By Meghan Smith
What seemed like an innocent app wasn’t as harmless or as easy to use as everyone thought it was. In April 2015, an app named Robinhood hit the market. This app marketed simple and free stock trading, something that was completely new to the investing industry. Most other stock trading apps on the market are for wealthier people who can afford a fee for each time they buy and sell stock and are experienced in trading and investing their money. Robinhood was made to target people who weren’t as wealthy, who knew little to nothing about investing, and to democratize the investing industry.
Robinhood allows something called option trading after just a few multiple-choice questions. Option trading is essentially the trading of stock with money that you don’t have and is usually the highest risk trading you can do. The app advertises it as “quick, straightforward, and free.” But as one user found out, this wasn’t the case. In June, Alex Kearns, age 20 and a college student in Nebraska, logged on to his Robinhood account to find a negative balance of $730,000. Shortly after, he killed himself. In his suicide note, Kearn’s said, “I only thought that I was risking the money I actually owned.” By saying this, it shows that Kearns wasn’t experienced enough to be using options trading, especially since he didn’t even know he was using it. Robinhood targets users who are young and inexperienced and allows them to engage in the riskiest stock trading there is. Most users don’t even know what they are getting themselves into.
The Robinhood app has faced a lot of scrutiny from economic experts. While the app does offer an opportunity for people who used to not be able to trade stock, it may not be worth it. Experts say that the app seems a little too much like a game, with confetti shooting across the screen when you make a trade. Also, the app makes trading a stock as easy as swiping the screen, skipping many steps that other similar apps have. The app incentivizes trading and selling stock very often, which makes trading even more risky. This is partially due to how the app makes its money, since it is free to the users. The companies who actually take the users money and invest it in the stock market pay Robinhood a fee to do this. This is due to the fact that these companies are deciding what price they give Robinhood customers for stock and are then buying and selling certain stock to make a profit over the Robinhood users.
While investing is something that most people use to help with finances in the long run, it doesn’t always need to be done on your own. Robinhood, although an innovative app, isn’t safe for college students, or any inexperienced investor, as shown by what happened to Alex Kearns. Daily stock trading is a dangerous game to play if you aren’t an expert, especially if the app you are using seems like a game. Investing is a good tool to use to make wealth, but for people with less experience, you may want to delete the Robinhood app and invest in a financial advisor instead.