Valuation for Robinhood, Maker of App That Offers Free Stock Trades, Tops $5 Billion

Tech
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Robinhood Founders Are Billionaires in Silicon Valley Minute

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I still struggle with now they’ll be able to monetize enough to justify the $5B valuation. I wonder what sort of multiple that is on their revenue.

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Absolutely. If they are worth $5B then Apple should worth $5T.

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My bet on IBKR gave me nice returns, so i think you are right.

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Robinhood Gets Almost Half Its Revenue in Controversial Bargain With High-Speed Traders

https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders?srnd=premium

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This is common to Robinhood, Etrade, Schwab, TD Ameritrade.

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Knew it’s too good to be true:

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2% for SIPC insurance?

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1 month treasury pays 2.36% today. I think savings and checking account should at least pay 2%. Banks are making too much money off people who save.

I have never bought treasuries. However, if you have a lot of cash, you should buy short term treasuries which is safer than checking/savings account.

How and where do people usually buy treasuries?

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1 month treasury is like 1 month CD. You only get the 2% if you hold it to the end. If the 3% guaranteed rate of robin hood is not marketed as a CD product, it’s just outright fraud.

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If you open an account at Vanguard they put your money into a Money Market account that pays 2.23% or you can move the money to a prime Money Market account paying 2.34% Vanguard funds list - index and active mutual funds | Vanguard

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Money market has no insurance. Some of the money market fund had issues in 2008. There should be a money market fund for treasuries only.

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Maturity mismatch, my friend.

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This fund is 100% T-Bills. Vanguard Mutual Fund Profile | Vanguard

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Consider me a pessimist but I see plenty of people being burned by Robinhood and index funds alike. There are so many unsavvy investors out there getting excited about the tech, apps and “how affordable it is” with no clue about underlying assets.

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tomato is long gone out of forum, I do not think he will be back.

My question is how Robinhood will result someone to burn? It is the action of individual to act on selling and buying right?

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Reading various forums, the concern seems to be that Robinhood makes trading easy for relatively financially illiterate people. They think they are getting free trades, and with easy access to margins and complex instruments such as options, it gamify’s the whole investment experience. This encourages people to trade often and frequently with a decoupling of the sense of value of money. It works to Robinhood’s interest (since they make money on the backend) but negatively impacts the average Robinhood user. A close analogue or parallel I can see (they may even be following that strategy) is the “gacha” mobile games and how they part the user from their money.

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I suppose you have a point @Jil, technically it’s not Robinhood’s fault. However as @BA_lurker notes, they’ve made trading so easy/efficient and have sucked in a very young, inexperienced customer base. They’ve almost used gamification for trading, which is not a positive thing in my book.

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index funds? referring to sector etfs? Usually by index we meant S&P, Dow, NASDAQ, total market, small/mega cap.