Why Most Investing Apps Are Designed to Make You Trade More

The answer is payment for order flow (PFOF). Every time you place a trade, your broker routes it to a market maker who pays for the privilege of executing it. More trades = more revenue.

In 2021, Robinhood collected $974 million from PFOF — roughly half its total revenue. That same year, transaction-based revenues accounted for over 77% of Robinhood's net revenue.

This creates a fundamental misalignment:

Your broker profits when you trade, but you profit when you don't.

Barber and Odean (2000) studied 66,465 households at a large discount broker and found that the most active traders earned 11.4% annually while the market returned 17.9%. The top quintile of traders — those churning their portfolios more than twice a year — underperformed by over 10 percentage points annually.

Once you understand the incentive, the UX decisions make sense.

1. Confetti and Celebrations

Robinhood famously showed confetti when you completed a trade. The feature drew heavy criticism during a February 2021 Congressional hearing, where Rep. Nydia Velazquez asked CEO Vlad Tenev whether Robinhood had "perfected the gamification of trading." They removed the confetti — but the principle lives on across the industry.

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2. The Home Screen Is a Price Ticker

Open any investing app. The first thing you see is how much your portfolio moved today. Not this year. Not since you started. Today.

This guarantees an emotional reaction — either anxiety or euphoria — both of which lead to action.

Benartzi and Thaler (1995) explained why this matters in their landmark paper on myopic loss aversion: the more frequently you check your portfolio, the higher the odds you'll see a loss — and humans feel losses roughly twice as strongly as equivalent gains.

Checking daily doesn't give you more information — it gives you more pain.

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3. Push Notifications for Price Movements

"Tesla is down 5%!" — What are you supposed to do with this information? Nothing, if you're a long-term investor. But the notification creates urgency. Urgency creates trades.

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4. "Discover" and "Trending" Sections

Social proof meets investing. "10,000 people bought this stock today."

Barber, Huang, Odean, and Schwarz studied attention-induced trading among Robinhood users and found that investors overwhelmingly buy attention-grabbing stocks rather than searching systematically — and these herding episodes are followed by negative returns.

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5. Fractional Shares and Round-Up Features

Making it effortless to buy $1 of any stock removes friction. Friction that, for long-term investors, was actually useful. The small effort of placing a considered trade was a natural filter against impulsive decisions.

DALBAR's 2024 Quantitative Analysis of Investor Behavior paints a stark picture:

• Average equity investors earned 16.54% in 2024
• The S&P 500 returned 25.02%
• That's an 8.48 percentage point gap — the fourth-largest since tracking began in 1985

The causes? Late re-entries, poor rebalancing, and tactical moves that missed rallies.

Average equity investors have now underperformed the S&P 500 for 15 consecutive years. The last time they beat the index was 2009.

Casinos pump oxygen into the room, remove clocks from walls, and make the exit hard to find. They want you in a flow state where you lose track of time and money.

Investing apps do the same thing digitally:

• Infinite scroll through stock lists
• Real-time charts that move while you watch
• Swipe to buy

A CFA Institute report on investment gamification documented how variable reward schedules — the same mechanism used in slot machines — create anticipation and encourage compulsive portfolio checking.

The difference is that casinos are regulated as gambling. Investing apps? The SEC proposed rules in July 2023 to address conflicts of interest in "digital engagement practices" — including confetti, scratch-off graphics, and award systems — but the rule moved back to proposal stage as of 2024.

Regulation hasn't caught up.

A tool designed for your benefit would:

• Show your portfolio value once a week, not in real-time
• Never send price movement notifications
• Display long-term performance by default (years, not hours)
• Make it slightly harder to trade on impulse
• Never celebrate a transaction — the goal is fewer of them

This is the philosophy behind One Day Investor. Not because we're against trading — but because the research is overwhelming: more frequent decisions lead to worse outcomes.

One day a week is enough. Not because more information is bad, but because more frequent decisions are.

Next time you open your investing app, ask:

Is this feature here to help me build wealth, or to make me place a trade?

If you can't tell the difference, that's by design.

• Robinhood Revenue and Usage Statistics — Business of Apps
• Trading Is Hazardous to Your Wealth — Barber & Odean, The Journal of Finance (2000)
• Attention Induced Trading and Returns: Evidence from Robinhood Users — Barber, Huang, Odean, Schwarz
• Myopic Loss Aversion and the Equity Premium Puzzle — Benartzi & Thaler, The Quarterly Journal of Economics (1995)
• DALBAR 2024 Investor Behavior Report
• Investment Gamification and Implications for Capital Markets — CFA Institute
• Robinhood Gets Rid of Confetti Feature — CNBC
• SEC Proposed Rule on Digital Engagement Practices — SEC.gov