How Someone Lost 1 Million Dollars On Robinhood

You want to invest but you have little experience and you don’t want to pay commissions. A quick online search displays several apps willing to help you invest your money. One app kind of feels like a game! It’s got falling confetti, emoji notifications and one-click trading.

So you join the over 13 million Robinhood users buying and selling the riskiest financial products in the market. You don’t have a huge amount to invest, but this is the real deal. This is how you’re investing for your retirement.

You decide to add to your account by funding it with $15,000 in credit card advances, like one Robinhood trading app user did. As he spent more time on the app, he lost more money and took out two $30,000 home equity loans. He spent more time on the app, buying and selling, always hoping to pay off his debts. Although his account value totaled over $1 million this year, almost all of that has disappeared. His recent balance was just under $7000.

Robinhood is appealing to the masses. Its landing page declares, “Investing for Everyone,” with “commission-free investing and more ways to make your money work harder.” 

An article in the New York Times tells us Robinhood’s “sales pitch of no trading fees or account minimums… has turned it into a cultural phenomenon and a Silicon Valley darling, with the start-up climbing to an $8.3 billion valuation.”

The article continues, Robinhood has “drawn inexperienced investors into the riskiest trading. And the more that customers engaged in such behavior, the better it was for the company.”

Robinhood: Better for the Company, But Not the Customer

iFlip believes it’s better to take the high road, to do the right thing. This means doing the best for the customer or investor. Their mission is “to empower individuals to preserve, protect and grow their wealth.”

You don’t have to know how to trade at iFlip. Having the best algorithmic trading software, AI will buy, sell and hold positions in your portfolio. iFlip’s AI is like a living thing, constantly learning, making their portfolios, Smartfolios. AI makes it so even very inexperienced traders can grow their investments at iFlip.

Instead of online financial advisors, iFlip has Specialists to walk you through setting up your professional or advanced Smartfolio Account.

How Does Robinhood Compare to Other Investment Firms?

According to the New York Times, “More than at any other retail brokerage firm, Robinhood’s users trade the riskiest products and at the fastest pace. 

In the first three months of 2020, Robinhood users traded nine times as many shares as E-Trade customers, and 40 times as many shares as Charles Schwab customers. They also bought and sold 88 times as many risky options contracts as Schwab customers, relative to the average account size.”

An Incentive to Encourage More Trading

Although Robinhood doesn’t charge fees for trading, it gets paid more if its customers trade more. It’s called “payment for order flow” and many retail brokers also do it. However, Robinhood makes considerably more for each stock share and options contract sent to the professional trading firms.

For example, New York Times explained, “For each share of stock traded, Robinhood made four to 15 times more than Schwab… In total, Robinhood got $18,995 from the trading firms for every dollar in the average customer account, while Schwab made $195.”

“Industry experts said this was most likely because the trading firms believed they could score the easiest profits from Robinhood customers.”

Too Easy to Trade?

With its trendy stocks and a pop-up green trading button, has Robinhood made it too easy to trade? New York Times reports even beginners with “no investing experience are coached by the app on how to change the answer to ‘not much’ experience” in order to trade options.

They have “made the financial markets accessible to the masses, but the risks of trading through the app have been compounded by its tech glitches.”

According to anonymous Robinhood employees, “Robinhood failed to provide adequate guardrails and technology to support its customers.”

You want to know what you’re investing in and the risk involved. iFlip’s AI provides the necessary guardrails. It helps you avoid large risk through its mathematical algorithms. Every day, AI analyzes the markets to see the best moves for the positions in your Smartfolios.

Technologically Challenged

Most people trying to grow their wealth or retirement choose not to work with a company that repeatedly has their website go “down more often than those of its rivals — 47 times since March for Robinhood and 10 times for Schwab.” 

It was down for almost two days in March and customers were unable to access their accounts. See related blog. 

And last year, Robinhood customers were mistakenly able to borrow infinite money to multiply their bets. This led to very large gains and losses.

No one wants their money stuck in a trade when the market is moving against them. You need rock solid, accurate, fast and simple technology that is consistently up and running. You won’t have those types of problems with iFlip. Since AI is used on both the desktop and the mobile stock trading app, you’ll know your losses will be limited. 

How Did iFlip’s AI Do in the March Crash?

Designed to constantly learn from the market, iFlip’s AI allows the best mobile stock app and the automated trading software to limit your losses during volatile times. Then, the cash saved from those times is used to grow your wealth.

In March, when most investors experienced substantial losses, iFlip investors saved around 20-25 percent of their investment portfolios. You see, iFlip’s AI sold stock investments in the S&P 500 on November 8, 2019. This was well before the market crashed February 10, 2020 losing over 32 percent.

Read How iFlip’s AI performed During the 2020 Crash

Want to see how iFlip can help you grow your wealth? Check out this short video. Then hop over to iFlip and learn more about AI, Smartfolios and protecting your risk.

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Past performance is not indicative of future performance. iFlip data results assembled using various Flip algorithms applied to the equities listed on this webpage (if any). Results compiled for each equity and each algorithm assume a 10,000 initial investment beginning on Jan 1st 2005. A $0.01 / share commission applied. All iFlip price assumptions are based on the opening price of each day as found in Yahoo finance. Yearly NAV data points compiled by compounding annual returns using standard year over year accounting. S&P500 results are derived using the SPY as a proxy. The data on this webpage is not intended as a solicitation. Always seek professional advice for suitability.

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Ed Sweeney is a partner and a founder of RCM Alternatives. Previously, he was a Managing Director of Trading at TD Options, LLC, a subsidiary of TD Securities until 2006. 

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Marc Chesley is a software industry pioneer with a passion for growing people and companies. He is a recognized innovator and operational leader. As former CTO at Infusionsoft, Marc helped grow the company from startup to over $100mm in revenue. He has led as CEO and President of many fast-growth software companies. 

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For the last 10+ years he has trained thousands of employees and business owners on how to market effectively, grow sales and build sustainable growth in their companies.

His passion for technology led him to one of the fastest growing software companies called Infusionsoft, which peaked with over 150,000 software users.  As the VP of Business Training for customers, he developed and oversaw the expansion of the Elite Business Education curriculum program.

Since then he has led as the co-founder and CEO of iFlip, SAAS Financial Technology Company.  His passion is to empower all individuals to grow their wealth for the future through the use of AI investing technology.