4 Reasons to Avoid Robinhood
In the past year, retail investors have flocked to mobile trading apps to get in on the stock market -- but Robinhood Markets (NASDAQ: HOOD) and its well-known trading app have had a rough 2021 thus far. Here are four reasons why investors should steer clear of this recent IPO.
Options can be difficult for new investors to understand, and in some cases, they present the unlimited risk of financial loss. In the first quarter of 2021, options made up 38% of Robinhood's revenue; on each option trade, the site earned $2.90, compared to $0.40 on each equities trade.
Robinhood's significant earnings from option bets give it an incentive to push inexperienced investors to trade those risky securities -- and potentially lose all their entire investment on a single trade. That's a risky business strategy for Robinhood's users, especially since the company has yet to weather any bearish market conditions.
Source Fool.com
