Alexander Kearns’ last words scribbled on a suicide note. During the pandemic, the 20-year-old investor signed on to Robinhood’s app and began trading options, a complex investing instrument that promises “easy profit.” Worse, he upped the ante with borrowed money called margin.” data-reactid=”12″“I had no clue what I was doing…” That was Alexander Kearns’ last words scribbled on a suicide note. During the pandemic, the 20-year-old investor signed on to Robinhood’s app and began trading options, a complex investing instrument that promises “easy profit.” Worse, he upped the ante with borrowed money called margin.
Fast forward to June 12, the would-be investor run up $730,165 in debt (or so he thought) and took his life. This story may be the most tragic, but it’s not the only one.
More and more young investors are blowing their life savings on Robinhood. And as I’ll explain, they all share two things in common that may be screwing up a freshly-minted generation of investors.
Investing Has Become A Game
There has never before been a time when trading was so cheap and so easy.
Take Robinhood, America’s most popular investing app. In minutes, you can set up an account and trade everything from stocks to futures and even complex leveraged instruments. For free!
Not only that, Robinhood was designed to make trading seem fun. Its dumbed down app was supposed to educate and make investing more accessible to young investors. But all it’s done is convince them investing is a mere game.
In fact, speculating in stocks has become so entertaining that even 10-year-olds are putting games aside to trade. Get this:
risky investments.” data-reactid=”63″All this has turned the new generation of investors into a hoard of “day traders” who cluelessly dabble in complex and risky investments.
A lot of them make rash investment decisions based on rumors or “investment advice” they find on Reddit, or Twitter, or even Tik Tok. Hell, some of them appear to be be picking stocks almost randomly.
Ever heard of the little-known Chinese real-estate firm (DUO) that shot up 300% out of the blue? Well, it happens that the company had “fangr” in its name and Robinhood investors mistook that for “FAANG” stocks.
They bought the stock in bulk thinking they were buying a basket of America’s biggest tech stocks and drove its price to the moon.
Or remember when oil crashed below zero? Everyone scrambled to pick up every fund with “oil” in its name. United States Oil Fund (USO), America’s largest oil fund, became one of the most popular buys among Robinhood investors.
crude oil.” data-reactid=”68″Little did they know, oil funds like USO don’t even hold oil. They also don’t consistently track oil’s price over the long run. And yet many investors bought these funds thinking they were buying crude oil.