When your revenue relies on generating transaction fees, your customers' moods have an outsize impact on your business prospects. While you might think that this dour environment is good for brokerage firms -- with traders frantically placing more orders, even if they're selling -- the opposite is actually true.

Brokerage firms feeling the heat

Some of the hardest-hit stocks in the recent market downdraft have been those of brokerages like Robinhood (HOOD) and Interactive Brokers ( IBKR ) . Others -- like Charles Schwab ( SCHW ) -- have also fallen, but not as dramatically. You can probably guess by reputation alone which of these companies are reliant on customers who generate trading revenue.

Millennials and Gen Zers are Robinhood's people. And though the broker has toned down the gamification of investing in recent years (no more confetti!), it's still a draw for short-term, glued-to-their phones traders. True to the brand, the company has been the most volatile of this trio.

On Monday, Robinhood's share price plummeted more than 20 percent. Why the big whammy? On March 7, the broker got slapped with a $26 million fine by the Financial Industry Regulatory Authority (FINRA) for multiple violations, some of which go back years. It was also ordered to pay $3.75 million in restitution to customers whose trades were executed at an inferior price (due to a practice called "collaring," or converting market orders to limit orders).

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Robinhood also relies heavily on crypto transaction revenue. Although President Trump's announcement of a strategic cryptocurrency reserve provided a slight bump to falling Bitcoin and Ethereum prices, plunging crypto prices may be impacting the highly lucrative trading volume that Robinhood relies on.

If Robinhood is the go-to platform for budding stock jocks, Interactive Brokers ( IBKR ) is the sophisticated uncle who actively manages his portfolio with the latest and greatest advanced trading tools. Still, that didn't spare the broker from a bad case of the Mondays.

Like Robinhood, Interactive Brokers ( IBKR ) relies heavily on transaction fees from traders. The stock's 16 percent single-day drop was its largest price decline in years on top of a miserable February.

Despite the volatility -- or, rather, because of the recent beat-down that has cut its share price by nearly a third -- some analysts are optimistic about Interactive Brokers' ( IBKR ) future prospects, especially as it expands its reach beyond the U.S. market to attract a global clientele of traders. Still, the company's reliance on trading volume makes it extremely susceptible to investor whims.

Finally, the granddaddy of brokers, Charles Schwab ( SCHW ), took Monday's blow to the chin like a champ. Its share price declined a mere 3 percent.

Compared to Robinhood and Interactive Brokers ( IBKR ), Schwab's exposure to customer jitters isn't as pronounced. In addition to its brokerage business, the company offers a robo-advisory portfolio management service (Schwab Intelligent Portfolios) and has an advisory arm generating revenue from customer deposits. Plus, its own Schwab-branded mutual funds and ETFs are a source of recurring revenue both within the portfolios it manages and institutional and retail customers.

Bottom line

The big takeaway for investors? Diversification matters. The same approach that helps businesses withstand tough times eases volatility in your own portfolio and helps stabilize your returns.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.