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Robinhood Layoffs: How You Are Affected

Updated: Nov 9, 2022

The latest Robinhood news is crazy.

Robinhood's monthly active users is declining.
Image from Robinhood investor relations

The retail trading explosion

When the Covid-19 pandemic changed our world in 2020, people significantly changed their lives. Everybody was stuck at home and unable to work, which caused the government to send stimulus money to help people.

Likely out of boredom, people took this stimulus money and decided to throw it into the stock market. Robinhood is a beginner-friendly platform, so it gained a lot of customers at this time.

Crypto booms causing retail FOMO

The stock market is not the only place retail decided to use their stimulus money. Cryptocurrencies had an insane bull market along with the stock market from 2020 through 2021.

People made life-changing money in crypto, which caused a large amount of FOMO from most retail investors. Unfortunately, the crypto bull market ended at the end of 2021, leaving many disappointed with losses.

CEO Vlad blames layoffs on this…

As financial markets were booming, Robinhood was ambitiously hiring more people, anticipating that the retail frenzy would continue through 2022. However, we entered a bear market and a technical recession in 2022, causing many retail traders to flee from the markets.

Robinhood's assets under custody is decreasing.
AUC of Robinhood accounts

Vlad takes the blame

Vlad stated that the Robinhood layoffs were on him because he approved them as CEO, assuming the markets wouldn’t die in 2022. Now that the bear market has shooed away many investors, Robinhood realized they were overstaffed through 2021 and decided to lay off 23% of its workforce.

Robinhood layoffs and market sentiment

The best time to invest in the stock market is when others are fearful and uninterested. That is precisely what is going on in today’s market. Many investors have sold off their assets and are not even looking at the financial markets.

Once the stock market begins recovering, positive investor sentiment will return. Many retail investors lose money because they buy into the hype and sell when the markets come down.

The stock market indexes have gone through 10-year spans where they did not appreciate in value at all. Therefore, the market may not recover for longer than we think.

Layoffs are happening in many companies

The Robinhood layoff news has received plenty of media attention, but many other companies are laying employees off in 2022. Companies like Microsoft, Shopify, Lyft, TikTok, and many more are also laying off employees.

The overall economy is slowing down, and it is reflected in the financial markets. Interest rates are also rising, making it harder for growth companies to borrow due to increased costs.

Can Robinhood go bankrupt?

While the company is laying off staff, there is no news of Robinhood going broke quite yet. If Robinhood goes bankrupt, investors are still protected by the SIPC or Securities Investor Protection Corporation for up to $500,000 of investments and $250,000 cash.

How to invest in a recession

After entering a technical recession signaled by two consecutive quarters of GDP falling, investors must develop a plan. The most important rule of investing is not to lose money.

- Index funds and ETFs

Investing in funds is a great way to ensure your investment will pay you over the long run. Single companies are never guaranteed to recover all of their losses. On the other hand, funds are invested in hundreds of companies, so if one goes bankrupt, it will not affect your portfolio a ton.

- Value stocks

Value stocks generally pay generous dividends and theoretically trade at a bargain price. Value investors use things like the P/E ratio to determine whether a stock is undervalued or overvalued.

How to make money if you are laid off

If you were laid off from your job, there are various ways to make money online. The best way to make money online is to teach yourself valuable skills that are in demand. Ideally, you teach yourself these skills while working a job so you can eventually quit and create your own business.

Valuable in-demand skills:

  • Copywriting

  • Content writing

  • Social media marketing

  • Ecommerce

  • Affiliate marketing

Bottom line

The Robinhood news is further evidence of the economy slowing. The stock market is dead, so it is a great time to start investing in stocks. The best time to start is when others are fearful and uninterested.

The financial market can still come down further, but this is why it is best to dollar-cost average over time. If you are planning on holding your investments for a decade or longer, it is a great time to start learning about investing.

Before you go

You can download my FREE eBook by clicking here!

If you want to keep educating yourself about finance, you must check out these posts as well:

7 Personal Finance Hacks You Must Know

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