What is the Robinhood App?
Robinhood is a commission-free investment and stock-trading app that allows users to invest in stocks, ETFs, cryptocurrency and more. The app boasts a fee-free model that allows users to trade stocks and other securities at no cost. Robinhood was first launched with Apple phones and products but has since developed across all platforms.
Robinhood doesn’t require an account minimum to trade, and offers commission-free trades for users. The app has a variety of offerings, including cryptocurrency and even options trading.
Robinhood also offers Robinhood Gold – its premium account that allows users margin to trade.
Overall, Robinhood’s commission-free model, range of investment products and easy-to-use app have made it increasingly popular. Especially among the younger demographic.
Pros & Cons
|No commissions on stock trades.
|No retirement accounts.
|No account minimum.
|No mutual funds or bonds.
|Limited customer support.
Robinhood is a FREE-trading app that’s ideal for investors.
Trade stocks, options, and exchange-traded funds (ETFs) without paying commissions or fees.
The service is innovative, cutting out all costs associated with investing.
But as always, there’s a tradeoff to free.
Though Robinhood offers both web and mobile trading, the platforms are bare bones. Some investors may find the range of tradable securities and account options lacking.
Robinhood does offer “cryptocurrency” trading, yet, you do not actual own the crypto. You can only buy and sell crypto on the platform and are unable to transfer crypto to a third-party wallet.
Robinhood is best for
- Frequent stock, options or ETF traders.
- High-yield checking and savings.
- Mobile users.
- Individual taxable accounts.
- Margin accounts.
Where Robinhood Shines
Commissions: This is obvious: What’s better than free?
Robinhood remains committed to providing 100% commission-free stock, options, ETF and cryptocurrency trades.
The savings for investors who trade frequently is significant. After all, every dollar you save on commissions and fees is a dollar added to your returns.
Account minimum: None. (For a margin account, Robinhood requires a $2,000 minimum portfolio balance. This is a Financial Industry Regulatory Authority regulation.)
User friendly: The sign-up and account funding process is quick and painless.
Completed on smartphone, tablet or desktop. The app asks for some personal information and within an hour, you’re approved. At which point you can start bank transfers.
Robinhood uses instant verification with many major banks.
This mitigates the hassle of reporting micro-deposits to an account to verify information. Bank transfers up to $1,000 are available instantly for investing. As are proceeds of up to $1,000 from selling stocks.
Deposits larger than $1,000 will take four to five business days to process. Users can set up weekly, biweekly, monthly or quarterly automatic deposits.
Streamlined interface: The service doesn’t offer all the bells and whistles of a typical online stock broker. This could be seen as a negative.
But for investors who know what they want, the Robinhood platform is more than enough to quickly execute trades. It supports market orders, limit orders, stop limit orders and stop orders.
Both the mobile and web platforms include a feature called collections, which are stocks organized by sector or category. Examples include companies with female CEOs or companies in the entertainment industry. On web, collections are sortable and allow investors to compare stocks side by side.
At the bottom of the app you can access portfolio values, watch lists, transaction history and account statements.
Where Robinhood Falls Short
Limited securities: Mutual funds and bonds aren’t supported.
Robinhood also lacks an automatic dividend reinvestment program. Dividends are credited to accounts as cash rather than reinvested in the security that issued them. The company has said it hopes to offer this feature in the future.
One account option: For investing, Robinhood supports only individual taxable accounts.
Investing through a taxable brokerage account should come only after you have invested in a tax-advantaged account like a 401(k) or IRA.
Customer support: Many brokerage customers expect phone support which Robinhood doesn’t provide.
Robinhood’s customer support is done through email. The company does not publish a phone number.
It does have a useful and well-organized help center online, and the website is easy to navigate.
Is Robinhood Right for You?
“Free” often means the extra fees are buried deep where you can’t find them. Robinhood is refreshing because the service is truly free. You can trade without spending a dime in fees or commissions.
You’ll give up a few things in exchange (advanced trading tools, notable research, education and the full range of investment options).
But if limiting costs is your #1 concern, Robinhood is the best choice.