How Much Robinhood Investors Lost In 2022

Robinhood users lost a lot of money in 2022. Now, the company plans to offer advisory and expand its horizons to ensure that it has generational staying power.

Happy Wednesday. For the masses, it’s hump day. However, for the fintech, neobank, and and crypto-aware, Robinhood’s Q4 2022 earnings today are like Groundhog’s Day for their respective industries.

That’s because as a leading industry player, Robinhood’s earnings offer some clues as to how alike publicly-traded and privately-traded businesses might be. While it might be tempting to just take a look at the top and bottom-line, there’s way more to glean from other data in the company’s reports.

There’s a lot of useful data in Robinhood’s own quarterly filings, which makes its Q4 earnings a goldmine. And since the period is Robinhood’s final quarter of the year, that means we can finally put a lid on the worst year for retail investors in recent history.

How bad? Well, a few weeks ago, I used the Robinhood Top 100 list to ballpark that figure. In the hayday of the bull run, we had a live list of the top stocks on Robinhood through Robintrack.net, a project built by my colleague Casey. However, once Robinhood killed the API that Robintrack used to serve free insights on the platform’s users, I continued scraping and compiling a spreadsheet with past and present members of the publicly-accessible top 100.

I concluded in the latest update that the median performance of past and present ‘top 100 stocks’ was -45%. I also matched my work against the somewhat perplexing Robinhood Investor Index and Spencer Jakab at The Wall Street Journal asked Robinhood how well its investors fared. Their answer? Well, they didn’t really offer one to Jakab.

So, I started looking for a verifiable, data-backed figure of how much Robinhood investors lost in 2022. I was genuinely surprised when I found that the company has started being relatively transparent about the loss—it’s about a hundred pages deep in their Q2 and Q3 2022 10-Qs, along with YoY comps, which gives away at least four quarters of recent data.

However, it wasn’t exhaustive—so I started fudging around in Google Sheets to mimic their (simple) formula and track some other stats from their 10-Qs, their S-1s, and other statements. From that, I was able to get users’ losses not just since it started the process of going public in 2020, but all the way back to 2017.

The losses are stark, especially in 2022. Robinhood users lost over $54 billion of their own money in the year. In simple loss terms, which includes net deposits over the period, AUC fell by -36% YoY—which means that investors lost money even as they added more.

If you work in the industry, your kneejerk reaction might be to say that ‘everybody lost money',’ and you’d be correct. However, Robinhood investors lost way more than ‘everybody.’ On the whole, they did significantly worse than the S&P 500 and Russell 2000 over the same period.

The fairest comparison was the Nasdaq-100, which fell -32% YoY.

I was particularly struck by the fact that investors lost so much in Q4, the sole quarter in which the S&P 500 was positive in 2022. However, you can look to Nasdaq heavyweights like TSLA 0.00%↑ for clues. As the most popular stock on Robinhood, Tesla's 50% fall in Q4 probably represented a significant portion of the collateral damage.

I’ve made the sheet with Robinhood’s financials available so you can take a look if you’re interested. I’ll also update it going forward.

In fairness to the company, they are not fully to blame for their own users’ performance. The platform’s users skew younger—in 2020, the company said its average user is 31—and more inexperienced with trading than competing brokers like Vanguard and Charles Schwab. There, account balance averages regularly exceed six figures. Compare that to Robinhood’s AUC per funded account average, which is just $2,704.

However, they are now gainfully aware that new investors’ success is a symptom of their environment. The company’s IPO era “You don’t need to become an investor, you were born one” messaging (which I took a shot at in a 2020 editorial for my friends at Bullish, archived here) has gone by the wayside.

Perhaps the company was scared by the comparisons—”Robinhood, Coinbase, and DraftKings are all in the same business, but only one of them knows it”—and an aggressive media campaign to fault Robinhood for its users’ ignorance. It’s these factors and interpretations that shook the company to recognize that its business is not sustainable if it relies on retail sentiment.

That’s why it’s now leaning into the kinds of things I had hoped for in said editorial: qualified accounts, advisory services, and more robust tools for advanced traders are on the horizon.

Whether that has an impact on the company’s top or bottom-line is hard to discern so far. However, regardless of that, its more sustainable orientation is admirable. I’m hoping we’ll be able to get a feel for its strides, as well as how it affects the broader fintech business, once the company releases its data rich 10-Q for Q4.

Ultimately, I’m once again starting to find myself optimistic on Robinhood and its future—I guess you could call me a fan. Who else would track this stuff down? (Now if only they would call me back for a job…)

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