So you’ve been reading Yahoo finance, Bloomberg and you saw Jim Cramer on CNBC. You are certain that GPRO or NFLX are going to double in value. Now all you need is a service that will take your hard earned dollars and put them on the stock of your choice. What options do you have? E-Trade will happily help you out for about $7.99 to $9.99 per trade, Schwab will do this for $8.95 per trade and Scottrade comes to the rescue at “just” $7.00 per trade.
Unfortunately, even the cheapest option seems rather expensive. Consider this, as a small investor, you have $500 to invest in a given stock. So you use Scottrade and put all your money on TWTR. After the commission has been deducted, you essentially bought $493 worth of Twitter stocks. Now, lets say you hold onto the stock for a while, and it goes up by 5%. Great, lets cash out and sell. The stock you own is now worth a cool $517. Great! But hang on, Scottrade takes another chuck of your money when you sell – a further $7. So you are left with just $10 of profit.
Obviously, if you are investing large amounts of money, these fees are negligible but for the small guy with a few hundred dollars, these fees make trading unfeasible financially.
This might all be about to change though thanks to a very promising app appropriately named Robinhood. Robinhood is going offer zero commission trades with no minimum deposit requirements, and hence effectively opening up the stock market to a massive new audience.
What’s the story behind Robinhood?
The story of Robinhood began almost a decade ago at Stanford University, where co-founders Vladimir Tenev and Baiju Bhatt were roommates & classmates. After finding real interest in the finical world, the two decided to pack their bags and head to Wall Street to build a company that made high-frequency trading platforms for some of the world’s largest financial institutions.
They soon learned that high frequency traders and electronic trading firms pay effectively nothing to place trades on the market. On the other hand, everyday investors were taxed up to $10 per trade. Baiju and Vladimir realized it was time to bring this advantage to the people. By automating many of the costly duties that existing brokerages maintain as a holdover from the pre-Internet era, they could build a much more cost efficient and enjoyable brokerage. This is where Robinhood was born.
What is the atmosphere like at the moment at the Robinhood HQ?
Jack Randall, Robinhood’s head of communication told Bizzvenue “We are all heads-down working around the clock to ensure a successful launch on the App Store. There are a mix of emotions, of course, but we are excited to share Robinhood with as many people as possible.”
Who is the target audiance?
Robinhood is targeting 18-to-30-year-olds with relatively limited financial assets at their disposal. The goal is to make investing accessible for young people on a friendly mobile platform.
How is Robinhood able to offer commission-free trading while others charge up to $10 per trade?
Over the last decade, technology has enabled entrepreneurs to build the most efficient businesses in history. Building an automated, electronic brokerage from the ground up allows Robinhood to eliminate the costly touchpoints where other brokerages require human intervention or paper receipts. Rather than relying on primetime advertisements and costly brick-and-mortar storefronts, Robinhood maintains a lean bottom-line, allowing it to attract and retain customers far more cheaply. Robin hood doesn’t have massive offices and corporate expenses.
How does Robinhood make money?
Robinhood is going to offer margin trading as well as API access, which will allow partnered developers to build applications in conjunction with Robinhood. Robinhood will also receive remuneration for providing trade volume in certain markets. In the future, they also plan to offer premium services for active investors. Robinhood is focusing on building a wonderful brokerage experience rather than short-term profits.
When will Robinhood launch?
The app, according to Robinhood, has already been submitted to the App Store and is on course to launch on the Apple iOS in early 2015. With over half a million users already signed up there is a real chance that these new investors will have a massive impact on the Nasadq index, with a guesstimate of a cool half billion being invested within a few days seeming plausible.
Any other cool features?
The app allows users to share their predictions for the future, past experiences, or insights that could lead to successful trades. The individuals who perform best rise to the top, gaining more exposure and recognition. Beginners without any experience can look over the predictions of more experienced users and effectively get free advice from the pros.
