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How does Robinhood make money?

37 10 April 9, 2018 at 04:43 PM
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I've been making small transactions that I would never think of doing in my Schwab account. Since there's no transaction/commissions buying a single share at a time of a stock or ETF isn't a issue.

I've read they make money on credit balances. Mine is less than $100. Unless there are huge cash balances from other customers, I don't see how that pays the bills.

Robinhood Gold has a small monthly fee for margin trading, but how many really use that?

The Robinhood set up encourages small trades. Since they're free, unless I'm missing something, I don't see how that earns money.

I'm OK with all of this. If the company is being funded by investors until the money runs dry, that's fine. If that happens, then I'll just transfer my positions to my Schwab account, and move on. If they do need to charge a small commission to pay the bills, like $1 a trade, I'm fine with that. Other customers should be too, if that's what it takes to stay in business.

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Last Edited by landen118 September 9, 2018 at 03:38 PM

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#3
Quote from Burgerwars
:
I've been making small transactions that I would never think of doing in my Schwab account. Since there's no transaction/commissions buying a single share at a time of a stock or ETF isn't a issue.

I've read they make money on credit balances. Mine is less than $100. Unless there are huge cash balances from other customers, I don't see how that pays the bills.

Robinhood Gold has a small monthly fee for margin trading, but how many really use that?

The Robinhood set up encourages small trades. Since they're free, unless I'm missing something, I don't see how that earns money.

I'm OK with all of this. If the company is being funded by investors until the money runs dry, that's fine. If that happens, then I'll just transfer my positions to my Schwab account, and move on. If they do need to charge a small commission to pay the bills, like $1 a trade, I'm fine with that. Other customers should be too, if that's what it takes to stay in business.
In order to make a lot of money in the future, one must first lose "bait" money. Also, your orders are flagged internally by Robinhood for proprietary studies and sentiment gauging. All of this data will be inserted into mathematical AI models to predict asset price movement by big institutions.

Data is the new gold. That's how it works in the 21st century and beyond.
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Last edited by johndoe35 April 9, 2018 at 07:10 PM.
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#4
When I first read the title, I thought this was about the character who is Robin in Robinhood movie. Lol.
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#5
Quote from johndoe35
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In order to make a lot of money in the future, one must first lose "bait" money. Also, your orders are flagged internally by Robinhood for proprietary studies and sentiment gauging. All of this data will be inserted into mathematical AI models to predict asset price movement by big institutions.

Data is the new gold. That's how it works in the 21st century and beyond.
Wow, this is really interesting stuff. Can you elaborate on it a little bit more? Have any links to look at?
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#6
Quote from platinumdeals132
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Wow, this is really interesting stuff. Can you elaborate on it a little bit more? Have any links to look at?
We are all just test monkeys in the giant data machine. Monkeys work best if they get a sugar cube every once in a while.
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#7
They operate in a similar way as a mutual fund, in that they own a lot of whole stocks and divide them up among people looking for pieces of those stocks. You can allocate pieces of your stock to other people without incurring an ETF fee, so they don't spend a lot of money on the majority of their offering. A lot of customers also hold cash in their accounts, much like a bank does, and their company is making interest off of the idle cash which more than pays for what they spend on you.

This is aside from any data/information on habits they can sell, but looking at google for example, information is money too Wink
Quote from Burgerwars
:
I've been making small transactions that I would never think of doing in my Schwab account. Since there's no transaction/commissions buying a single share at a time of a stock or ETF isn't a issue.

I've read they make money on credit balances. Mine is less than $100. Unless there are huge cash balances from other customers, I don't see how that pays the bills.

Robinhood Gold has a small monthly fee for margin trading, but how many really use that?

The Robinhood set up encourages small trades. Since they're free, unless I'm missing something, I don't see how that earns money.

I'm OK with all of this. If the company is being funded by investors until the money runs dry, that's fine. If that happens, then I'll just transfer my positions to my Schwab account, and move on. If they do need to charge a small commission to pay the bills, like $1 a trade, I'm fine with that. Other customers should be too, if that's what it takes to stay in business.
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#8
Why would anyone use any other broker if Robinhood is free?
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#9
Robinhood crypto doesnt actually go out to market or record any transactions on the blockchain. It acts as an intermediary and sells you an iou ETN kind of thing, which means they always get the full spread on bid/ask anytime anyone transacts, that is easy money.
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#10
Quote from slickpost
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Why would anyone use any other broker if Robinhood is free?
My employer forbid usage of Robinhood. That is one reason why.
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#11
Quote from pr1nyc1
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My employer forbid usage of Robinhood. That is one reason why.
Are you involved in the securities industry? I don't see why an employer would care what brokerage you used. It's your money.

Quote from jd2010
:
Robinhood crypto doesnt actually go out to market or record any transactions on the blockchain. It acts as an intermediary and sells you an iou ETN kind of thing, which means they always get the full spread on bid/ask anytime anyone transacts, that is easy money.
My suspicious self wonders about this. Since you can't transfer in or out crypto, is all this just a book entry backed by nothing? That would work as long as there is not some huge swings generating huge orders where they're not on the wrong side of the market. Anyway, this is probably not the case.
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Last edited by finzz2dlft May 24, 2018 at 12:21 AM.
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