By Stefan Caray
When Vladimir Tenev and Baiju Bhatt founded Robinhood in 2013, the company’s website said the two wanted to create “a company that leverages technology to encourage everyone to participate in our financial system.” Instead of stealing from the rich and giving to the poor, Robinhood said its mission is to “democratize finance for all.”
Over the last several years, Robinhood has received scrutiny for its game-like user experience. With Robinhood reporting a relatively-young average age of use, as well as a large percentage of users being first time investors, experts like Nick Gallo, a certified public accountant and financial writer, questioned if college students should use the platform.
Despite the enjoyment of the app by young people, Gallo and others have expressed caution for students trying to “get rich quick” on Robinhood. He questioned if the convenience of Robinhood is worth the potential risk
“I would first caution them to take their time,” said Gallo. “In life in general, it’s those quick and easy wins that turn you into a millionaire overnight that are very few and far between and unreliable.”
However, some college students like Pierce Sanders, a senior environmental health science major and general business minor at the University of Georgia, use Robinhood to learn more about the stock market and hone their trading skills.
“I definitely think it’s a good way to get started,” said Sanders. “It was a really good way to get involved (in trading) and learn the basics of how everything works.”
The gamification of Robinhood could be a reason why it is so popular among a young demographic. Robinhood reports the average age of users is 31.
Sanders acknowledged Robinhood’s approach could be potentially dangerous for those with minimal trading experience.
“I definitely feel like you can get to a point where it would feel like you’re in a casino,” said Sanders. “It’s very simple and you can feel like you’re just giving your money away.”
Tragic stories have been reported as the result of a Robinhood user not fully understanding how the app works. One such occurrence, according to Forbes, led to the suicide of 20-year-old Alexander Kearns, a college student at the University of Nebraska. Kearns saw a negative balance in his account totaling $730,000, when in reality, he was looking at interim trading data and did not actually have a negative account.
Features in the app can be misleading. One animation that existed on older versions of the app, known as the “confetti feature,” displayed confetti after each trade was completed. However, successful trades are not necessarily means for celebration as they do not always mean money is being made. Gallo said features such as these encourage users to trade more, which could prove costly over time.
Gallo said Robinhood frames the experience in a way that convinces young people that more trading will be good for them. “When in reality, they’re only looking out for their own best interest,” Gallo said.
Gallo used Robinhood during his time at the University of San Diego, while Sanders is still on the app today. The two had differing opinions on whether or not college students should use the platform. Gallo advocated against it, while Sanders was in favor of Robinhood. However, the two had a very similar message for those thinking about trying the app.
“I’d definitely recommend it,” said Sanders. “But I would definitely advise caution because if you’re not smart you can definitely mess up a lot of things.”
Stefan Caray is a journalism student at the University of Georgia.