“Online brokerage Robinhood touts its willingness to lend money to customers so they can multiply their returns just like Wall Street pros, even likening investing with borrowed money to the thrill of riding a motorcycle. What the company doesn't say is that its lending strategy has put clients — who tend to be younger and less experienced at playing the market — in financial peril even before many piled into the shares of struggling video game retailer GameStop in January. “Robinhood's lending so customers could "buy on margin" — in which someone takes out a loan to buy stock, options or other securities — more than doubled in the first six months of 2020, all too often with negative results. Regulatory filings reviewed by CBS MoneyWatch show that investors who borrowed money from Robinhood were nearly 14 times more likely to be unable to repay the loans than investors who borrowed from rival brokerages eTrade, TD Ameritrade and others.”(Sorry / Article a bit dated.(References 2020) Likely, more relevant today than then)
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This whole thing will not end well. Financial literacy NEEDS to be taught to young people. Everyone else would do well to learn about it, without a doubt. I've got "pre-approved loan" offers ready for me to view and take advantage of when I log-in to my credit union account. If I was very stoopid, I'd hop right on and take them! ORK.
Derf
For anyone trying to assess “market climate” and factor that into their macro analysis, this can’t be a positive indicator. I don’t remember the dot com era getting quite this nutty - but do think the hype was more pervasive than - with a very high percentage of (otherwise intelligent) investors drinking the kool-aide.