News, Culture & Society

Robinhood’s Traders & Their Fanaticism of ETF Trading

It was sometimes back when a group of individuals, more precisely those, who wanted to invest and trade developed an app called Robinhood. This downloadable app was made available to the general public free of cost. In the initial days of its operation, the app was launched to allow multiple trading options which included all types of traditional trading as well as crypto trading.

As of today, the app could be used for conducting fractional trading and also for recurring investments on a short and long-term basis. Both these options had been integrated at the start of 2021 only.

However, it was in 2020, when the popularity of this app skyrocketed. It then became a prominent app where traders started to pursue their trading careers. The pros and cons of this application are that the trading accounts are not subjected to minimum deposit, everything from trade to execution is streamlined and it allows crypto trading as well.

The traders at Robinhood are fond of remaining active most of the times wherein the large number of traders are actually sound and profitable trading. But there are also some of the investments which raise a big question mark. As a matter of fact, this questionable investment venture is the popular one amongst Robinhood traders and relates to stock trading.

It was revealed in an analysis compiled by Bloomber, a Financial News firm that a large number of Robinhood traders are fond of buying “thematic ETFs”. It was reported by Bloomberg that in 2020 alone the investors had put in 20 Billion Dollars in investment in ETF. It was further revealed that in November alone, ETF received an investment of US$ 5 Billion approximately.

Thematic ETFs are known as exchange-traded funds that are against the traditional formula of exploring broader markets. Instead, ETFs could be for instance an exposure of investment in pet products or the marijuana industry.

Considering an investment in ETF could go either way but it is largely considered as a smart move. But this depends entirely upon the investors and their skills whether the industry, where they had invested the money, would prospectively outdo or not.

But most importantly, this type of investment is rather more risk free than its principal form of trading i.e. stocks trading. It makes sense because if a trader has bought stocks of one particular marijuana producing company then the risks are greater. However, if a trader has injected the investment in the overall marijuana industry through ETF trading option, then the chances of risks are lessened. Instead, the chances of successful trade are increased automatically.

So in simple words, thematic ETFs enables traders to explore beyond the horizon of simple trading, which impersonates the broader market only. Normally in stocks trading a trader is not required to conduct fundamental analysis. However, in ETF a trader has the opportunity to learn fundamental analysis. This is because ETF requires conducting research to keep the investment secured and profitable simultaneously.

There is yet another rationale behind Robinhood’s traders investing wholeheartedly in ETF.

There are currently two major types of thematic ETFs that are highly popular amongst Robinhood traders. One is called ETFMG Alternative Harvest which relates to cannabis or marijuana industry. The second one is the United States Oil Fund.

It was recently reported by Motley Fool that both these ETFs were neither sound investment ventures nor were profitable in 2020. It said that the reason for both ETFs not being sound was the outburst of the Covid-19 Pandemic.

Due to lockdowns and restrictions on movement, the global oil industry was severely damaged. Similarly, due to the same reason, the marijuana industry was adversely affected. So those traders of Robinhood who had invested in both of these ETFs succumbed to great losses as they opted for short-term investments. Only if they had invested for long term basis then there was a chance that they could have earned profits as well.

Now once again the marijuana industry, as well as oil industry, have started to show signs of growth and stability. But before investing in ETF, it is better to treat them with care and caution.