COLUMBUS, Ohio – A new app explodes in popularity and features a no-commission business model that allows aspiring investors – namely millennials – to play in the stock market.
What you need to know
- With a new share-making app, you can invest commission-free
- The app has 3 million users since early May
- This month, a student committed suicide after an app glitch falsely said he had more than $ 700,000 in debt
According to the company, Robinhood gained as many as 3 million users on May 4. They estimate that about half of them are investors for the first time.
Financial software developer and former Robinhood user Cole Brown says the platform’s success came during a perfect storm.
“First, the unprecedented action of the Federal Reserve, which has convinced many people that nothing bad can happen,” said Brown.
He says the closure of COVID-19 meant that people had more time and that the stock market was a way to gamble virtually when casinos were closed.
“It’s a gigantic casino that is always open,” said Brown.
But Robinhood has not always been so lucky.
On June 12, a 20-year-old student committed suicide after an app glitch falsely said he had more than $ 700,000 in debt.
Robinhood’s founders released a statement saying, “We learned that Robinhood customer Alex Kearns has died by suicide and left a note mentioning confusion with our product. We quickly contacted the family of Alex to share our condolences and offer to speak. We have been personally devastated by this tragedy. ”
The root of the problem, Brown says, comes from developers eager to market their product and from a user group unfamiliar with the financial world.
In short, from what I have experienced with their platform, I have since moved to another broker that I am much happier with, but in the sort of disadvantage where you are going to lose money on this transaction, Robinhood just completely failed to understand the trading that made it possible for you to set up. It seems that this person correctly foresaw a very small risk and then saw this huge number, “he said.
Brown says this kind of confusion is extremely disturbing, but it is not uncommon. In fact, it happened to him.
“I experienced this exactly with Robinhood. Basically, they closed my account for a day, they said I owed an absurd amount even though the total liability on my account was only $ 2,000. It took them 24 to 48 hours to figure it out, after which the loss persisted. ”
He says that if you delve into a financial risk, it is important to trust who is handling your money and to inform yourself of all possible outcomes. And just like at a casino, “don’t play with assets you don’t want to lose completely.”