Robinhood is handing out investing tips! Thats write folks, Robinhood is once again claiming to help out the little guy with investing. From college students all the way to Nursing homes robin hood wants to roll out a new system on its app that will give investing advice to everyone that uses the broker.
It will produce personalized portfolios, featuring four exchange-traded funds. “The recommended ETFs will give customers exposure to a diverse set of domestic and international equities, as well as exposure to the U.S. bond market,” the firm said.
While in theory it may seem harmless that a big brokerage such as Robinhood wants to help its clients make wise investments in reality however this could prove to be another shit show from Robinhood all over heres why.
As many of you remember back when Gamestop (GME) was being taken over by Reddit once the stock soared passed anyone’s expectations Robinhood stopped all trading of the stock costing people hundreds,thousands and yes even millions in potential profit.
And while it may not exactly go down like that again, it could almost certainly go bad for anyone looking to invest their hard earned money. You see the issue here is that Robinhood isn’t really a fiduciary their a brokerage and before Robinhood came into play with its no broker fees brokerages use to be paid by the average client. It use to be that a small percentage of your trade would go to the broker maybe around 1 to 2% for every trade made. So if you put $2000 into Disney (DIS) then 1% of that would go to the broker, Simple right?
Well according to James Royal a principal reporter at Bankrate he disagrees and is skeptical of Robinhoods new education platform stating the following.
“Robinhood gets paid when its customers trade. Investors themselves don’t pay for the cost of placing trades there, but big investors may pay Robinhood for access to its clients’ trades, allowing the big guys to get a better price,” he added.
“My biggest concern with a program such as this is whether Robinhood must act in the interests of its clients and to what extent. A broker is not normally considered a fiduciary — that is, someone who must work in your best interest,” he said.
“Will Robinhood recommend the lowest-cost funds from a leader such as Vanguard?” Royal said. “Or will it offer only higher-cost funds? And perhaps more to the point, is it getting paid for its recommendations by a fund company?”James Royal a principal reporter at Bankrate
Remember if your going to trade in the market, Especially one that’s so volatile in today’s world BE CAUTIOUS. People have been getting screwed by lately whether its stocks,crypto or any other market.
Do your research and stay away from clear indications of a pump and dump and you and your portfolio will be just fine. Oh and newbies, please, stay away from options until you’ve learned to deal with losing.