Why Investors Should Steer Clear of (Most) Robinhood Stocks
There's been lots of volatility on the markets this year since the outbreak of COVID-19, a lot of which has come as a result of more retail investors getting involved in the markets. The pandemic is keeping people at home, and live sporting events have been canceled, meaning people have been buying and selling shares as a way to generate some excitement in their day-to-day lives. And one particular platform that's been attracting young investors is Robinhood.
Robinhood's attracted investors by offering commission-free trades, making it easier to place small bets on stocks. But that low-cost structure may have helped enable investors to take on high-risk positions, sending speculative investments soaring in the process. Here's why you should generally avoid stocks that are popular on Robinhood.
Retail investors, especially those on Robinhood, are often more willing than institutional investors to take on significant risk for the chance to rake in a significant profit. There's no better proof of that than what happened with Hertz (NYSE: HTZ). Despite filing for bankruptcy on May 22, the stock was seeing a lot of activity on Robinhood. Data from Robintrack, which tracks stocks that Robinhood users hold, shows that there were more than 170,000 users who were holding shares of Hertz on June 14. Prior to the bankruptcy announcement, there were fewer than 44,000 Robinhood users who were holding Hertz stock.
Source Fool.com
