I like to write about businesses, companies, tech, the economy, and investing
Thanks to Robinhood (and Reddit)
The days of institutions dominating the stock market are over, with the rise of investing apps such as Robinhood and Sofi, investing is easier than ever and the younger generation is taking advantage and rushing into the market.
The traditional broker firms such as Interactive Brokers, Charles Schwab, and TD Ameritrade all offer digital platforms for investing, however, their UI (user interface) is too complicated for the millennials. Millennials tend to be a lot more impulsive when investing and most of them do not have full knowledge of how the market works, therefore a lot of advanced functions these traditional broker firms offer are basically useless to them. Gen-Z, millennials, and the younger generation now represent 50% of the US population and this market is huge for brokers and investing apps. Robinhood saw this as an opportunity and created an app that is really easy to use and the UI is as clean as it can be. This fits right into millennials' appetite and as some people say Robinhood made the investing app like a gaming app or even a gambling app where a large investment is only one click away.
Then there comes the famous Gamestop incident, where an institution shorted the stock then retail investors short squeezed the stock resulting in the stock price skyrocketing. I don’t want to get into too much detail, but the most important effect here is that millennials now think that they are able to double or triple their money quickly. With the word spreading around Reddit quickly, a new and large batch of millennials decided to get into the stock market through Robinhood as it is the fastest and easiest way to do it. This trend continued with more short squeezes, the rise of meme stocks, the rise of crypto, these events all ignited the thought of getting rich overnight, and investing is slowly becoming gambling. Now thanks to all this market frenzy a lot more millennials are aware of this thing called investing.
I certainly think this is a good thing in a way as retail investors deserve a spot in the stock market and investing wisely can definitely help you accumulate wealth in the long term. However, all these trends lately are resulting in millennials having a totally wrong mindset towards investing. Some people became millionaires throughout these few months but more of them went broke but of course, only the success story is shown on the media. Some of them even got margin calls and are in debt due to having unreasonably high leverage. The design of the Robinhood app is now being criticized as the app is ‘too easy to use which resulting in millennials not treating investing seriously, also it is not logical to allow such young adults with little to no income to have access to such high leverage which might result in significant financial damage.
There is no going back now as only more and more millennials will start to invest due to the market frenzy going on right now. However, to turn the bad into good, it is important to promote the right mindset for investing and have more regulation towards investing apps. If millennials are able to start investing wisely, this whole trend might turn out to be a good thing for both millennials and the market as millennials are able to accumulate wealth and there are now more retail investors and participants in the market.
© 2021 Investoradar