How the Neobroker tempts us to gamble
With the Corona crash, many young people in Germany went public. Trade Republic plays a big part in that. With the latest update, however, the neobroker wants to tempt its users to gamble. That is very dangerous! A comment.
I have been active on the stock exchange since March 2020. It all started with a few shares that my father had given me. A few days later, on the recommendation of a good friend, I opened an account with Trade Republic – and since then I haven’t made a better decision from an economic point of view.
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And like the official surveys of the Deutsches Aktieninstitut (DAI) show I’m definitely not alone. After the stock market in Germany had a difficult time, interest in investing returned with the start of the Corona crisis.
There were more than 12 million investors in Germany in both 2020 and 2021. In both cases, this corresponds to highs in the past 20 (!) years.
Trade Republic, Scalable Capital and Co.: The success of neo-brokers
But how is it that young people in particular are suddenly interested in trading in shares, ETFs and the like? As is so often the case, the answer lies in technology.
Because in fact, with the Corona crash on the stock markets, the great triumphal marches of the neo-brokers began. Their business model is simple: the cost of buying and selling shares is very low. It is operated via smartphone and the purchase is uncomplicated. A simple concept for success.
The best known is certainly Trade Republic. Noisy own information the Neobroker has over a million users. Current estimates assume a much larger target group. The Berlin fintech is said to have between two and three million users.
If you want to buy or sell shares in the German flagship company, you pay one euro – regardless of the amount invested. Stock and ETF savings plans are executed completely free of charge.
Thus, the barriers to entry for newcomers to the stock market are very low. The inhibition threshold to register is correspondingly low, which explains the high user growth at Trade Republic.
Dangerous update at Trade Republic: The urge to gamble
Minus 0.54 percent looks like a crash in the Trade Republic app. (Photo: Screenshot / Trade Republic)
In August 2022, however, Trade Republic rolled out an optical update for its own app. This is not uncommon for the Neobroker itself. After all, the users express many wishes and the further development of the central trading point is crucial for future success.
However, the latest innovation is not recognizable at first glance compared to the previous changes. And that is what is so dangerous about the situation.
More drama in price action for more buying and selling
Specifically, the Berlin neobroker has worked on the presentation of the price development. The rashes have increased significantly. The screenshot on the right shows a mere 0.54 percent loss on the day at the bottom. A value that is perfectly normal.
However, at first glance, the course development suggests that there has been a small crash with losses of between two and five percent. This is definitely a change for long-term users of Trade Republic.
The problem with it: The distorted display creates visual fears. If your own deposit is supposedly in the red, some users are more quickly tempted to sell shares in order to minimize the alleged losses.
More sales – and also more purchases – are in turn financially interesting for neobrokers, since they also earn more money with a higher trading volume. This gives the visual change a negative aftertaste.
Buy and sell stocks: be careful with hasty shots
That’s why it’s all the more important for shareholders to be cautious. We must not allow ourselves to be tempted to invest by optical representation variants.
So before you quickly press “buy” or “sell”, you should first look at the exact numbers. How big is the loss or gain really? Are there fundamental changes in individual stocks that could be responsible for a crash?
If that is not the case, the old motto of successful investors on the stock exchange applies: wait and see. Because unrest is the most dangerous companion on the trading floor.
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