Free Stock Trading for millennials
It was during the Occupy Wall Street 2011 movement that Baiju Bhatt decided to democratize finances.
Today, while wrapping himself in a blue blanket against the cold of AC in Palo Alto's office of his first $ 1.3 billion venture, Bhatt said that Thomas Piketty's research on wealth inequality also inspired his mission.
That explains the company's name: Robinhood, whose final round of funding in April sent a value of more than $ 1 billion, making it one of the newest "unicorns". Regarding the means of social change? Free stock trading for millennium generation.
This hardly toppled the capitalist system. However, shareholdings in the United States have certainly declined since the financial crisis. Gallup polls show that 54 percent of US stocks, compared with an average of 62 percent before 2008. The decline is larger among people between 18 and 29 years, compared with 42% and 31%.
"We have ended up in such an annoying situation through a series of backward events where American consumers in general have completely abandoned the money-making system with their money," said Bhatt, 32, dressed in a black shirt and jeans with long hair in a ponytail. He and co-founder Vlad Tenev, 30, are targeting people younger than them. Average users - among the 2 million registered for accounts in Robinhood - in their thirties.
The biggest problem, I suggest, is that some Americans have savings in the first place. Mr. Bhatt replied that there was an important increase in the amount maintained in the Robinhood account. Among those who signed up two years ago and stated less than $ 5,000 total liquid assets, about 26 percent now have more than that in the Robinhood alone.
If that's true, part of it is because of the bull market: the S & P 500 has risen 20 percent over that period. But Bhatt says it is something very different. "Many of these consumers see Robinhood and buy shares as they see from previous earnings," he said.
"If someone says, 'Yes, I think Apple is a great company and they make great iPhone and I want to invest because I think it will be fine', I think it is a great place for people to start. people choose to do that instead of spending their money on a new pair of shoes, that's a great thing. "
He would not agree when I suggested that it might be better for his client to buy and maintain the cited funds that track the index. But he says: "The people do not know what it is, or, [they think:] 'It sounds like talking about finances.'" Just what's better, Apple's portion is better than a new pair of Adidas.
It's harder to find the social good in the way Robinhood gets paid. Sen comes from the sales flow of customer orders. Do more in the interest earned from your savings. But the biggest source of income seems to be the "gold" membership plan, which offers margin operations, or "gold purchasing power". Gold members pay $ 10 per month for a $ 2,000 credit, or as much as $ 75 per month for $ 15,000.
Somewhat worrisome: Robinhood finds a monthly subscription model after realizing that their customers can not calculate interest rates. "They do not feel comfortable doing that mental math on their heads," said Mr. Bhatt. Should they then buy shares with borrowed money? More broadly, is friction always bad? It costs only $ 4.95 to place transactions in Schwab, a traditional broker. It does not seem like a very expensive investment barrier, but it can hamper hyperactive trade in low numbers.
Robinhood customers experienced coercion last week when the company system crashed and angry users picked up Twitter to complain that they had lost money as a result. "This is not one of our best moments," said Mr. Bhatt. "I mean, that's unacceptable." You invest more in software engineering to try to avoid this problem.
While struggling to find a can of soda in a mini-fridge bottled with beer, Mr. Bhatt made an interesting, unusual speech among Silicon Valley's founders today, for public gain. "I think all these companies are kept secret as long as they are really bad, companies have to go public and they should not collect $ 7 billion before them," he said. "I think that would be good."
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