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  • Using Robinhood? Read this...

    I actually first hear of Robinhood on this forum. Sounded interesting - how do they do it? Always a catch, right? This post by Rick Kahler, who is quite highly respected in the fee-only planners’ community, explains concisely. I suppose my next question is - why do so many highly-paid physicians choose to use this platform?
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

  • #2
    I have never used Robinhood either. Nothing is free really. You can get "free" advice at Merrill Lynch and pay for it thru commissions. You can get a free dinner with your whole life insurance salesman. If you are actually a trader that trades high dollar volumes of stock it would really behoove you to know exactly how your trades are routed and all the invisible fees you are paying. Frequent trading is also a tax nightmare. Just my 0.02 cents.

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    • #3
      After this week, a lot less people will be using RH and this whole ordeal probably torpedoed their IPO this year.

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      • #4
        It’s an easy way to buy crypto.

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        • #5
          I checked it out to see what all of the rage was about. The mobile interface is overly simplistic and it sends you notifications of stock movements way too often. I suppose it is a way to encourage more frequent trading. The mobile app does not show the duration of your holdings either, like it doesn’t matter.

          I find most other brokerages that I have used to be better. Fidelity, vanguard, TD all seem to do a better job.

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          • #6
            If you’re getting hosed on something that should be as straightforward and transparent as buying a share of GameStop, imagine the possible shenanigans with buying crypto on such a platform.

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            • #7
              I suspect it's a generational thing.

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              • #8
                Originally posted by Hank View Post
                If you’re getting hosed on something that should be as straightforward and transparent as buying a share of GameStop, imagine the possible shenanigans with buying crypto on such a platform.
                Not here to defend robinhood, but i didn't have any issues buying BTC at 10K and selling at 39 and buying back some at 34. The stock buying restrictions (now up to 50 stocks) and sketchy options execution is an entirely different story. when fidelity starts allowing bitcoin purchases, i'll just do it there.

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                • #9
                  This news about RH was posted on here and discussed a month ago...
                  https://forum.whitecoatinvestor.com/...obinhood-fined

                  All of the brokerages, even the "reputable ones" like Fidelity or Vanguard, make money off of slippage and fees. They give you the 100 shares for maybe $75.75 per share, but they bought them at $75.40 per share earlier in the day - or may try to buy them for $74 tomorrow. They buy in blocks of thousands and minimize their commission and SEC fees that way (yet they charge every guy who buys even 5 or 10 shares the SEC fee... and used to charge them a trade commission fee for a trade that was between their brokerage and the "buyer"... no actual trade with the market and no actual market commission, lol). There is still a fee for 'assisted' trades with a broker or brokerage phone rep, hidden fees for most 401k auto-buys or changes, etc tough... even though there is a 99% chance the brokerage is making no trade - only an account note in your account and their leger of what to keep an eye on and maybe buy/sell if needed. It is that way, and it always has been that way since people (and esp 401s/403s) have bought stock from brokerages/advisors and not direct from the company itself.

                  In fact, they usually won't really buy or sell anything at all when you pushed the trade confirm button (unless maybe you are a whale or fund makeing a 7, 8, 9, etc figure trade... in that case, they can't risk that buy stock exploding in price and not owning at least a similar amount of it). What they really do is just give you some shares from their "pool" of that stock or fund. Yes, this is even for VTSAX or VTI direct buy in a Vanguard cash account. Nothing really happened except you got charged a fee - a smaller fee than years ago but still some fee and slippage. You "bought" it and it shows up in your account, but they may own more or less of that stock/fund than all of their clients "own" (smart money is they own much much less, haha). This is why the big funds are not allowed to cash out their giant positions... it would ruin the market. They can short their own stuff, they can sell other options on their holdings, or they can sell off blocks over weeks and weeks, but they can't dump truck a stock instantly. Both the market and the brokerages prevent that (trade limits, market shutdowns, etc).

                  ...As a swing trader (even a day trader in my youth), I will tell you that it $0 commissions is still a huge improvement from having that slippage on top of a $7, $8 or $10 fee on each end (buy and sell). But yeah, the brokerages are all crooked... again, even buying mutual funds at Vanguard gets you ripped off a few pennies or dollars on each transaction or even each share and charged SEC fee that that the brokerage didn't pay (although they do pay the occasional fee on their big block purchases).

                  All of the major ones do free trades now (TD, Fidel, Merrill, etc etc), so I have no idea why people do RH.. probably since it lets people do fractional shares, trade options, spitcoin, or buy OTC stock, foreign, etc when they wouldn't qualify (esp the options) on a reputable site due to too low of account balance or no exp with those things. I have no problem with people buying things they can't afford/understand or trying strategies that are risky... but most of the major brokers curb this stuff unless you have a 6 figure account and have done options steadily and increasing difficulty level... since they want their clients to actually last awhile (for more commissions, slippage, maybe active mgmt fees, etc over the many years)

                  The $0 trades and slippage are not the enemy, though... slippage is tale as old as time. It was going on even when trades were phoned in.... even before brokerages.
                  Last edited by Max Power; 01-31-2021, 08:18 PM.

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                  • #10
                    Originally posted by fatlittlepig View Post

                    Not here to defend robinhood, but i didn't have any issues buying BTC at 10K and selling at 39 and buying back some at 34. The stock buying restrictions (now up to 50 stocks) and sketchy options execution is an entirely different story. when fidelity starts allowing bitcoin purchases, i'll just do it there.
                    I'm still confused about why you'd buy BTC somewhere where you don't actually own it but you do you.

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                    • #11
                      Originally posted by jfoxcpacfp View Post
                      I actually first hear of Robinhood on this forum. Sounded interesting - how do they do it? Always a catch, right? This post by Rick Kahler, who is quite highly respected in the fee-only planners’ community, explains concisely. I suppose my next question is - why do so many highly-paid physicians choose to use this platform?
                      I’m genuinely curious how many (percentage) of physicians use Robinhood. After this week especially, they’ve shown themselves to be unserious with respect to individual decision rights. Not sure why anyone would use them moving forward.

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                      • #12
                        Originally posted by CordMcNally View Post

                        I'm still confused about why you'd buy BTC somewhere where you don't actually own it but you do you.
                        i'm confused why you would want to deal with storing bitcoin passwords, wallets, key phrases or whatever. kind of like having to store physical gold.

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                        • #13
                          Originally posted by fatlittlepig View Post

                          i'm confused why you would want to deal with storing bitcoin passwords, wallets, key phrases or whatever. kind of like having to store physical gold.
                          Some people like to be able to withdraw or transfer their money from the bank and have complete control over it. And, apparently, some don't. How RH treats BTC goes against everything BTC stands for.

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                          • #14
                            Im not a fan of making things more complicated.

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                            • #15
                              Originally posted by fatlittlepig View Post
                              Im not a fan of making things more complicated.
                              Now transfer your BTC without having to sell it like my original statement was about. Nobody has said you can't transfer money in and out of RH which you are miraculously showing can be done. Again, I think you're missing the original intent of BTC.

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