It's bad because the majority of people who invest their own money invest without enough information about the company. Finance is almost deliberately obfuscated to keep retail investors out, and unless you have the time and the knowledge, it's going to be difficult to make decent returns unless you're investing in mutual funds, ETF's, etc.
Disclaimer - founder of http://capp.io and this is basically what we found in our market research.
Depends on the size of the company, IME. Small to mid-caps can be very transparent. To add extra protection, buy at the lower end of the market cycle or when the sector of the stock is out of favor.
No idea. I think investing is advanced enough that you typically need somewhat complex jargon and data to actually make money - over time it's basically become an old boys club and no-one's really trying to make it accessible to regular investor.
I'm sure falseprophet's response would be something along the lines of "index funds bla bla bla professional investors bla bla bla efficient market hypothesis bla bla bla" which isn't necessarily wrong (I agree with this line of thinking myself, mostly) The problem is when people complain about new opportunities for average folk and use an argument that amounts to "we need to protect dumb people from themselves" which is too simplistic an answer for complicated problems, in my view.
Often, people end up being smarter than you think, when given the opportunity (not that I'm endorsing Robinhood... I'd be very cautious about using them, based on first impressions)
If we stopped protecting dumb banks from themselves and everyone else, we wouldn't need to worry so much about protecting dumb people from themselves.
As for efficient markets - I'm still trying to understand how social institutions that melt down every decade or so and are a consistent focus of criminal proceedings can be considered 'efficient.'
We are probably in the same camp; I just wasn't sure if GP was comparing casinos with 'stock trading' or the equity asset class in general, which, if one subscribes to the 'boring' methods of index fund investing, are hard to beat over a 5+ year time window.
I would hope ETFs are available on this platform, since they trade like stocks.
He's probably suggesting that it's risky, because it is. Laypeople should know what they're getting into. I've had the opportunity to invest a sizable chunk of change into the US equity market twice in my life: once in 1999, and again in 2006. I lost my shirt both times. The stock market is not for everyone. It is not always a magical money-increasing machine, although it might "statistically" and "historically" produce positive returns over a long enough term.
If "laypeople" just means "not financial industry insiders", then no, it's not necessarily bad.
If "laypeople" means "people who haven't bothered to spend any time at all learning how the market works (or at least, how it's supposed to work)", then yes, it's a very bad idea. For those people, the market may end up being functionally equivalent to a casino, but without the free drinks.
I think if an ignorant person wishes to trade stocks, the lack of a platform like this won't stop them. Retail brokers like Etrade and Scottrade got the pennystock crowds long ago.
Mentioned in another reply, I would hope ETFs are available on a platform like this, since they trade like stocks. Hopefully that would allow more people to put small amounts of savings into index funds. That being said, Robinhood wouldn't be very innovative on that front, since many brokers offer the more popular index-based ETFs without fees anyway.
