ROBINHOOD Tracking

A lot has been said about Robinhood traders on social media and in trading & investing circles. Some call them bag holders while others call them dumb money. They have been blamed for large inflows into ETFs like USO or JETS when the seemingly "smart money" was heading for the exit but if you look back many of these "popular" stocks have done well. So the question is "are the Robinhooders, as they are called, really dumb money or is this just a cases of wall street smarty pants being a little jealous of common man making some dough?" 

Let's find out !!

In this age of information, a great thing about Robinhood traders is the data. You can see some interesting statistics here. 

So to put the Robinhooders to test, I decided to create a social experiment. I created two fun indices with real money. 

1. VS-Trader Robinhood Popularity Index(VRPI)
2. VS-Trader Robinhood Momentum Index (VRMI) 

Both indices are created today with starting value of USD 1,000 each. The indices will follow the following rebalancing rules:

VS-Trader Robinhood Popularity Index : VRPI

• This index will track the top 5 most popular stock on Robinhood. 
• The index constituents will have equal weight in amount to begin with i.e. 1/5th of the index value to start with.
• The index will be rebalanced every quarter end thus next rebalancing will be on 30th September 2020.
• At the time of rebalance, the index constituents will be replaced by the top 5 most popular stocks on Robinhood on the rebalancing date with the following provisions:
• If a constituent maintains the position in the index at the time of rebalance it will not be sold.
• The new constituents will be added by sharing the equal weight of the amount raised by selling the outgoing constituents.
• If a constituent goes to zero or delisted (very likely with some of the Robinhood holdings), it will be replaced by new constituent on the rebalancing date by selling a part of the remaining constituents. 
• Thus this index will always contain 5 stocks or less. 
• No adjustment in the index value will be done for dividends and other corporate actions.

VS-Trader Robinhood Momentum Index : VRMI

• This index will track the top 5 stocks with most popularity increase over a month.
• The index constituents will have equal weight in amount to begin with. i.e. 1/5th of the index value to start with.
• The index will be rebalanced every month end thus the next rebalancing will be on 30th June 2020.
• At the time of rebalance, the index constituents will be replaced by the top 5 most popularity increased stocks on Robinhood on the rebalancing date with the following provisions:
• If a constituent maintains the position in the index at the time of rebalance it will not be sold.
• If a constituent is showing profit, it will not be sold. Let the profits run.
• The new constituents will be added by sharing the equal weight of the amount raised by selling the outgoing constituents. 
• If there are no outgoing constituents the index constituents will be sold proportionally to raise amount for new constituents.
• If a constituent goes to zero or delisted (very likely with some of the Robinhood stocks), it will be replaced by new constituent on the rebalancing date by selling a part of the remaining constituents. 
• Thus this index may contain more than 5 stocks over its life.
• No adjustment in the index value will be done for dividends and other corporate actions.

You can see the portfolio constituents, and other details here. I will also provide periodic update on how this strategy works. To be honest I am surprised by some of the entries here but I am keeping an open mind (and wallet open up to USD 2,000). Who says markets are rational!

Let me know what you all think!