Millennials are buying stocks instead of coffee.
That’s according to Robinhood cofounder and co-CEO Vlad Tenev, who said in an interview for Business Insider’s podcast, “Success! How I Did It” that a number of millennials are using the commission-free stock trading app Robinhood to spend less while dabbling in the stock market.
“We’re actually giving people the ability to do something that they haven’t been able to do anytime in the past,” he said.
Data collected over several years of activity on the app show that the app’s average 30-year-old millennial users tend to buy more shares than they sell, and they are more likely to buy a few shares of dozens of different stocks for a diversified portfolio.
Rather than investing money from a savings account, Robinhood’s millennial users are more likely to invest money they would have spent on discretionary items, like a coffee or something from Amazon. And the data show that millennials have actually made and saved money through the app.
“You have these people that maybe are buying 50 different stocks but one or two shares of each and they’re creating these diversified portfolios using small amounts of mone,” Tenev said. “That type of transaction would have cost thousands of dollars in the past — people just wouldn’t have done it.
Check out the episode with Tenev explaining how he launched Robinhood as a viral sensation, below, or keep scrolling for a transcript of how millennials are using the app.
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Here’s the relevant part of the Robinhood interview, explaining how millennials invest:
Shontell: A lot of your users are first-time people dabbling in the stock market. They have got a few hundred dollars to spend. They skew a little bit younger. So what are some of the habits that you’re seeing this younger generation do with their money? Where are they investing it, how are they acting, do you think the recession affected their habits at all?
Tenev: It’s so interesting because there are a lot of habits that we see that have surprised us and that, frankly, we haven’t seen before.
One thing is now that we have several years of activity, we’ve built a really interesting data set, and we can track people as they spend more time in Robinhood. And the customers that joined Robinhood two years ago, we collect their self-reported liquid net worth, so how much money they have in liquid form in cash. Their Robinhood account balance today is larger than their self-reported liquid net worth two years ago. So we had this idea that Robinhood would function as a savings vehicle, and that seems to be bearing out.
Another thing that we noticed is that that money, rather than being diverted, as we might have thought, through checking and savings, really looks like it’s coming out of spending money. So this is money that would have been spent on coffee or on Amazon or just discretionary stuff, and because Robinhood has the experience that you might get from buying a physical product or something on Amazon, it sort of feels like spending in a way that’s very positive and very engaging, but people end up building a portfolio over time.
And one thing that’s super unique is there’s a lot more buying than selling activity on the platform, and you have these people that maybe are buying 50 different stocks but one or two shares of each and they’re creating these diversified portfolios using small amounts of money. That type of transaction would have cost thousands of dollars in the past — people just wouldn’t have done it. So we’re actually giving people the ability to do something that they haven’t been able to do anytime in the past.
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