The meme-stock craze helped make trading app Robinhood a household name, but its CEO said some users have shifted from YOLO-style bets on SPACs and crypto toward long-term, passive investing.
Passive investing in broad index funds has been in vogue for years and heralded by the likes of Warren Buffett as a way of avoiding the costs and risks of active trading, like transaction fees and picking the wrong stock.
Robinhood became synonymous with speculative day traders during the COVID-19 pandemic, pioneering the commission-free stock-trading model while drawing fire for gamifying investing with digital confetti and other visual cues.
The fintech company “kind of turned back the clock” on the shift toward simply owning the index, its CEO, Vlad Tenev, said. But traders on its platform have warmed to passive investing, he said on an episode of Bloomberg’s “Odd Lots” podcast released this week.
“A lot of people trade more actively at first and then eventually end up doing more passive investing — mostly because they don’t want to put in the time, they have other things to do, so they prefer all of their investments to be hands-off,” he said.
‘Motorheads’ and minivan buyers
While some traders on the platform are active traders with the latest tech, others are casual retirement savers, Tenev added.
He likened the first group to “motorheads” who care about performance, high speeds, and harnessing the latest tech. “These are the folks that are strapped into their battle stations, and they have nine screens,” he joked, adding that some are “incredibly sophisticated and wealthy, and they even have Bloomberg terminals.”
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The other group is “the mass market” and consists of “folks that buy minivans,” he said. “They want a relatively hands-free and low-friction way of investing and saving for the long term, and we have products that serve both of those,” he added.
Tenev pointed to the growth of Robinhood users using products such as retirement accounts. Robinhood’s assets under custody in traditional Individual Retirement Accounts (IRAs) and Roth IRAs soared by about 600% last year to over $13 billion, according to its latest full-year earnings.
On a February earnings call, Tenev said people were now “comfortable moving in hundreds of thousands of dollars into Robinhood.”
Robinhood’s net revenue grew by 58% last year to nearly $3 billion, helping it swing from a pre-tax loss of about $500 million in 2023 to a nearly $1.1 billion profit in 2024. The improving financials have fueled a roughly four-fold rise in Robinhood’s stock price over the past 12 months, lifting its market value to north of $80 billion.
Bullish retail investors and new products have also helped drive the rise. Robinhood’s stock spiked earlier this week after it announced it was rolling out tokenized investing in Europe.
