Flavio Frohlich
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9/4/2020

3 Things I learned about myself when I started using Robinhood

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Investing used to be a complicated process only accessible to rich and privileged  people. Apps such as Robinhood promise easy access to the stock market (and more), which I thought to be a great idea. Briefly, these apps let you buy and sell stocks (and other financial products including cryptocurrencies) without commission (fees). Recently, I have decided to try it. I was not prepared for what expected me. I have only lost money (too be expected, given that most amateur investors do poorly when they start picking stocks instead of being smart and buying index funds). The premise to all this is that I am not a professional investor and know about as much/little about the stock market like any random person (definitely not equipped to give you financial advice). Today, I would like to share with you my experience and the lessons I have learned.

(1) Using the app is (too!) straightforward. It is built to make it as easy as possible for you. You can connect a checking account and are immediately ready to invest. The user interface feels like a game and it is indeed very, very easy to start investing. In that regard, the user interface easily beats whatever I have seen from more established banks. And here is where the problem starts. The app may as well be a slot machine. Once I was in the red (very quickly), it was far too easy to "instant-transfer" more money to keep on buying to make up for the losses. The mental energy required for not falling for this was quite substantial. Lesson 1: Once something feels like a game, we can easily forget what is at stake (your hard earned money!) and get caught up in the moment.

(2) Using this app, I quickly saw myself making many kinds of "think mistakes" that I thought I would be immune to. Having done quite a bit of math in my life, I was ready to throw all this overboard and replace cool reasoning with quick and irrational thoughts. For example, as a particular share started going up, it was easy to convince myself to buy into this as well. I usually see myself as an independent thinker but I guess the worry about missing out on an opportunity quickly drove me to become a follower instead of a leader, which is not a good idea when playing the stock market. Lesson 2: Everyday we experience the pressure to act like everyone around us. Learning how to recognize and manage this pressure sets us free and makes us a better leader.

(3) Emotions win, each time. Having spent most of my life in school, I would have predicted that I know how to use reason instead of emotions. Think twice. Very quickly, I realized that my investment decision were driven by raw emotions such as fear of missing out (FOMO), excitement about (potentially) absurd gains on any given day, and in general my desire for excitement and distraction from the more mundane things in my life.

Overall, I have lost a little bit of money (I set myself a cap that I have not yet passed...) and learned a lot about my own vulnerabilities and how apps are designed to exploit them. Now, not all is bad. I always enjoy learning about myself. Also, I still believe that giving people who do not have investment accounts the chance to invest is a good thing. Note that I am (by far) not equipped to give you financial advice. However, I think there is a broad consensus of experts that you should buy index funds and keep them long-term. 

If all this does not deter you, here is the link to sign up for a free account and try. Note that this is an affiliate link that will give you (and me, at no cost to you) a free stock (small chance to get a fancy one like Amazon, again the gambling marketing strategy!) when you sign up. You have been warned! Please share your thoughts and your own experience.

Take care,

Flavio


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careersbooster link
9/14/2020 10:15:17 pm

This is one of those plays that you can just go and admire. I know that it is not that popular, but it is very entertaining. Not only is it a timely play, but it also tackles issues that we have yet to face. I hope that we can go and watch it. I know that it is going to be a bother for your schedule, but please, just go and watch it, believe me, you will thank me later.

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