Back in 2017, we witnessed how Bitcoin was successful in catching the attention of young people. It became the major gamble for most of the people, especially the young and inexperienced investors, which had a graph going vertically up and warned the investors. This year, Robinhood may also act as a ringing bell for the investors.
Robinhood Inc, an American financial services, offers people a platform where they can invest in stocks, ETFs and options through app and website with no commission or low fee charged. It operates entirely online without any branches under it. With the user base of around 10 million people, it earns revenue from interest earned on customers cash balances, selling order information to high-frequency traders and margin lending.
Craze for Robinhood:
The current pandemic has left everyone with no other choice but to sit at home and wait for miracles. This has turned everything stagnant and kept billions of people sitting idle at home. In the absence of any sports gambling, the youth generation has started shifting to the stock market for entertainment. This has become a global craze where phenomenal trading is carried out through this online platform provided by the company.
Secondly, due to saving accounts gifting low interest to amateur investors, they have now been inclined towards stock market. The attractive and key factor for using Robinhood is it being a zero fee trading app. This is generally beneficial to retail investors or small investors who love investing in penny stocks and taking less risks. Robinhood was successful in attracting the first-time stock investors and witnessed 25% increase in number of users with 3 million retail investors joining after the pandemic spread out. This has made merchants and investors busy throughout the day thereby adding craziness amidst this global pandemic.
This craziness has led to a cold war in terms of controlling the stock market between Robinhood Community and regular investors. The number with which new retail investors were joining into Robinhood, made them cause a bubble in stocks.
These investors are making a huge return in smaller sector of the stock market, where they are investing more in penny stocks and bankrupt names which are generally neglected by the experienced investors and thus, they are unable to have control on the overall market.
Even after being inexperienced, not-so technically skilled, these retail investors were successful in turning market to their side and making it bullish for their advantage.
A statistics released by Barclays that: Robinhood investors’ approach has worked so far, with the smallest 25 stocks by share price in the Russell 2000 index averaging 124% in return since the market bottom in March, compared to just 28% on average for the biggest 25 names by share price, shows how they have increased average return percentage and are successful in earning even at this Covid-19 period where many big markets celebs where feeling helpless.
This might also create a negative impact for other major investing platforms where youth and retail investors used to invest. They might see less rally coming their company’s way. But, it has surely been a great success for Robinhood, a start-up influenced by 2008 recession and is believed to have been gifted in the next Economical Recession of 2020.
Stocks which performed well in Robinhood:
Coronavirus has turned to be an opportunity for pharmaceutical and biotechnology sectors. Every big player in this sector has been spending billions in their Research and Development to come up with the vaccine for this pandemic. Similarly, all the traders know about the good future growth in this sector and have started investing in them. Two companies which are Pfizer Inc. (PFE) has been added to 110,008 Robinhood accounts and Moderna, Inc. (MRNA) has been added to 106,045 accounts, within a span of just one month and also are the winners in the race for the last month. Both companies recently announced that their new coronavirus vaccines are entering phase III trials. And, if they pass the last stage then it will surely see a vertical growth for a longer period of time.
Some other companies which performed explicitly through this platform where Tesla, Amazon, Apple, NIO, Microsoft, among others. Electronic vehicles have been one of the safest investing trends for this year. This is the reason why Tesla stock has performed so well has become mean reversion traded stock where retail investors would buy it when it is low and sell at a higher price. Due to such variations, there has large amount of stocks being traded in this company. It gained around 30% in the last quarter and their capital now stands at $267 billion. More than 2,10,000 users rallied towards this company through Robinhood.
Though these 4 months were backing the Robinhood community, retail and youth investors, yet the uncertainty of the stock market can anytime turn the tables. Many Robinhood investors are yet to see the real harsh faces of investing in this financial market.