Question

In: Finance

Stock trading apps, which allow participants to make commission-free trades, are drawing millions of users. The...

Stock trading apps, which allow participants to make commission-free trades, are drawing millions of users. The apps, which include Robinhood, Webull and MI Finance, attract users who are typically young, new to the markets and are experiencing volatility for the first time. Users say they check their apps as often as their social-media accounts, trading to kill time with the hope of easy riches. Some say the risk for novice investors is reminiscent of the early 2000s tech-stock boom, when online trading brought Wall Street to main street. The new generation of traders are not reluctant to be active. Charles Schwab, the largest e-broker by far, said that trading by brokerage clients hit a record in December. Since launching in 2013, Robinhood has amassed about 6 million clients. Still, trading remains risky. Moreover, some believe that stock trading apps can encourage people to become stock pickers who aren't building wealth and aren't properly diversified.

Do you think it a good idea to use an app to pick stocks rather than a traditional broker?

Solutions

Expert Solution

To trade online or picking up stocks through Stock trading apps is always a good idea in comparison to having trade through traditional brokers because

1) The trading of stock is dependent on the past data and their analysis, so that stock are being picked at the lowest cost and sold out at the top end of the rally. So, such analysis and conclusions can be done more accurately through the computerized online trading.

2) The trading of stock involves huge volume with less profit margin. The commission free trades through Stock trading apps will be a “Icing on the cake”.

3) The brokers are not available each and every time to execute trades, so it will be a convenient to trade online, where there exists a facility to trade at any time with the investors comfort.

4) The brokerage trading requires transfer of funds through checks, whereas in online trading everything and movement of stock and fund is take place account to account online without any lose of time and without personal involvement.

5) In online trading, we are having control on our account through passwords, which is not possible while trading with brokerages.

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