Ash Blankenship

May 8, 2021

In defense of Robinhood

The investment app Robinhood has taken much heat lately following the Gamestock trading fiasco, when earlier this year traders flooded Robinhood to buy up low cost shares of the video game retailer. The traders who pumped up the stock emerged from social platforms, namely Reddit. I won’t go into details of the events that took place, but if you’d like to learn more you can find a good explainer over at CNET.

Robinhood is now the center of the controversy because mistakes were made, especially because the company halted shares of Gamestock during heavy trading (bad). But Robinhood is also under attack because the company has become a threat to big wig investors.

Warren Buffet, everyone’s favorite investor (?), referred to Robinhood as a “casino” and the SEC says it’s examining Robinhood because they believe it “gamifies” trading, encouraging people to invest more.

In defense of Robinhood

Before Robinhood's founding in 2013, investing in the stock market required thousands of dollars, creating a high barrier of entry and locking most people out. Robinhood broke down that barrier by offering fractional shares, allowing anyone to invest in a portion of a stock, often for as little as $1. And they did so using a functional, easy to use, beautifully designed app. 

Other brokerages have following in Robinhood's footsteps, offering factual shares of stock and mobile apps. But Robinhood is seen as the disrupter and is therefore under the microscope more often. Because of Robinhood's disruption, long-term investors with tens of thousands or even millions of dollars in the markets feel threatened. 

Robinhood's mission explains it best, which is to "provide everyone with access to the financial markets, not just the wealthy." 

And it has done just that. You might say Robinhood is a victim of its own success. 

Fixing the issue

Many people have lost a lot of money in stocks that were purchased using Robinhood. But we all know that investing has its risks. The fact that Robinhood makes investing easy means we're going to see more people take risks. But this isn't Robinhood's fault. We need to be better informed not just about how the markets work but about how money works. We should take responsibility for our financial education. 

But for every Robinhood horror story, there are many successes. 

Many people have used Robinhood to successfully enter the market and generate a positive return on their investments. I've been using the app for over a year. My trades are based on research and I stay away from trading what's trending in the moment (with the exception of Dogecoin, which I love but know that I could lose everything I've put into it and I'm okay with that). 

By breaking down the barriers to entry Robinhood has allowed me to become an investor, just as it has millions of others. And the fact that I can pick up my phone to make trades is icing on the cake. Kuddos to Robinhood!