Most people are too scared to seriously play the stock market. Few amateurs know enough to confidently invest on their own. Luckily, free iOS app Robinhood launches today to put crowdsourced finance wisdom in your pocket. Track stocks, view advice on what to buy or sell from other users, share your predictions, and build a reputation. Robinhood could turn a new generation into investors.
But it’s not just for novices. Robinhood was designed to be the best mobile stock-tracking tool in the world. Surprisingly enough, that’s not that difficult. When Robinhood’s founders asked focus groups and financial veterans what they use to research stocks on the web the resounding answer was “Yahoo Finance,” but when asked what they used on mobile, most replied “….”
That’s why Robinhood’s founders Vlad Tenev and Baiju Bhatt set out to combine social investing with a sleek mobile design that’s heavy on gestures. They’re the right guys for the job, since this is their third finance company. Both Stanford grads, Baiju got a master’s in math there too, while Vlad dropped out of UCLA’s prestigious math PhD program so the two could found an algorithmic trading startup called Celeris. Then they built the financial software company Chronos Research, which worked with major investment banks.
These experiences revealed the senseless gap in mobile and the unaddressed consumer market.”Think about doing something intelligent with your money,” Bhatt tells me. “We find a lot of people, especially younger people, don’t do it. It’s not that they have some disagreement with entering the stock market, but they don’t know how to do it.” And no one’s really helping. If you look at the top of the finance app charts, you just see things like PayPal, Mint, and various banks’ apps.
So the goal of Robinhood? To put individual human investment advisors out of business and give their jobs to the crowd who can walk each other through smart bets. And that’s an approach increasingly supported by research. Robinhood is working with teams at Stanford and MIT to prove out theories and early data suggesting crowds perform better in the stock market than even the most skilled individual. That’s convenient for people who don’t have the spare change to hire an advisor.
Invest Like The Rich
When you first join Robinhood and its merry band of investors (currently only on iOS), you’ll get suggestions of local and popular stocks to add to your watch list and see friends you can follow. Once finished on-boarding you’ll see your watch list that tracks the performance of the stocks you follow. The News tab pulls in the popular finance articles, which are remarkably up to date and accurate, as well as a personalized stream of articles about your stocks.
Click into any of your stocks to get more info on their performance stats over time, related news, plus a crowdsourced buy/sell rating. For instance, 69 percent of the Robinhood community rates Google a buy right now.
If you want to lend your thoughts, the app takes advantage of the touch interface to let you drag your finger across a chart to show how much you think the stock’s price will rise or fall over the coming weeks and months. Then you can add a short comment to support your prediction. For example, you could swipe to say Google will go up 8 percent in the next three months, and explain “The market is realizing the importance of Glass and self-driving cars, and their synergies with Google’s other businesses.”
The meat of Robinhood is the Feed, where these predictions show up. You can scroll through a global feed or just recommendations from your friends, and agree, disagree, or comment on them. Rather than a broadcast platform, Robinhood doubles as a social network around stocks, where you can ask people specifically why they made a rating. Overall the app feels slick and professional, which is critical to Robinhood as its success largely depends on trust. The style comes thanks to the design team at Google Ventures, the lead investor in Robinhood. Its seed round was also joined by strategic angels including several early members of the executive team from leading electronic market maker GETCO.
Give Shame To Poor Predictors
But how do you know which Robinhood users to believe? That’s where my favorite feature comes in. If you asked a traditional investment advisor what their track record over time is, Bhatt tells me they’d typically dodge, stating “past performance is not indicative of future results.” In other words, they get it wrong sometimes, but don’t want you to know.
Well, guess what, Wall Street? The Internet’s here and it brought its buddy, transparency. Robinhood tracks everyone’s stock price predictions against real-word performance and lays them out on each user’s profile. So you can see someone has rated 107 stocks with 70.42 percent accuracy, an extremely impressive record that earns them a score in the 99th percentile of all Robinhood users, aka, this is someone you might do well to trust.
The app’s Community tab even offers leaderboards of the best performing advisors, and suggestions of people to follow. Bhatt explains that along with fostering transparency and trust, the ratings are “a way for people to show they’re smart. That’s a very compelling driver of any action.” During beta tests, a whopping 25 percent of users were contributing predictions. So much participation is very uncommon for user-generated content apps. It seems there’s pent-up demand for a collaborative approach to stock research that a traditional website like Yahoo Finance just can’t provide.
Democratizing Wall Street
Robinhood is solid already and it’s just getting started. In the future the company hopes to let you actually buy the stocks you’re betting on. That would take it from its current place competing with Stocktwits’ unstructured micro-advice to more directly battling E*Trade and other mass-market investment mediums. In the meantime, it needs to watch out for buy ratings going viral, which can produce big wins for those who jump on the bandwagon early, but excruciating losses for those who buy late only to see the price snap back down.
But what really excites me about Robinhood is how it shifts investing from a game of access to a game of talent and cooperation. The stock market has long been the domain of suits who spend all day researching and the clients who can afford to pay them. With this app, finally anyone can get their hunches validated or invalidated by the knowledge of a crowd that’s held accountable to their predictions. While the stock market will always be risky, Robinhood lets you know you’re not alone in facing those risks.
Tenev explains his app’s name reflects that. “We understand the connotation of taking something from the rich and giving it to the poor. Robinhood is liberating information that’s locked up with professionals and giving it to the people.”
Download Robinhood for iOS