When I first met Baiju and Vlad (Robinhood founders), I loved their product idea but said the one thing I would change is free commissions.
Now that I have used their product for months, I sure am glad the commissions are free and they did not listen to me. It would be crazy to not have a generation of people learning to invest actively as well as passively.
As I tell anyone who does NOT want to trade…buy $SPY every month or every quarter with equal amounts of money for a very long period of time. If the market is down for 3-6 months, double up the monthly investing in $SPY. While it is not a stress free way to investing (there is NO stress free way to invest), it is simple, efficient and it works. Robinhood allows anyone to do in the most inexpensive way to date. Any other spin on cost free investing is just marketing spend and misdirection.
Eventually the SEC will bring back nickel spreads, maybe even a dime to really fix the financial markets and add a human layer back to the system, but you can’t blame Robinhood for realizing that the last $8 of commission is the dumbest part of the inefficiency.
Taking $8 to respend on marketing to get another group of people to spend $8 is no different than free commissions on top of a modern, mobile, lean team and great product that grows through social networks and word of mouth.
As for the ‘journalists’ (non product testers) at ‘Barron’s’ …the same good people that said sell Facebook at $18, tell their readers to ‘not expect research or other frills’. They actually lead with that in the headline. They call Robinhood fledgling, which is the nastiest way you can say venture backed startup that won’t go away quickly.
We should REJOICE that Robinhood will not provide research and other frills. Here is the drivel from Citibank (code name Shitty) on Instagram valuation bump this week. Yes a research work of art. Trend following into a 5 year boom.
Not one article the whole week ‘rejoiced‘ in the UTILITY of a Robinhood. That the lack of research and ‘frills’ was a BENEFIT. That dollar cost ETF investing had never been friendlier or cheap!
Fidelity did take out full page ads across the country saying that ‘free trades wont make you a better investor’:
The fine print does offer FREE TRADES!
It is now time and execution that will decide the future of Robinhood and this amazing industry, but I am so glad to be an investor in Robinhood and help push the industry forward and shake things up a bit.