive Brokers) don’t make interest on their customers’ balances.

Woah that is totally untrue. Brokerages make a lot of money by investing your balance. In particular, IB makes 49% of its revenue this way.

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

To add an even clearer source to the other replies: https://www.interactivebrokers.com/en/index.php?f=1595

IB is abundantly clear that it makes money from cash balances. I'm not sure where you got this idea from.

Huh? That's just not how this works. There's always a spread between the cash interest that the custodial firm gets on the balances it holds and the interest it pays to the customers.

Interactive Brokers makes 49% of revenues from customer balances.

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

They make it abundantly clear that options are risky.

I have a couple of shares on the app for a company. Just for anecdotal data. It’s fun to see. I would never put large amounts of my money in there.

Good for you. (Not sarcasm —- this is what individual stock investing should be for retail. For fun, to have a tiny bit of skin in the game.) But many people let it get out of control, either because they lack this self discpline, or because they randomly see positive results and then think they’re good traders.

Those people can freely lose all of their money through a lack of self-control with any other brokers as well. Just because Robinhood has a good UI/UX that makes it easy to navigate doesn’t really qualify it as “predatory” or puts it at fault more than any other brokerage service.

Lending?

What makes them worse than than anyone that charges a fee?

The ones who charge a fee don’t make interest on your balances.

Yes they do.

" 57% of Schwab’s revenues are from net interest"

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

No, no, no.

Care to elaborate? I was under the impression that Indexes are treated the same way as stocks.

Amateur investors are best off buying indexes and holding forever. Robinhood entices them to trade in and out of individual stocks (or worse).

> Amateur investors are best off buying indexes and holding forever.

And you can do so on robinhood by buying ETFs while potentially saving money on transaction fees if you were to use a traditional brokerage (I say potentially because vanguard lets me buy their etfs without a transaction fee when I use their brokerage account).