According to a new index in the brokerage app aimed at new investors, tech companies, electric vehicle makers and some meme stocks are among the overall mix of stocks in Robinhood users’ portfolios.
These are stocks like Amazon AMZN,
Ford Motor Company F,
and Disney DIS,
It is also Nio NIO,
and AMC shares of AMC Entertainment Holdings,
APE preferred shares,
All of this shows that Robinhood users are buying — and keeping — businesses “they know, understand and believe in for the long haul,” the company said in an announcement Friday morning. unveiling the Robinhood Investor Index.
“The index reflects how our clients invest based on the 100 most-held stocks on Robinhood,” the company said in a statement.
“Unlike most other indices, it is not weighted in dollars, but in conviction. We measure a client’s conviction for each investment by looking at the percentage it represents in their portfolio,” Robinhood added.
““Unlike most other indices, it is weighted not by dollars, but by conviction. We measure a client’s conviction for each investment by looking at the percentage it represents in their portfolio.”
“And to make sure that all clients are represented equally, we have an average conviction for each investment for all clients, whether they have $20 million or $20 million in their account,” he added.
“The index does not reflect an individual investor’s positions or performance, but rather an aggregate view of what our clients invest in on a relative basis,” Robinhood said, noting that it will update the index. every month. (The index does not include exchange-traded funds or cryptocurrency.)
For all of 2021, the 100 most widely held stocks by Robinhood users beat the overall performance of the Nasdaq Composite, and now the two are essentially tied, according to Robinhood data.
The Nasdaq COMP,
is down nearly 23% since the start of the year. The Dow Jones Industrial Average DJIA,
is down almost 12% and the S&P 500 SPX,
is down 15% during this period.
“As investors grapple with volatile stock markets and assess recession risks, Robinhood hopes it can be helpful for users to see where others are putting their money.”
“Validation is really, really important to a segment of our investors, and so they’ll find that very valuable,” said Robinhood chief brokerage Steve Quirk.
In other words: validation is effectively knowing that a certain group of people take the same approach; for some, it helps them feel like they’re not alone.
Of course, there can be pitfalls in completely following what others are doing, but Quirk noted that the index is just one data point to inform investor decisions.
Other indicators paint a bleak picture for equity markets. More than half of people have voted for stock prices to fall over the next six months, according to the latestsentiment survey of the American Association of Individual Investors.
But that could be a “buy” signal, as the organization views the sentiment survey as “a contrarian indicator” like, for example, a value opportunity.
In total, the most represented sectors in the index include consumer durables, technology and consumer services, said Robin Hood.
At the start of 2021, the stock value of memes like GameStop soared, buoyed by social media support from places like Reddit’s WallStreetBets.
But Robinhood came under heavy criticism when it temporarily halted buy orders for GameStop and other companies during the trading frenzy. This was a necessary step due to warranty requirementsCEO and co-founder Vlad Tenev said later, also pointing out that the vast majority of Robinhood users were buy and hold investors instead of traders eyeing short-term games.
Now Robinhood has a new challenge: tough stock market conditions are hammering users’ wallets and presenting headwinds for the company itself. Last month, Tenev announced its intention to reduce its workforce by 23% due to weakening economic conditions which hampered business activity and reduced the value of their holdings.
Assets in custody fell 31% from the first quarter to $64.2 billion in the second quarter, Robinhood said in its second quarter results.
stocks are down nearly 40% since the start of the year.