In the world of finance and investing, people tend to want 2 things – to make money and to have ultra low fees. When we look at the stock market, there’s been numerous debates over investment fees and how it can significantly cut into overall returns. As of recent, you’ve seen a lot more investors asking their advisors about fees, and also wondering what service they are getting for the fees being paid. The topic of investment fees has sparked an absolute shift in global investing. ETFs (Exchange Traded Funds) have experienced explosive growth the last 10 years as they offer a model where clients can be diversified but also pay very low fees compared to mutual funds. According to a report by Investopedia last week, ETF assets under management passed a $4 trillion dollar milestone. Many investors and portfolio managers have shifted allocations over the years to incorporate these low cost vehicles that have also outperformed higher cost mutual funds over the long-term. Just how popular are ETFs getting? Well according to the report by Investopedia, it initially took 8 years for ETFs to surpass 1 trillion in AUM. As of recent it only took 1 year for ETFs to go from 3 to 4 trillion in AUM.
Robinhood Took The Brokerage Industry To School
Before RobinHood got involved in Cryptocurrency, it was busy changing the stock brokerage industry by giving people the opportunity to purchase stocks with no commission costs. Robinhood does not offer funds for clients, but it offers investors the opportunity to purchase individual stocks at no cost. You can think of Robinhood as your own self-managed account where you purchase the stocks you like with no commission costs like other brokerage houses would charge you for buy/sell. As we mentioned above, investors are fee conscious which aloud Robinhood to accel. Back in May, Robinhood was on pace for a 7 billion dollar valuation, as its become one of the top platforms for millennials. One may ask, well how does Robinhood make their money? It’s been said that Robinhood collects revenue through “spreads.” A spread is pretty much the difference between the bid and the ask price. With this being said, it might be difficult for short-term traders to get the best execution prices, but for long-term investors this facet is not as important in our opinion. Saving on fees is a much better trade off in the long-term.
Robinhood Expands into Cryptocurrency
As of recent Robinhood has given users the ability to purchase cryptocurrency on their platform. Currently users have the ability to purchase Bitcoin, Bitcoin Cash, Bitcoin SV, Ethereum, Ethereum Classic, Litecoin and Dogecoin. Due to rules and regulations that Robinhood has to abide by, there are currently 39 states that a client could be from to be eligible to purchase crypto through Robinhood. They have all these details on their website. Robinhood has a very solid competitive advantage in our opinion because they aligned themselves well if crypto were to go mainstream. Right now, we are still in the regulatory stage where a lot of people are still iffy. As crypto becomes more mainstream, Robinhood is going to be one of the only places that you could monitor both your traditional and crypto assets. Investors usually like to monitor all holdings one one platform which is what RH will ultimately give you. Many crypto investors right now have wallets on multiple exchanges, which can get very unorganized and stressful. Robinhood is positioning itself to monetize this issue for its clients.
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