Robinhood Disrupted Finance, But Its Major Downsides Must Not Be Ignored

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Robinhood Disrupted Finance, But Its Major Downsides Must Not Be Ignored
mohamed_hassan / Pixabay

Traders have a love/hate relationship with Robinhood app, stock trading, and investing apps. The app launched in 2013 and quickly became a phenomenon because of its pitch of no trading fees or account minimums.

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It became particularly appealing for younger and inexperienced investors due to its ease of use. That was even more so the case since the onset of the pandemic, as millennials that were working from home became intrigued by Robinhood.

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Between the one-click trading, easy access to complex investment products, and gamified details such as falling confetti and heavy usage of emojis, novice investors quickly found themselves hooked.

Robinhood App: Temptation-fueled addiction

According to Andrew Reed, a partner at Sequoia, “Robinhood has made the financial markets accessible to the masses and, in turn, revolutionized the decades-old brokerage industry.”

Robinhood app does deserve credit for disrupting finance, but the behavioral nudges from the app have a way of encouraging investors to act with only their short-term interests in mind, which can be akin to fuel a gambling addiction.

When the going gets rough for the app and its users, they stand by their claim that the app’s features are meant for informational purposes only, and are not intended to serve as a recommendation to buy or sell any security.

Even so, that doesn’t change the fact that Robinhood is essentially like a casino in their users' pockets, because the ease of it, plus unlimited free trades, can encourage users to make bad decisions.

This downside of Robinhood app sparked the need for a new form of a full-service brokerage, which takes advantage of the cost-saving model of discount brokers but with the addition of actual investment advice.

Which app will accomplish that role? Let us know what you think by sounding off in the comments section.

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