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Millennials Are Pouring Into Fee-Free Brokerage Apps

Brokerage Apps

Nearly 7.7 million American workers under 30 are now unemployed, and stock markets have taken a beating as the ongoing coronavirus pandemic continues to rattle the economy; but surprisingly, these younger generations are imbued with a sense of opportunity, rather than risk. 

They’ve chosen the background of a pandemic to kickstart their investing careers.  

The dramatic sell-off in stocks over the last four months, combined with more time at home due to quarantine, has given birth to a new interest in investing--particularly among young novices who favor the new breed of online brokerages. 

All major online stock trading platforms have seen a surge in demand in recent months and new accounts spike in the first quarter of this year. Many new users are young or even first-time investors, and over half of them are aged 34 or under.

In fact, online brokers saw new accounts grow as much as 170% in the first quarter.  

Charles Schwab Corp said that retail clients opened a record 609,000 new funded accounts followed by TD Ameritrade, which reported a record 608,000 new brokerage accounts. E*Trade saw a net gain of 363,000 accounts. 

Despite glitches and crashes on heavy trading volume days, Robinhood has added 3 million accounts this year, with half of them first-time traders. 

In March, when the market was tanking, and as volatile as we’ve ever seen it, the Robinhood platform continuously crashed. The app suffered three outages during the past few weeks of market turbulence.

Robinhood attributed the outages to an infrastructure "instability" that kept systems from communicating with each other. The issue prevented clients from accessing its app, website, and help center. 

Despite the outages, Robinhood has been a major disruptive force in the online brokerage arena. 

It’s pioneering zero-fee commissions policy inspired a new generation of traders to begin their journey. For the novice trader or the would-be dabbler, nothing is better—or easier—than Robinhood. And while it’s not exactly stealing from the rich to give to the poor--as its name would suggest--it is leveling the playing field a bit.

The start-up grew from one million subscribers in 2016 to six million accounts in 2018, and late last year said it had topped 10 million

One of the benefits of having Robinhood in the digital forest is that it has upped the ante for other trading houses. In fact, pressured by Robinhood, all other online trading platforms created their own zero-fee trading platform, instead of charging almost $25 per trade.

Robinhood is especially popular with millennials, with a median customer age of 31.  

Back in 2018, the company decided to go public. In May, the company raised over $470 million in funding rounds, leading to a valuation of $5.6 billion. In late March this year, it was clear that any Robinhood IPO prospects were on hold, just like everyone else, due to the pandemic.

However, this month the company completed a new $280 million fundraising round that pushed its valuation even higher, to $8.3 billion.

So what are all those online trading newcomers interested while eschewing risk in a time of pandemic?

A recent study commissioned by E*TRADE revealed that Gen Z and Millennials are focused on their investments amid the current crisis. According to the findings, investors under 30 say their number one concern during the pandemic is their investment portfolio (53%), followed by their health (44%), and then their ability to afford day-to-day living expenses (43%).

On Robinhood, the top stocks trending right now show an interesting pattern, according to Business Insider: Young investors on the app are betting against legendary traders like Warren Buffett, and even winning. 

Indeed, while Buffett has been liquidating airline stocks because of the coronavirus culling, they’re hugely popular on Robinhood. 

Even car rental giant Hertz has gained 825% since filing for bankruptcy in late May, thanks to Robinhood investors throwing themselves at this moving train despite another legend--Carl Icahn--liquidating his position. 

By Michael Kern for Safehaven.com 

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