Robinhood is an investment platform that has gained massive popularity, particularly because they don’t charge fees and they’re a great starting point for investment newbies.
This was not the norm when they first started out, so it gave them an edge over the competition. But has it stayed that way?
The problem with something being trendy (and offering no fees) is that a lot of people can jump on the bandwagon in the hopes that they will get rich quickly. This doesn’t typically happen overnight, but we can only hope, right?
New competitors have entered the market for investment, and some of them are now offering no commissions and other benefits too. How does Robinhood compare in this new investing landscape?
Today we’ll go through a Robinhood review to see if it’s worth using over other platforms.
What Is Robinhood?
Robinhood was founded in 2013 by Vladimir Tenev and Baiju Bhatt, and the app was launched in 2015. They were the first to offer commission-free trading and set the standard for stock trading online.
Today, there are 13 million active users nationwide and it continues to grow each year.
Robinhood is an online brokerage firm that investors use to trade stocks and exchange-traded funds (ETFs). If you’re interested in cryptocurrency trading, Robinhood is one of the only places that you can do s.
Now you’re probably thinking, “Okay cool, but how on earth does Robinhood make money if they offer free trades?” Well, have no fear, they don’t have a bunch of hidden fees to be concerned about.
In short, Robinhood makes money from the interest they earn on customers’ cash balances and margin lending.
Put simply, the money you have left in your account after purchasing stocks has interest on it. For example, right now we have $10 in our account sitting idle, waiting to be invested, and Robinhood acquires interest from it.
In addition, Robinhood and most brokers will sell order flow- which means they sell your order fulfillment to wholesale market makers. Since the industry of online brokers is turning towards no commissions, almost all the platforms you could use will use this as a way to earn money on your account.
Setting Up A Robinhood Account
To set up an account, head on over to their sign-up page. You’ll have to fill in information such as your name and email, then a username and password.
You’ll be asked to answer a few more questions, and then you will verify your identity by providing your Social Security number.
You can use the Robinhood trading platform easily on the web page or you can download the mobile app. Having easy access on your phone is important for hands-on investors.
Who is Robinhood Best For?
Robinhood is very popular with anyone new to investing and has been since they opened up shop. The mobile app is easy to use and a Robinhood free stock for signing up is perfect for you!
Plus, if you’re looking for the best stocks for beginners, there are plenty of great options that you can invest in using Robinhood.
As an added bonus, Robinhood has added fractional shares to their site to entice investors. This means that all the money in your trading app is put to good use, you can buy part of a stock with whatever you have in your account. It’s a big draw from those who don’t want uninvested cash in their account.
In addition to fractional shares, their new DRIP program allows customers to reinvest dividends into the stock or ETF. It’s really simple to set up as well, as all you need to do is:
- Go to the Account tab
- Click on ‘Investing’
- Scroll to the Dividend Reinvestment section
- Enable Dividend Reinvestment
- Toggle the switch on
Besides new investors, The Robinhood Gold option is best for margin traders, or those looking to borrow when they are short on cash for new stocks. Gold status gives you access to $5000 – $50,000, which can make a big difference when you’re interested in large-cost stock options!
Lastly, anyone who wants in on cryptocurrency trading should check out Robinhood since they are one of the very few who are part of the cryptocurrency trades.
Who is Robinhood Not For?
Where Robinhood offers cryptocurrency trading and others don’t, there aren’t many other options on this platform to diversify your portfolio. For people interested in investing in retirement, mutual funds or bonds (low-risk investments), or fractional shares, another trading platform may be what you’re looking for.
In addition, the customer service department seems to still be a bit lacking, so you have to do your research on your investments and make sure you’ve got your bases covered when putting your money out there.
It seems like a recurring thing with trading platforms, but customer service has got to be in tip-top shape to keep up nowadays! We’ll see what Robinhood and their competitors put out to up their game.
Robinhood Review Key Points
- Free trading and cash management, unless you upgrade to Gold status
- Gold or any other fees are very low, which is good in terms of helping you keep more money in your pocket
- It’s relatively easy to use, which is good for newbies
- The mobile app for any-hour access
- You have instant access to your money
- No account minimum
- The customer support needs updating, but this can be quite common
- The cryptocurrency spread can be more than on other platforms
- They were involved in the GameStop craziness (worth a Google search, check it out!)
The basic account is free but you can upgrade to a Robinhood Gold account, which starts at $5 per month. You get access to margin trading, which means that you can potentially lose more than you deposited.
Depending on what you have in your account, you will instantly have access to $5,000 – $50,000 when you make a deposit.
Robinhood also offers a cash management account, where you can access your money that isn’t invested and earn a 0.30% APY through program banks.
This is what you will get with your cash account:
- A debit card
- An ACH account number and routing number
- Replacement of lost/stolen cards
- Access to Apple Pay, Google Pay, or Samsung Pay
Robinhood Trading Platforms and Tools
A lot of people head to Robinhood to do trading, but in all honesty, it’s not up to scratch.
There are better platforms for you to do trading on which have better charts for you to look at.
You can buy fractional shares on Robinhood, where you can automatically invest at a certain amount of time which is best for you.
Let’s take a look at some of the most common questions when it comes to using Robinhood:
Is Robinhood Free?
Yes, Robinhood is free to use, but there are some services where you will have to upgrade and pay $5, such as Robinhood Gold.
Can I Buy Bitcoin On Robinhood?
Yes, you can buy and sell Bitcoin on the Robinhood app. It currently offers 7 different types of cryptocurrency available for trading.
Is Robinhood Safe?
One of the biggest questions you should always ask yourself when setting up a financial service for banking or investing is how safe is it?
Robinhood knows how important your personal information is and uses state-of-the-art encryption to ensure all your information is safe.
Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
Is Robinhood Legit?
Yes, Robinhood is a legit company, but make sure you check out their controversies and where they fall before you join them.
How Is Robinhood’s Customer Support?
Many online brokers are still working on their support game. There is no direct phone number for customer support or live chat option yet. Robinhood has [email protected] to contact or you can fill out a questionnaire on their website, and they’ll call you back.
Who Are Robinhood’s Competitors?
Robinhood has lots of competitors, such as eToro, Charles Schwab and Coinbase.
How Is Robinhood Different Than Webull?
Robinhood and Webull have a lot of similarities, but Robinhood is geared for new investors whereas Webull has many advanced features for active day traders.
A History of Controversies
Whenever you’re going to hand over your hard-earned cash to a company, it always helps to look into their background a little bit. Robinhood has faced several controversies in recent years.
In 2019, Robinhood was fined $1.25 million for failing to give the best price for orders to their customers and was sued for failing to disclose that they relied on order flow.
Earlier in 2019, they had admitted that they stored passwords in a readable format, which they later confirmed was compromised in a hack.
Outages During High-Volume Days
In 2020 Robinhood faced a few outages, which has resulted in several lawsuits. When they were experiencing high-volume days, many people were not able to access the app and carry out trades.
Interestingly, they have offered some users credit for the days-long outages, but in exchange, they have to sign a document saying that they won’t sue.
Access to Options Trading and the Alexander Kearns Suicide
A tragic turn of events found 20-year-old Alex Kearnes committing suicide due to seeing a negative $730,000 in his Robinhood account (which was later found to only be temporary). In his suicide note, he accused Robinhood of allowing too much risk on the platform.
Robinhood’s Involvement in the 2021 GameStop Saga
You may have heard about all of the buzz about GameStop in 2021, where members of a Reddit forum joined forces to drive up certain stock prices.
Robinhood restricted this trading, which was called market manipulation, and done to protect the very wealthy, at the loss of the non-wealthy. This obviously didn’t go down well, and they have a new lawsuit coming their way.
Other Companies Similar To Robinhood
There are plenty of people out there who act like Robinhood is the only investing platform out there, especially if you listen to TikTok ‘gurus’!
If you are a newbie investor, you could try out TD Ameritrade or SoFi Active Investing. If you are a trader looking for something a bit better then check out Webull.
They are both similar in that they have no fees, apart from some additional extras. Robinhood also offers the chance to invest in options and cryptocurrency.
When comparing investment platforms, it always helps to look at the investment performance to see which would be better for you.
With so many options, it’s not necessarily about how well the investment platforms perform, but what investments that you choose.
With M1 Finance, there are portfolio options that could take a load off your plate. You can choose to either put together your own portfolio or choose a portfolio on the site.
There aren’t any portfolios that are ready to use on Robinhood, and they focus more on encouraging you to make short-term trades rather than long-term.
M1 Finance is great for investors who are looking for long-term investment options, whilst Robinhood is great for investors who are more for short-term investing and want to trade options and crypto.
Betterment vs Robinhood
Betterment is a robo-advisor, and Robinhood is more of a Do-It-Yourself platform.
As a robo-advisor, Betterment will invest your money automatically based on an algorithm that they have. They will ask you questions such as your risk tolerance and use that to select the best option for you.
With Robinhood, there isn’t this help, as you will have to select what you invest in, yourself.
Since Betterment is a robo-advisor that is hands-on with special capabilities, there are fees to pay. With the basic package, you will have to pay a fee of 0.25% for all assets. If you have the Betterment Premium package then the fee goes up to 0.40%.
Robinhood doesn’t have any of these fees, as there are no fees on your trades, and there are also no transaction fees. If you want to sign up for Robinhood Gold (where you can do margin trading), then this is $5 per month.
One of the best things about Robinhood is the usability side of things. They have clearly tried to make it simple to use, which is part of why it’s so appealing to new investors.
When you log in, you can see your portfolio value at a glance, but without a lot of information. The prices update when you are in the app, but not as quickly as other platforms.
Robinhood Trade Experience
You can trade on Robinhood, although the options trading is not easy to use. It is slower than other platforms, which is not beneficial when you are on there to trade.
There are not a lot of resources available to help you with trades, which won’t help you if you are new to trading and the Robinhood platform.
It also falls short in specific areas, for example- if you want to change the amount of the limit order, then you have to change the default to do so. It makes it more complicated, with added steps.
Range of Offerings
Something that Robinhood does differently is the ability to invest in cryptocurrency.
These are the assets that they currently support:
- U.S. Exchange-Listed Stocks and ETFs
- Robinhood Options Contracts for U.S. Exchange-Listed Stocks and ETFs
- ADRs for over 650 Globally-Listed Companies
Commissions and Robinhood Fees
You may be wondering how much Robinhood is to use, and if it’s actually free – Robinhood assures that it is free and will remain free to use. It’s free to open an account, keep it, and transfer funds to it.
There are, however, some fees that Robinhood is legally unable to avoid. These are:
- Regulatory Transaction Fee – this is what FINRA is required to pay to the Securities and Exchange Commission. If your sales are $500 or less then Robinhood doesn’t pass this fee on to you
- Trading Activity Fee – this is what FINRA charges online brokers, which Robinhood passes on to you unless the sales are 50 shares or less
- American Depositary Receipt (ADR) Fees – ADRs are certificates for foreign stocks, which may have custodial fees
Robinhood isn’t the best platform to use if you are looking for clear education on how to invest and trade, but that’s not what they have claimed to be there for.
That being said, there is a section on the Robinhood website called Learn, where they cover investing basics.
You can read articles on topics such as:
- What is an investment?
- What is a stock?
- What is the stock market?
- Three things to do before you start investing
- An overview of assets
- How to approach analyzing a stock
- How to get started with Options
- What calls and puts are
- Risk management
They have a whole library (it’s pretty big!) full of questions that you may ask about the specifics behind investing and the terminology, which is definitely a good idea to check out if you aren’t familiar with the lingo.
Robinhood Customer Service
If you are looking for customer service that will be as fast as trading on the platform, you are not likely to find it with Robinhood.
They are an extremely popular app and had a huge surge of new people signing up in 2020, which led to lots of complaints and requests for customer service, which then has a knock-on effect of further delays.
How Do I Contact Robinhood Customer Support?
If you want to get through to Robinhood customer service then you will have to do so on the app or through their website – there is no telephone number that you can call.
When it comes to order types, they are separated into Robinhood Stocks, Options, and Cryptocurrencies.
- Market orders
- Limit orders
- Stop orders
- Stop limit orders
- Trailing stop orders
- Limit orders
- Stop limit orders
- Market orders
- Limit order
If you are looking for a thorough analysis of your portfolio, Robinhood probably isn’t the best place to look for it.
You can look at specific days to see your portfolio value, although the Cash tab should be able to show you the breakdown between options, equities, and crypto.
If you need a portfolio analysis then you may want to plug your information into other sites such as Mint.
It’s perfect for those who want to dabble and get their feet wet, and Robinhood has been the beginning of many good investors’ histories.
It made waves by being commission-free, but other platforms now offer this and sometimes more. They lost the advantage and need to make new efforts to stand out among competitors.
We have had friends and family already use our referral link, and they’ve gotten free stock shares of Apple and Ford. With a free stock to start with and free commission-free trading, you don’t have much to lose.
I highly recommend you check them out when considering investment platforms, they may be a good starting point to making some solid investments.