What is Robinhood?
Robinhood continues to be a leader in the investing and brokerage space. They are continually innovating to create a better customer experience.
Robinhood Overall Rating 4.4 ★ / 5.0★
Robinhood is a commission-free US stock trading platform. They don’t charge commissions on trades or have any inactivity or withdrawal fees. It is easy and quick to open an account online. It is an intuitive app and desktop experience. Robinhood is a great platform for those that want to start investing or for those who trade relatively low volumes.
Pros & Cons
- Commission free stock & ETF trading
- Easy to use mobile and web experiences
- Fast and easy to open account
- Instant access deposits
- Access to invest in cryptocurrency
- Limited access to ETFs & no mutual funds
- Customer support is slow
- Educational resources is limited
- Not a portfolio based solution
Fees & Minimums 4.9 ★
Robinhood is known for its low barrier to entry. They have commission-free stock and ETF trading and there are no minimums to open an account and get started. Many other brokerages still have minimums to start investing with. Robinhood has dramatically reduced these two huge barriers to entry, making it easier than ever before to start investing.
Robinhood also makes it free to trade options and cryptocurrency. This is an awesome feature that many other trading platforms do not offer. This adds investment options and strategies that you otherwise would likely not have access to, especially at such a low cost.
Robinhood also has low financing rates for advanced investors who want to trade on margin or short a stock. Buying on margin is when you borrow money or stocks to trade. The first $1,000 margin is included with the Robinhood Gold subscription tier with a monthly fee of $5. For any additional borrowing, the user will pay a 5% yearly interest rate on the margin. This is a very competitive rate compared to similar companies.
There are no withdrawal fees or transfer fees with ACH transfers. Wire transfers cost $25 for domestic and $50 for international wires. Transfers of stock into Robinhood are free while stock transfers out of your Robinhood account into another brokerage cost $75.
Account Services 4.6 ★
Robinhood has an intuitive and easy account setup process that is extremely fast and fully digital. As previously mentioned, there is no minimum requirement of funding that is needed to set up an account. Setting up an account takes about 10 minutes to fill out and submit your account application. When signing up, you are required to fill in personal information, answer questions about trading experience, and verify your identity. It usually takes 24 hours to verify your account.
In the US, In order to open an account you must:
- Be 18 years of age
- Have a valid social security number
- Have a legal US residential address
- Be a US citizen, US permanent Resident, or have a valid US visa
Robinhood is only available to citizens in the US and Australia. Robinhood has announced that they plan to expand to other countries as well and has a waitlist available for the UK.
Robinhood has three different types of account offerings. They have the free version known as Robinhood standard, and a new Robinhood Cash Management account, and a Robinhood Gold account. These are all offered in taxable accounts only. Robinhood does not currently offer any retirement accounts.
Robinhood’s standard account has zero-commission trades. They also recently announced that they will be offering fractional share trading in the near future. With the Robinhood standard account, you get instant access to cash deposited up to $1,000. You also get access to extended-hours trading. One limitation to the standard account is you have limited day trading ability (only up to three per week). You also can’t leverage your money or trade on margin. But, for most investors, Robinhood’s standard account is sufficient.
On this level of Robinhood, you can trade:
- American Depositary Receipts for over 250 global companies
It is important to note that on Robinhood you have access to around 5,000 stocks, predominantly major US companies and ETFs. There is access to some non-US stocks but not nearly as many. With the options, you can only trade stock and stock index options. These options are not available for all stocks, only for more popular ones. For further information, it is best to contact Robinhood directly to see if they have access to what you are looking to trade.
Cash Management Account
Robinhood’s cash account has all the benefits of the standard account plus it has unlimited day trading options if you meet the required threshold of $25,000. With the cash account, you get commission-free trades during both the standard hours and the extended trading hours as well. With the cash account, you don’t have instant deposits, it takes 4-5 business days before the transfer from your bank account is complete, which is longer than most ACH transfers. You also don’t have access to leverage or trading on margin in the cash account.
Robinhood Gold has some great added features as well. You have an instant deposit of up to $50,000. You also have leverage of 2:1, which means you can borrow twice the amount of your investment. This means that if you have $50,000 you will be able to borrow an additional $50,000 giving you $100,000 to invest with. It is important to note that you do pay interest of 5% annually on the money you borrow. Robinhood Gold also includes additional research reports through Morningstar and Level II Market data. Robinhood Gold costs $5 a month for access. Day trading is also limited on Robinhood Gold as well.
User Experience 4.2 ★
Ease Of Use
Robinhood is extremely user friendly. It is easy to look up stocks and ETFs to buy and sell at your leisure. It is almost surprising how easy it was to look up stocks and make trades. Robinhood has both a mobile app and desktop access. They are both similar and easy to use. Robinhood is one of the more intuitive stock trading platforms out there.
The customer support offered through Robinhood is limited. This, however, is not surprising with their business model. The only way you can contact them is through email. You input your question into a question box where you select what you need help with. It often takes about a day for them to respond to inquiries. They do not offer any live support via telephone or live chat.
Robinhood has a positive history of reliability. They even built their own custodian platform to improve the experience, speed, and cost of their accounts. But, recently they have come under fire for three crashes on abnormally high trading days in volatile market conditions. This left many investors frustrated, but is noted to be an exception to their traditional reliability.
Other Features 4.0 ★
Robinhood does have some good in-app content where you can do additional research. They have an analyst-rating section where you can see how financial experts feel about individual holdings. They show a percentage of experts who say buy, hold, or sell. You also have access to the fundamental data about the stock like the P/E ratio, number of employees, market capitalization, and more. Additional research and market data are available through Robinhood Gold.
The charts are basic on Robinhood and there is not a lot of customization that you can apply to the charts or to compare different stocks. They also have a news feed about different products and companies that are provided by highly qualified producers such as Yahoo Finance, Motley Fool, and Seeking Alpha.
Robinhood does have some educational tools. They do have a learning center where they do post blogs. Their blogs are easy to understand and useful for beginners. There were not, however, any platform tutorials or educational videos to help you with your account and market understanding.
A favorite feature for some account holders is the popular Robinhood Snacks podcast and newsletter. Robinhood Snacks provides a daily update where they give you a quick 3-minute market overview for the day. This is all available for free.
Robinhood takes security seriously. They have two-factor authentication login to improve account safety. Robinhood Stock and ETF trading is a member of SIPC which protects Robinhood customers up to $500,000 (including $250,000 for claims for cash). Their cryptocurrency trading platform, however, does not have the same protection and is not insured by anyone.
This is directly from Robinhoods website about their security measures:
- Your account password is hashed using the industry-standard BCrypt hashing algorithm, and it’s never stored in plaintext.
- Sensitive details, such as your social security number, are encrypted before they’re stored.
- Our mobile and web applications securely communicate with our servers using the Transport Layer Security (TLS) protocol with up-to-date configurations and ciphers.
- Once we verify your banking credentials, we’ll never access them again. We use trusted third-party integrations to access information about your bank account, such as your account number and available balance.
Robinhood does not have any good portfolio management tools besides the dashboard where it tells you how all of your investments are doing. This is especially concerning for those who are not experienced traders and who are not aware of their own capacity for risk. If you are looking for a more long term portfolio management approach Robinhood may not be the best fit for you.
One thing to note on the Crypto platform is that it is not available in all states. The platform is available in 46 states and Washington DC but is not currently available in Hawaii, Nevada, New Hampshire, or West Virginia.
Is Robinhood Right For You?
Robinhood is an excellent platform for those who are looking for commission-free US stock and ETF trading. Robinhood is intuitive and user-friendly. They have an easy account opening process that is fully digital and fast. If you are an experienced stock trader who is looking for a do it on your own platform where you will be placing the trades then Robinhood could be great for you. Robinhood can also be valuable for people new to investing who have a small amount of money that they are trying to start to learn to invest with.
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