Millions of investors using Robinhood tend to favour stocks that are simpler and easier to understand, according to new research from Washington State University (WSU). The study also found that these less complex stocks outperformed more complicated firms during the period examined, suggesting that a preference for simplicity may have benefited investors.

The research examined investment patterns among users of Robinhood, a popular commission-free mobile app and web-based trading platform. According to the company, Robinhood has about 28 million users, with an average age of 35. Researchers say understanding the investment behaviour of these younger, digitally savvy investors is increasingly important as they play a larger role in financial markets.

“These preferences have market effects,” said Mario Reyes, professor and chair of the Department of Finance & Management Science in WSU’s Carson College of Business. Reyes noted that greater demand from Robinhood users for simpler stocks could influence the market. The findings also have implications for investor relations, suggesting companies should communicate effectively with inexperienced individual investors as well as large institutional investors.

The study, published in Finance Research Letters, was co-authored by Ruixue Gao, who completed her PhD at WSU and has since joined Central Connecticut State University, George Jiang, professor and Investment Management Chair in Finance & Management Science, and Reyes. Founded in 2013, Robinhood Markets allows users to trade stocks, options and cryptocurrencies while also offering other financial services.

“The platform is very, very popular, and generally, these investors are very young,” Gao said. “We want to know what young people care about because they are the future of the stock market.” Previous research has found that Robinhood investors are often attracted to stocks with high “idiosyncratic volatility,” meaning their price movements may differ substantially from those of the broader market.

To examine whether simplicity also influenced investment decisions, the researchers analysed Robinhood holdings from May 2018 through August 2020. They assessed companies using two measures of complexity. Accounting complexity was measured by the number of accounting items reported in a company’s annual U.S. Securities and Exchange Commission filings. In contrast, organisational complexity was based on the number of businesses or operating segments within a firm.

The analysis showed that more Robinhood users invested in companies that were less complex and easier to analyse. Importantly, the relationship remained even after researchers controlled for company size, indicating that investors’ preference for simplicity was not merely a tendency to favour smaller firms. The simpler stocks preferred by Robinhood investors also outperformed more complex stocks during the study period.

Across different measures and comparisons, the preference for simplicity remained consistent. “What stands out is that Robinhood investors consistently gravitate toward companies that are easier to understand,” Reyes said. “Whether we measured complexity through financial reporting or business structure, the pattern was the same.” The findings highlight how a growing generation of individual investors may influence markets through a preference for companies whose finances and business models are relatively straightforward.

More information: Ruixue Gao et al, Robinhood: Simple app simple stocks, Finance Research Letters. DOI: 10.1016/j.frl.2026.110446

Journal information: Finance Research Letters Provided by Washington State University