Robinhood or ETrade: Is Robinhood a Good App for Trading?
The decision between using Robinhood or ETrade can be a boon for beginner traders or those looking to diversify their trading strategies. Robinhood, one of the most popular trading apps, has gained significant traction in the market, yet ETrade remains a trusted name in the realm of investment apps. Let's explore the pros and cons of these two platforms to help you make an informed decision.
Robinhood: A Promising Platform for Beginners
Robinhood is indeed a great app and can be a wonderful choice for those who are just beginning their trading journey. Here are some reasons why you should consider using Robinhood:
1. Ideal for Beginners
If you're just starting out, Robinhood provides an intuitive and user-friendly interface that makes trading accessible even for those who know very little about the market. The app's visual representation of stocks, options, and cryptocurrencies can enhance your learning experience.
2. Suitable for American or U.S. Residents
Being an American or residing in the United States means that you can ensure compliance with regulatory norms and potential tax complexities are minimized. However, it's crucial for non-U.S. residents to be cautious, as some investment apps may not be fully compliant or might add complexities to your financial situation.
3. Limited to Niche Needs
While Robinhood offers a wide range of stocks and cryptocurrencies, it may not meet the specialized needs of niche traders or high-net individuals who require more advanced trading features. Therefore, if you have specific financial goals or requirements, you may want to explore ETrade or other platforms that offer such functionalities.
Understanding the Fundamentals behind Investment Apps
It's essential to understand how these investment apps generate their revenue. When trading apps make more trades, they make more money. However, the evidence suggests that excessive trading often leads to losses rather than profits. Here are some points to consider:
1. Longer-term vs. Frequent Trading
The statistics are staggering - dead people's accounts perform the best. The living who perform best act as though they are dead, meaning they seldom log in and check the valuations. Most people lose in investing due to emotions, such as panic selling during market downturns.
A study by Vanguard indicates that the average DIY investor underperforms the index by 2% annually because they tend to buy high and sell low, essentially exposing the issue of the 'behavior gap.'
2. The Risk-Return Paradox
Despite the general market's upward trajectory, many individuals still end up losing money. The Dow Jones Industrial Average has increased significantly since 1900, yet a considerable number of traders still incur losses. This demonstrates that the way these apps promote frequent trading may not always align with long-term profitability.
Broader Benefits of Using Robinhood
Robinhood's primary challenge in the past has been the lack of initial investment. Numerous people believe that 'investing is only for the wealthy,' causing them to avoid seeking advice or starting their trading journey. However, by making investing more accessible through user-friendly platforms, Robinhood can bring many individuals into the market:
According to various sources, 80% of success in investing comes from simply showing up and staying consistent. If more people invest early and often with small amounts, it can lead to significant long-term gains. On the other hand, avoiding investment altogether can lead to overly cautious approaches or risky decisions in the future.
Additional Reading
To dive deeper into the world of trading and investment, explore the following resources:
Forbes - Robinhood Nasdaq Stock Screener Investopedia: 10 Secrets to Trading SuccessBy making an informed choice between Robinhood and ETrade, you can enhance your trading experience and potentially achieve better long-term returns.