Bridging the Opportunity Divide

The New Way to Trade Stocks — For Free

October 30, 2014
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The New Way to Trade Stocks — For Free
STOCK MARKET
Developers of the Robinhood free-trading app hope to make the stock market more accessible to young potential investors. Bryan Thomas/Getty Images
The app that aims to democratize access to financial markets.

Reduce stock trading fees to $0. Bring trading to a mobile platform. Make it quick, maybe even effortless. Does this sound absurd?

Stanford University grads Baiju Bhatt and Vladimir Tenev don’t think so. With their new app, Robinhood (due out in 2015), they hope to hook a young generation of financially conservative, uninvolved investors by boasting free stock trading and no account minimums. For consumers, this is a relieving and enticing departure from the $5 to $10 fees (per trade) charged by competitors, such as ETrade and Charles Schwabb — especially “if you’re young and every dollar is precious,” says Halah Touryalai of Forbes.

In an interview with Josh Constine of Tech Crunch, Bhatt states, “Financial institutions have communicated their trustworthiness by having their name etched in some marble building on Wall Street. But that just doesn’t resonate with people any more.” Or at least, it doesn’t mean much to the young generation Robinhood is hoping to appeal to.

Add to that its sleek, effortless-to-use interface (seen in a video collaboration with Sandwich, where a coolly collected, hip, bearded man reclines in his chair and juxtaposes the app’s casual ease to the oft televised hysteria of trading floors), it’s no surprise that half a million people have already signed up for Robinhood.

Robinhood already boasts $16 million in funding from companies such as Google Venture, Index Venture, Andreesson Horowitz and Ribbit Capital, and even from celebrities like Nas, Snoop Dogg and Jared Leto.

While the prospect of effortless, individual stock trading is appealing, Victor Reklaitis of MarketWatch proposes some issues, claiming that, “study after study has shown that most individual investors would be better off trading less rather than more.” Reklaitis also warns against the possibility of young investors falling prey to the app’s total ease and thus over-trading, inevitably losing them money (or, at the least, earning less than they might with a traditional brokerage).

Regardless of varying opinions, Robinhood’s mission to democratize access to financial markets is sure to have an impact on independent traders upon its release next year.

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