Robinhood launches “Recurring Investments” to reduce market volatility

 

Robinhood has rolled out crypto recurring investments to help investors grow holdings over time while potentially reducing the impact of market volatility.

“Recurring Investments” is a feature that allows users to regularly and automatically buy crypto, commission-free and with any given setup, with as little as $1 on a daily, weekly, or monthly schedule.

The neobroker argues that investing on a recurring basis can help focus on long-term growth, reduce risk, and reduce the stress of timing the markets.

In other words, it is expected to reduce market volatility – a problem for Robinhood, which has been forced to restrict trading of several instruments earlier this year on account of the t+1 settlement cycle while addressing extremely high trading volumes, namely during the Gamestop shortsqueeze.

“This is a strategy referred to in the industry as dollar cost averaging. Dollar cost averaging encourages investing money gradually at regular intervals, rather than all at once and regardless of where market prices stand, in order to help smooth out the price swings that can sometimes occur”, the firm stated.

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“Saving is a habit and recurring investments introduces a strategy to grow holdings over time while potentially reducing the impact of market volatility”.

Robinhood also pointed out to recurring investments across multiple coins without ever incurring a fee: “Many other crypto trading platforms charge a commission fee up to 4% for each crypto trade. On top of that, fees on other platforms are higher for smaller recurring purchases than they are for a single large one”.

“While that may make your strategy to regularly invest small dollar amounts more profitable for those companies, it ends up being counterproductive to building long-term wealth. At Robinhood, if you place an order and spend $100 to buy bitcoin, you’ll get $100 worth of bitcoin. Period”, the neobroker concluded as it reaffirms its mission to “democratize finance for all”.

Robinhood has also been under fire for its payment for order flow (PFOF) model, which has allowed firms like E*Trade and Charles Schwab to offer commission-free trades but has also raised alarm for conflict of interest.

The Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, has recently said that it would be seriously looking into the practice of payment for order flow and may also be inclined to ban it in due course of time.

The Australian regulator, ASIC, has recently stated it is reviewing its rules on PFOF in order to restrict the model further.