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Robinhood has Changed the S Robinhood has Changed the Stock Market Columbia Southern University EH 1020 English Composition II Robinhood has Changed the Stock Market Robinhood s commission-free investing application has democratized finance for all with its simple, user-friendly layout ...
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Robinhood has Changed the Stock Market
Columbia Southern University
EH 1020 English Composition II
Robinhood has Changed the Stock Market
Robinhood’s commission-free investing application has democratized finance for all with
its simple, user-friendly layout and features which include no account minimum, subscription-
based margin service and fractional shares. For decades, trading in the stock market was
exclusive and required a specific skill set, and a large sum of money and time. Robinhood's free
investing application has given the average investor the power to take their finances into their
own hands and at their own pace (Robinhood, n.d.). The influx of new investors would typically
mean more money is circulating the market, which equals more profits; however, some investors
are not fond of the new investors inspired by Robinhood because they believe they are gambling
instead of investing. Others believe the market change is occurring because Robinhood investors
are a much younger generation with different long-term goals and risk tolerances. During the
early stages of the Covid-19 pandemic, the stock market experienced a steep decline, which
caused many investors to liquidate their brokerage accounts to prevent capital losses to their
retirement accounts. When the stock market continued to tumble due to fear, uncertainty and
nationwide lockdowns, Robinhood investors were buying the dip and “did not panic,” wrote
Welch, a Finance Professor from the University of California, Los Angeles (Tepper, 2021).
Robinhood’s impact on the stock market stems from its ability to attract a new generation of
traders and investors. Believe it or not, the new and inexperienced Robinhood investors are
creating a more stable and forward-looking stock market. However, some do not view it that
, way; older investors with much more experience believe Robinhood investors are overly
optimistic and believe they are creating nightmare valuations. Nonetheless, Robinhood has made
a positive impact on the stock market.
The Literature Review
In order to better understand the overall impact Robinhood has had on the stock market, it
is important to understand its innovative investing approach and its ability to attract a new
generation of investors. This review will cover in detail the position of both sides of the
controversy, beginning with the pro-Robinhood side, which views Robinhood investors as
market stabilizers that favors innovation and development (progressive). It will also cover the
position of those against Robinhood, or the con side, that argues Robinhood investors are turning
the stock market into a casino, completely disregarding financial fundamentals and risk
management.
A Brief Look at the History of Robinhood
Robinhood came on the scene in early 2015 and was popular in countries all over the
world. It was created with one objective in mind, to democratize finance for all. Robinhood’s
CEOs Vlad Tenev, and Baiju Bhatt, had a strong belief that the financial system should be built
to work for everyone, which is why they designed an investing platform that lets average people
invest at their own pace and on their own terms (Robinhood, n.d.). Robinhood is one of the first
brokerage companies to design an investing platform that caught the eye of many new investors.
The investing platform features zero-commission trading, no account minimum, a subscription-
based margin service, and fractional shares, all available on one user-friendly application. Before
Robinhood the typical investors would be charged between $5 to $10 every time they traded
stock; it was also industry standard to require individuals to invest a minimum of $500 just to
open a brokerage account (Curry, 2021). In 2020, Robinhood was estimated to have 13 million
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