Stocktake: Robinhood investors learn a painful lesson

The retail trading craze is well and truly over, judging by Robinhood’s latest earnings report. The zero-commission US brokerage announced it is laying off almost a quarter of its workforce, having seen its number of active users decline by a third over the past year. No doubt, some users decided now was not the time to be risking their precious savings, given the inflationary pressures everyone is facing.

Similarly, it’s safe to assume many stopped trading because they had no choice, having lost a bundle of money following the meltdown in stock and cryptocurrency prices. This was predictable. Ignorance can sometimes be bliss, but reality inevitably sets in at some stage. Between March 2020 and March 2021, more than 95 per cent of US stocks rose in price, so many novice investors were rewarded for doing dumb things. Once the party ended, these same investing novices were bound to learn a painful and expensive lesson.

As far back as 1923, the legendary Wall Street speculator Jesse Livermore warned that people “who look for easy money invariably pay for the privilege of proving conclusively that it cannot be found on this Earth”. It’s as true now as it was then.