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Robinhood CEO: The retail investors that have felt 'talked down to' are now 'empowered'

·Senior Writer
·3 min read
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The pandemic, stimulus checks, the ability to own less than one full stock, and concurrent rise of commission-free trading have coalesced into ripe conditions for first-time investors. It’s been a good time for both buy-and-hold types and the daytraders meme-ing Gamestop (GME) to the moon. (The stock has soared more than 1,000% so far in January, though… check because it’s changing every minute..)

Robinhood, which is responsible for popularizing both commission-free trades and fractional investing, has long had the goal of democratizing investing. In an interview with Yahoo Finance, CEO Vlad Tenev explained that the investing climate of the past few days has illustrated a key problem in the world of investing – inequity.

“Retail investors and individuals have felt like they’ve been talked down to. Lots of them felt like they haven’t been taken seriously,” he said. “There’s this term 'sophisticated investor’ that’s been thrown around, so there’s an idea that they’re unsophisticated.”

Over the past few days, a group of retail investors on Reddit have swarmed on a few stocks, many with short positions held by hedge funds — “the establishment.” Because these stocks are relatively small in terms of market capitalization, the retail investors have been winning.

Vlad Tenev, co-founder and co-CEO of investing app Robinhood, speaks during the TechCrunch Disrupt event in Brooklyn borough of New York, U.S., May 10, 2016. REUTERS/Brendan McDermid
Vlad Tenev, co-founder and co-CEO of investing app Robinhood, speaks during the TechCrunch Disrupt event in Brooklyn borough of New York, U.S., May 10, 2016. REUTERS/Brendan McDermid

“There's a lot of pent-up aggravation at the financial services industry that's been brewing for the last 13 years,” one Redditor told Yahoo Finance on Wednesday. .

[Read more: GameStop phenomena is about 'the poor vs rich': Reddit WSB user]

As one former hedge funder wisely said, it’s easier to fight 100 mini Mike Tysons than a big one, and that’s what the “upstarts” are doing.

“I think people are seeing now that [retail investors] now have the ability to invest and they’re empowered,” Tenev said.

Clearly, the sophistication required to both have a solid investing thesis but also convince others of that thesis, resulting in margin calls for the short sellers, is something new and impressive.

One theme going around since the beginning of this latest retail investing boom is that this group is getting smarter. New investors, eager to learn, are driving up traffic to brokerages’ websites with educational content. Perhaps with GameStop the retail investors — the day-trading side — are having their Terminator Skynet moment, becoming sentient and gaining the upper hand, at least in certain cases.

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Tenev told Yahoo Finance that Robinhood had over 3.2 million people visit their education resource pages last year. (Robinhood has around 13 million accounts.)

“Just this past week we updated [the education pages] and launched a revamped version of our portal, which makes it really easy to go from the basic concepts of investing all the way through the more advanced concepts involving options trading,” Tenev said.

Daytrading may be more exciting, but it’s not the bread and butter of the platform, Tenev was quick to add.

“The truth is, while the activity around more active investing is probably more interesting to report on, the bulk of customers in Robinhood engage in what’s typically called ‘buy and hold’ behavior,” Tenev said. “The majority of Robinhood customers are what they call 401(k) savers, long-term investors.”

Options trading, on the other hand, is a “small fraction of the users we’re seeing,” Tenev said.

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Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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