Robinhood investors

Context

• The investment made by India’s Robinhood investors in April-June 2020, seems to paid off heavily.

Who are Robinhood investors?

• The?term?“Robinhood"?comes from customers of the US brokerage Robinhood, which, offers online and free trading in stocks.
• Robinhood provides:
  • commission-free trading for stocks
  • exchange traded fund (ETF)
  • American Depositary Receipt (ADRs)
  • cryptocurrencies
• It generates revenue from a broad range of sources, including Gold membership fees, stock loans, and rebates from market makers and trading venues.
• India witnessed its own version of the Robinhood surge when large numbers of retail investors opened demat accounts.

What propelled the rise of such investors in India?

• Discount brokerages have drastically lowered the cost of stock trading
• An industry-wide shift to online
• Covid lockdown also provided a window to retail investors

What precautions can these investors take?

• They should avoid any kind of leveraged products such as intraday trading or futures and options.
• They should stake a relatively small part of savings in trading so that losses in the market do not imperil their financial future.
• They should identify conflicts of interest among market experts
• Rather than blindly following someone’s advice, they should do their own research also.