Robinhood customers purchase and maintain corporations ‘they know, perceive and consider in for the long-term.’ Listed here are their favourite shares.

All of it reveals Robinhood customers are shopping for — and holding onto — corporations “they know, perceive and consider in for the long-term,” the corporate mentioned in a Friday morning announcement unveiling the Robinhood Investor Index.

“The Index captures how our prospects are investing primarily based on the highest 100 most owned shares on Robinhood,” the corporate mentioned in a press release.

“In contrast to most different indices, it isn’t weighted by {dollars}, however by conviction. We measure a buyer’s conviction for every funding by wanting on the share it makes up of their portfolio,” Robinhood added.

“And to make sure that all prospects are equally represented, we common conviction for every funding throughout all prospects, whether or not they have $20 or $20 million of their account,” it added.

“The index doesn’t mirror the positions or efficiency of anybody particular person investor, however somewhat it’s an combination view of what our prospects are investing in on a relative foundation,” Robinhood mentioned, noting that it’s going to replace the index month-to-month. (The index doesn’t embrace exchange-traded funds or cryptocurrency.)

As institutional and retail traders grapple with volatile stock markets and assess the chance of a recession, Robinhood is hoping there will be worth in customers seeing the place others are placing their cash.

For all of 2021, the 100 most broadly held shares for Robinhood customers beat the general efficiency of the Nasdaq Composite, and now the 2 are primarily on par, in line with Robinhood’s information.

The Nasdaq
COMP,
+2.11%
is down almost 23% yr so far. The Dow Jones Industrial Common
DJIA,
+1.19%
is down nearly 12% and the S&P 500
SPX,
+1.53%
is off by 15% in that interval.

“Validation is basically form of vital to a section of our traders, and they also’ll discover this very invaluable,” mentioned Steve Quirk, Robinhood’s chief brokerage officer.

Put one other manner: Validation is successfully realizing {that a} sure group of persons are taking the identical strategy; for some, it helps to really feel like they aren’t alone.

After all, there will be pitfalls in fully following what others do, however Quirk famous the index is only one information level to tell traders’ choices.

Different gauges paint a dark view of fairness markets. Greater than half of individuals voted that inventory costs will decline within the coming six months, in line with the newest sentiment survey from the American Affiliation of Particular person Traders.

However that could possibly be a ‘purchase’ sign, as a result of the group views the sentiment survey as “a contrarian indicator” as, for instance, a possibility for worth.

In all, probably the most represented sectors within the index embrace shopper durables, know-how and shopper companies, Robinhood said.

In early 2021, shares in meme shares like GameStop soared in worth, buoyed by social media help from locations like Reddit’s WallStreetBets.

However Robinhood got here below intense criticism when it briefly halted purchase orders for GameStop and different corporations through the buying and selling frenzy. It was a essential step due to collateral requirements, CEO and co-founder Vlad Tenev later mentioned, additionally emphasizing that the large majority of Robinhood customers had been buy and hold investors as an alternative of merchants eyeing short-term performs.

Now Robinhood has a brand new problem: Tough stock-market circumstances are hammering person portfolios and presenting headwinds for the corporate itself. Final month, Tenev announced plans to cut staff by 23% as a result of weakening financial circumstances that had been crimping buying and selling exercise and lowering the worth of their holdings.

Property below custody dropped 31% from the primary quarter to $64.2 billion within the second quarter, Robinhood mentioned in its second quarter earnings outcomes.

Robinhood
HOOD,
+4.95%
shares are down nearly 40% yr so far.

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