- Robinhood joined the stock market at a $US32 ($AU44) billion valuation on Thursday.
- Warren Buffett, Michael Burry, and other top investors have blasted the trading app as reckless.
- Market veterans have also warned day traders against rampant speculation and taking on debt.
- See more stories on Insider’s business page.
Robinhood went public at a $US32 ($AU44) billion valuation on Thursday, capitalizing on booming demand from retail investors seeking to trade stocks, cryptocurrencies, and other assets during the pandemic.
The trading app is popular among amateur investors and day traders because it doesn’t charge commissions, allows fractional investing, and trusts its users to trade on margin and buy and sell risky, complex financial products such as options.
However, Warren Buffett, Michael Burry, and other leading investors have accused Robinhood and its peers of encouraging speculation and excessive risk-taking. Market veterans have also warned newbies not to borrow too much, trade things they don’t understand, or treat investing like a game they’re guaranteed to win.
A Robinhood spokesperson directed Insider to a recent letter from the company’s cofounders ahead of the IPO.
“We’re proud to serve this next generation of investors, and it’s painful to see them continually lambasted in the news reports,” Robinhood CEO Vlad Tenev and director Baiju Bhatt wrote. “Anecdotes of people winning (and losing) large amounts of money garner more attention than the more pedestrian truths – the majority of our customers prefer to buy and hold.”
Here’s what 10 top investors have said about Robinhood and the day-trading boom. Their quotes have been lightly edited and condensed for clarity:
“If you’re a day trader and you can walk and chew gum, you are making money right now. You’re doing the same thing they did in the late ’90s. You’re rolling it. You think everybody is a genius in a bull market.” (June 2020)
Wall Street legend Richard Dennis conducted an intellectual experiment that turned 23 novice investors into overnight millionaires. Here are the 6 trading rules and philosophies that his ‘turtle traders’ live by.
“To the angry Robinhood bros who got into trading stocks this year: I was wrong. You’re amazing. This has nothing to do with the market. It’s all you and your mad skillz. Don’t take profits off the table. Double down, on margin. Borrow everything you can. Stonks never go down!” — sarcastically responding to the backlash from day traders after he tweeted they got lucky and should cash out some of their profits. (January 2021)
“We’ll have a tremendous unwind of a lot of the money that thinks the stock market is a one-way thing.” (March 2021)