The investment made by India’s Robinhood investors in April-June 2020, seems to paid off heavily.
Context
- The investment made by India’s Robinhood investors in April-June 2020, seems to paid off heavily.
Who are Robinhood investors?
- The?term?“Robinhood"?comes from customers of the US brokerage Robinhood, which, offers online and free trading in stocks.
- Robinhood provides:
- commission-free trading for stocks
- exchange traded fund (ETF)
- American Depositary Receipt (ADRs)
- cryptocurrencies
- It generates revenue from a broad range of sources, including Gold membership fees, stock loans, and rebates from market makers and trading venues.
- India witnessed its own version of the Robinhood surge when large numbers of retail investors opened demat accounts.
What propelled the rise of such investors in India?
- Discount brokerages have drastically lowered the cost of stock trading
- An industry-wide shift to online
- Covid lockdown also provided a window to retail investors
What precautions can these investors take?
- They should avoid any kind of leveraged products such as intraday trading or futures and options.
- They should stake a relatively small part of savings in trading so that losses in the market do not imperil their financial future.
- They should identify conflicts of interest among market experts
- Rather than blindly following someone’s advice, they should do their own research also.
