Being unleashed from long-held trading constraints can also result in unrealistic and overconfident expectations and blind spots in one’s hunting instincts …
The digital app economy has empowered anyone with a smart device to tap into opportunities around the globe: jobs, gigs, gray imports, soul mates, brides and even stock market speculation.
Ever heard of the Robinhood finance app? It runs on a zero-commission stock and cryptocurrency trading platform claiming to “democratize finance for all”.
Things were going well for users until the inevitable happened: where you see people lose their life savings when hit rock-bottom.
When everything went wrong
In December, 2020, the United States Securities and Exchange Commission stated that “Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices.” In the same month, the Commonwealth of Massachusetts accused the company of manipulating inexperienced customers and exposing them to risky options.
In January, 2021, the company found itself fending off complaints after outages, and restriction of trading. At the moment, the Robinhood app is available only in the United States (plans to expand were derailed by pandemic) but even non-Americans with a US Visa can open it.
Think of all the Asian executives who travel to the US and are able to download the app. Conversely, there are Americans who work in Asian countries who then download the app, as this amusing thread goes:
1st Man: I’m an American citizen I work and teach in China and I want to buy stocks using Robinhood. Am I able to buy stocks from China. I set up an account but I can’t download the app. Any help would be appreciated.
2nd Man: Get a VPN. You’ll need it in China anyhow. Unless they started blocking VPNs already.
1st Man: Yea I already have a VPN, I figured out the app. I was in the Chinese App Store. Soon as I switched back to American App Store I could download it.
3rd Man: And lie about his residency?
1st Man: What do you mean, my residency is in America. I have an American address. I just work in china, I’m still a us citizen.
Similar trading apps
Webull is a China-owned app created by an alumnus of the Alibaba Group that, like Robinhood, offers zero fees and no account-minimum. Unlike Robinhood however, Webull provides two free stocks after a user opens an account. It is worth noting that Webull has taken in thousands of dismayed former Robinhood traders.
TD Ameritrade, available in over 100 countries, has the same offerings as Robinhood: zero fees, zero promotion, and no account-minimum. The app offers stock trading and even retirement guidance.
Other similar trading apps and platforms include eToro, IG, and Interactive Brokers, although these offer minimum fees rather than zero commission.
A lesson in digital risk appetite
Editor’s note: It is beyond the scope of DigiconAsia.net to regurgitate the precautions to take when speculating in the various investment instruments, whether online or offline.
What does bear reminding is that, in the digital app economy, while software platforms can and do democratize global users from long-held constraints, they also expose users to new risks and temptations. The Robinhood platform is not the first platform to burn the fingers of overleveraged punters, and it will not be the last. (Remember Cash App?)