I think Robinhood does a great job of giving young traders the experience and knowledge of what actual trading is like before they're managing really meaningful amounts of money. College kids trading $500 on Robinhood are going to become 30 year olds who have a much better sense of how markets work and how emotion affects their own trading than college kids who are just instructed to give all their savings to mutual funds. I think RH has a niche and potential to really change things provided they don't do too much to incentivize dangerous behavior (like the deleted tweet).
Maybe, except the college kids who just give all their money to mutual funds will make more money. The day-traders won't "learn how markets work," they'll learn how to lose money by making dumb trades based on less information than their counterparties. They won't learn anything, aaaannnnyyyyything, of actual value.
College kid who started trading in RH a while ago here. After reading some basic investment books from authors like Peter Lynch, Taleb, and What Jim Paul, decided to get some experience in the markets. Invested a little saved and since then made a decent return, better than if that money was in a bank. So far, I'm doing better than the large-company mutual funds after 3 years, but as I've been reading, that's probably good luck.
It's been an interesting experiment that gave me incentives to learn more about financial markets, which I otherwise would not have touched. However, I started by reading and knowing a little bit, so I won't touch crypto trading until I know more.
> Invested a little saved and since then made a decent return, better than if that money was in a bank. So far, I'm doing better than the large-company mutual funds after 3 years, but as I've been reading, that's probably good luck.
The only thing you should be comparing yourself against is the s&p500, if you haven't beaten that, then you're down.
Also, the markets have been in an unprecedented bull run. Everything you've learned will be useless once the tide turns
Well, I don't think everything will be useless. Think it was John Maynard Keynes who said "The market can stay irrational longer than you can stay solvent." While that quote concerned shorting a bubble, I'd say the principle holds for determining when a bull market will turn, as well.
While I'm 'beating' the S&P by 10% over my puny 3.2 year life, I gained more value from feeling the urge to trade during downturns, but resisting, seeing bad investments fade away (thanks, SolarCity), and effects of global events, such as Brexit and Trump USA. I would recommend trying stocks to people who can afford to do so as a way to really learn what books mean when they say there is an irrational 'fight or flight' instinct that individual investors have, not to mention the herd mentality of institutional investors.
I believe the unprecedented bull run is also a contributor to Robinhood’s success. Most of your mobile app day traders are going to drop off when the market turns bearish.
The fact you’re browsing HN and have read all those books probably means you’re not the average user (read more intelligent) of RH. Just read the RH subreddit and looks at all the novice questions the users there ask.
if the premise is that you can't make money as a day trader, no matter who you are, because the stock market is essentially efficient, then they aren't making dumb trades with less information, because all information is reflected in the price. What they are doing is accumulating more risk, giving them higher odds of fluctuating out, but the expected value is the same as holding mutual funds, maybe even a little higher, since mutual funds have administrative fees, and robinhood is free.
If that is not the premise, then it's not good general advice to tell people to avoid day trading as they won't learn anything. If the market is not efficient, then return on investment is correlated with your amount of information, and they will absolutely learn things of actual value, or at least their experience with trading will contain information about the strength of their hypotheses, regardless of whether they infer that information.
There are plenty of ways to learn the market without spending money as a day trader on Robinhood.
Most financial events are cyclical. Trading really hasn’t changed much since the late 17th century so reading a history book on financial speculation and market cycles would teach you plenty.
Another alternative is simulating trades without allocating real liquid to it. Watch how those assets evolve over time.
If the goal is attaining wealth then “wasting money” is probably a more accurate statement.
How someone decides to use their money is up to them. If emotional reinforcement helps them remember something then I suppose day trading is an option.
I’m only suggesting there are frugal ways to learn if your ultimate goal is to build wealth.
I agree probably 90%. If this had existed when I was in my first year of university and had a little money in the bank still, I probably would have thrown some at GOOGL when the Gmail beta came out.......
On the other hand, it could have got ugly. Hindsight is often 20/20 and young people can get competitive, over-aggressive, and dumb.
It took me until far more recently to even start to pay any attention to things like financial markets and trading.
We’re going to see a massive loss in money in the next crash. With low interest rates, everyone is in the market in some way. Mostly in index funds, bot traders, or things like RH. The next crash is going to destroy those funds as they try to sell off their massively overvalued stocks.
We’re setting up for a rough time. The baby boomer’s retirements and the millenial’s savings(in the market, not savings accounts) are going to get hit really hard.
When I was in college I made every dumb trading mistake there is.
I traded on emotion, bought high, sold low, with margin leverage, and with options.
Fortunately I didn't have much money then, so my losses were a large percentage but a relatively small dollar amount.
In hindsight all those losses were inexpensive lessons that have served me very well now that I'm older and have more at stake.
So let the young and inexperienced trade. If you protect them from themselves, you deny them the ability to learn at a relatively low cost, and they'll wind up learning later at a much higher cost.
I've been using Stash to invest in some EFTs. I've only put in $50 to date and will put in more since the market is doing well but I did it more as a learning experience.
What would be the best way to learn, for someone looking to invest $500+, who's never done much investing before?
Outside of ~10 shares of Starbucks stock given to me when I worked there in 2001, this has been my only experience.
P.S. Those Starbucks shared have been long-lost - somehow they moved them from Schwab to another company and no one told me where/how). I forgot about them until today.
EDIT: Looking at my docs, I bought 7 shares at $18.275 in April 2001. The stock price is $60.55 today. I need to figure out who holds these and see what I can do to reclaim them.
EDIT2: I found them. I found where the original account was, called them and got the details. Sadly, the account was marked as dormant and I learned about "Escheatment". The stocks were cashed and the amount is now held by my state and I have go through several hoops to reclaim.
There are two main schools for investing/stock trading. "Value investing" which is trying to buy company stocks that are undervalued and generally seeks to hold these stocks for a long time, and "technical analysis" which is focused more on predicting future stock price moves based on reading charts and is focused more on short time frame. Value investing is a more well-respected style but people have made enormous amounts of money from both. If you're interested in value investing I would just read everything warren buffett and charlie munger have ever created. For technical analysis I would just google it and explore and watch out for BS. Investopedia is a great beginner's resource for both.
To piggy-back on the other reply, since he went on recommending material for fundamental analysis, I'll go the other way and go on recommending material for technical analysis. If you're completely unfamiliar with the TA environment, I'd recommend heading over to https://www.babypips.com/learn/forex which is absolutely fantastic in your development of trading vocabulary.
After that, I would recommend reading Technical Analysis of the Financial Market by John Murphy, and books tailored to specific indicators (you can write me back if you wish and I can go more specific).
