Updated November 29, 2020

Robinhood Review: Is it Safe?

Read more about Robinhood
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Robinhood lets you trade stocks commission-free and has no account minimums. Is it safe? Are there hidden fees? Read on for the pros and cons.

Robinhood Promo
Get a Free Stock (worth between $2.50 and $200)

Overall Score

4.0

Stock Trading

5.0

Options Trading

4.0

Mobile App

4.0

Commissions and Fees

5.0

Ease of Use

5.0

Research

1.0
5-point scale (the higher, the better)

Pros and Cons

  • Commission-free trades
  • No minimum
  • Extended trading hours
  • No IRAs
  • Limited research
  • No mutual funds & bonds

Bottom Line

Free way to trade stocks with limited bells and whistles

What Is Robinhood?

Robinhood is a free trading app that lets you trade stocks, ETFs, options, and cryptocurrency 100% commission-free.

It's great for traders who want to cut down costs. However, this very simple app lacks research, tools, and account options.

It's marketed as the brokerage for those "other than the wealthy."

They don't offer physical branches, banking, or manual account management options. This is how they cut the fat.

The app makes it simple and walks you through the trading process, but you won't get any investing guidance.

Pros & Cons

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PROS:

  • Completely 100% commission free
  • No minimum to start
  • Offers fractional shares
  • User friendly app
  • Real time market updates
  • Free extended trading hours
  • Free cash management account
  • SIPC protected

CONS:

  • Limited research and tools
  • Only individual taxable account available
  • No mutual funds or bonds
  • Weak customer service

Compare Investing App Promos

Stash

Sign Up and Get $5

  • Sign up, add at least $5 to your account and get a $5 bonus.
  • Invest with fractional shares
  • Get portfolio recommendations

Who Robinhood is Good For

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Originally, Robinhood was invented to help Millennials get started investing without giving up a majority of their earnings to commissions. But Robinhood could also be good for:

  • Beginners without a lot of capital to invest.
  • Active stocks, ETFs, and options traders.
  • Those who want to try trading cyptocurrency.

If you don't require a great deal of research and are confident to make investments on your own, Robinhood could be a great way to get started.

Is Robinhood good for beginners? Robinhood is good for beginners in the sense that trades are free and there is no minimum requirement. This allows anyone to invest without worrying about fees. The app is also simple to use. However, it does not provide any guidance, so you still need to do some research to select your own investments.

Get started with Robinhood: Claim your free stock today

Pricing & Fees

Robinhood has:

  • No trade commission fees
  • No account maintenance fees
  • No inactivity fee
  • No bank transfer fees (incoming or outgoing)
  • No account transfer fee (incoming)
  • No returned check, ACH, wire & recall/stop payments fees

Note that the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) do charge a small fee for stock sell orders. These fees are:

  • SEC: $20.70 per $1,000,000 of principal (rounded up to the nearest penny).
  • FINRA Trading Activity Fee: $.000119 per share (rounded up to the nearest penny and up to $5.95).

Some account fees you may encounter are:[1]

  • $75 account transfer fee (outgoing)
  • $20 domestic overnight mail
  • $50 international overnight mail
  • $5 paper statements

How does Robinhood make money?
How does Robinhood even exist if they don't charge commissions? Robinhood generates revenue in these ways:

  • From their paid Robinhood Gold account, which is their margin trading service. This starts at $5 a month.
  • From interest earned on your cash balances.
  • Rebates from market makers and trading venues

Stop overpaying commissions. Use Robinhood instead

Investments & Account Options

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Robinhood only has these trading options:

  • Stocks
  • ETFs
  • Options (new this year)
  • Cryptocurrencies (Bitcoin, Ethereum, and 5 more)

The only account you're able to open is an individual taxable account. There are no retirement accounts or college savings options.

If you're looking for a more robust brokerage, check out the options from M1 Finance. Plus, earn up to $2,500 when you transfer your account.

Is Robinhood Safe?

Robinhood is legitimate. Your investments are covered by the Securities Investor Protection Corporation (SIPC). The SIPC insures the stocks and options investments in your account up to $500,000 (including $250,000 for claims for cash) if Robinhood fails. It does not protect against investment losses from the market.

Robinhood is also a SEC-registered broker-dealer, and a member of the Financial Industry Regulatory Authority (CRD #165998).

Note: Robinhood Crypto is not a member of FINRA or SIPC. Any cryptocurrency investments will not be protected by SIPC.

3 Types of Accounts

Robinhood offers 3 types of accounts. Each one is designed to suit different investing needs.

Robinhood Instant (free):
You will automatically start with the Instant account when you sign up. This account gives you:

  • Instant deposits up to $1,000 (instead of having to wait the usual 5-6 days for ACH to clear)
  • Instant access to funds after selling
  • Extended trading hours

Robinhood Gold ($5/month, $2,000 minimum):
This is Robinhood's premium margin trading service. You get more buying power depending on your account size and larger instant deposit amounts. Read more below.

Robinhood Cash (free):
This account does not have instant deposits or instant access to funds. However, there are no restrictions on day trading. And you cannot invest on margin.

How do I get my money out of Robinhood?

You can withdraw your funds into your bank account, up to $50,000 per business day. From your account options, just select "Transfer" and then "Transfer to Your Bank" to initiate the withdrawal. There is no fee to withdraw.

Here are some withdrawal rules:

  • After a sale, you must wait for the funds to settle before being able to withdraw. The settlement period is the trade date + 2 trading days.
  • After a deposit, you can only withdraw funds to the bank account from which they were deposited for the first 60 days.

Ally Invest

Get Up to $3,000

Expires 9/30/2021

The minimum qualifying deposit to receive a cash bonus is $10,000. Accounts will be reviewed 60 days after account opening to determine the total qualifying deposit. Corresponding cash bonus will be credited to the account within 10 business days. Once the bonus is credited to the account, the bonus and qualifying deposit (minus any trading losses) is not available for withdrawal for 300 days. If the qualifying deposit is withdrawn, the bonus may be revoked.

Deposit or TransferCash Bonus
$10,000 - $24,999$100
$25,000 - $99,999$250
$100,000 - $249,999$300
$250,000 - $499,999$600
$500,000 - $999,999$1,200
$1,000,000 - $1,999,999$2,000
$2,000,000+$3,000

M1 Finance

New Customers: Deposit $1,000 and Get $30

  • Open a new M1 account.
  • Deposit $1,000 or more in your Invest account during your first 14 days.
  • Get a $30 bonus.
Expires 12/31/2021

App Features & Tools (Free)

Robinhood does not have as much tools as other more robust brokerages, but it has enough for the basic investor. Here are some features the app has.

  • Extended trading hours. You can trade 30 minutes before the market opens and 2 hours after it closes - from 9:00 am to 6:00 pm.

  • Market orders: Execute orders including limit, stop limit, and stop orders.

  • Collections: This feature organizes stocks by sector. Sort and compare stocks side-by-side.

  • Price Paid: View the average price per share that Robinhood investors paid. This helps beginners judge if the stock is a good buy or not.

  • Market updates: Get real-time updates on stocks in your watch list.

  • Charts: See candlestick charts and indicators for stocks and cryptocurrencies.

  • Day trading: Perform up to 3 day trades in a five trading day period. Cash account users or those with $25,000 account balance have no limitations.

  • Instant deposit: Bank transfers up to $1,000 are instantly available for investing (for Instant and Gold account users).

Robinhood Snacks: This is Robinhood's daily newsletter. It distills down the top financial news into just a 3-minute bite-sized read. Robinhood also has a daily podcast, where it says 3 business stories in 15 minutes.

Robinhood Gold (Paid)

Robinhood Gold is the premium margin account (which means you can trade with borrowed money). You can try it for free for 30 days. The fees and minimums are:

  • $2,000 minimum investment
  • $5/month account fee
  • 5% annual interest based on how much margin you use

Your first $1,000 of margin is included. If you borrow more than that, you'll pay 5% yearly interest on the amount you use above $1,000.[2]

Investing on margin is risky and you can lose more than you borrowed if you're unlucky with your selections. This should only be done by more advanced investors who have done their own research and are comfortable with risk. Learn more about how margin accounts work.

Some premium features of this account includes:

  • Increased buying power. You get up to 2x buying power. For example, if you have $10,000 in cash, you can get up to $10,000 margin for a total of $20,000 buying power.

    You can also set a margin limit so you only borrow what you're comfortable with.

  • Bigger instant deposits. Your instant deposit limit is based on your account balance.

    • Up to $5,000 for all Gold users
    • Up to $10,000 for balances over $10k
    • Up to $25,000 for balances over $25k
    • Up to $50,000 for balances over $50k

  • Morningstar research. Get in-depth research reports from Morningstar on 1700 stocks.

  • Level II market data. See real time bids from Nasdaq.

Robinhood Cash Management Account

Robinhood recently launched its new Cash Management product. There is no account service fee or minimum balance requirement.

It features:

  • Free debit card
  • No fees at 75,000+ Allpoint and MoneyPass ATMs
  • No overdraft fees
  • No foreign transaction fees
  • Interest on your uninvested cash
  • Direct deposit of paychecks

You don't get a checkbook, but you can request to send a physical check through the app and Robinhood will send on your behalf. This service is completely free.

Robinhood is partnered with program banks (which include Goldman Sachs, HSBC, Wells Fargo, and Citibank). These banks provide FDIC insurance up to a total maximum of $1.25 million.

All Robinhood users can open a Cash Management account. You must have a brokerage account to also use Cash Management.

Customer Service

Robinhood's customer support is very limited. There is no phone support or live chat available. Once you're a Robinhood user, you can only contact them via email.

Robinhood does have an extensive FAQ section in their Help Center on the site. That may be enough if you're okay with finding answers on your own. If you prefer full customer support, then perhaps look into one of the larger brokerages.

How It Compares

Robinhood vs E*TRADE:
E*TRADE is a full service brokerage. It offers a wide array of investment products and account options (including IRAs). It also has two robust platforms along with plentiful research, whereas Robinhood is more bare-bones.

Combining the services of the two brokers, though, can give you the best of both worlds. You can save for retirement through E*TRADE and save on commissions on your stock trades through Robinhood.

 

Robinhood

E*TRADE

 

Benefits and Features

Stock Trading
$0
$0 per trade
Options Trading
$0
$0 per trade + $0.65 per contract
$0 per trade + $0.50 per contract if you make 30+ trades a quarter
Annual FeeAll trades are commission-free. No platform fees. 
Minimum Deposit
$0
$500 for brokerage accounts
No account minimum for retirement accounts
Mutual Fund Trading
No
$0 for no-load, no-transaction-fee funds
$19.99 for transaction-fee funds
Commission Free ETFsAll U.S. listed ETFs
250+
Phone Support
No
 
Live Chat Support
No
 
Email Support
Yes
 
Human Advisors
No
 
Robo Advisor
No
 
Penny Stocks 
Check
Tax Loss Harvesting
No
 
Goal Tracker
No
 
Automatic Deposits
Yes
 
Broker Assisted Trades
Not available
$25 + Regular Commission
Customer Service 
800-387-2331
Good For
Beginners; Active traders
 
Inactivity Fee
$0
$0
Maintenance Fee
$0
$0
Online Platform
Yes
 
iPhone App
Yes (4 stars, 3.2m ratings)
 
Android App
Yes (1.4 stars, 360k ratings)
 
BankingNo service fees for Robinhood Cash Management account. Free debit card with no in-network ATM fees or foreign transaction feesChecking account offers no minimum balance requirements, free online bill pay, and unlimited debit card and check transactions.
Mobile App
Check
Check
Desktop App E*TRADE Pro (requires you execute at least 30 trades during a calendar quarter or maintain brokerage account balance of at least $250,000)
Futures Trading $1.50 per contract, per side + fees (excluding bitcoin futures)
Locations
No
 
Online Community
No
 
Seminars
No
 
Virtual Trading
No
 
Fractional Shares
Yes
 
Taxable Accounts
Yes
 
401k Plans
No
 
IRA Accounts
No
 
Roth IRA Accounts
No
 
SEP IRA Accounts
No
 
Trust Accounts
No
 
529 Plans
No
 
Stock TradingStarStarStarStarStarStarStarStarStarEmpty Star
Options TradingStarStarStarStarEmpty StarStarStarStarStarEmpty Star
Mobile AppStarStarStarStarEmpty StarStarStarStarStarStar
Commissions and FeesStarStarStarStarStarStarStarStarHalf StarEmpty Star
Ease of UseStarStarStarStarStarStarStarStarStarStar
ResearchStarEmpty StarEmpty StarEmpty StarEmpty StarStarStarStarStarEmpty Star
BankingStarStarStarEmpty StarEmpty Star
Online CommunityStarStarStarStarEmpty Star
Trading PlatformStarStarStarStarStar

Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details.

Robinhood: Pricing information from published websites as of 04/18/2020.

E*TRADE: Pricing information from published website as of 12/05//2020.

Robinhood vs Acorns:
Acorns aims to help young adults save more and invest their spare change. You link your bank and credit cards to the account, and every time you make a purchase, Acorns rounds up the purchase and invests the change.

Acorns automatically selects your investments and manages your portfolio for you. You don't get choose to the stocks like you would with Robinhood. Another advantage is that it supports fractional shares, so you can invest in a share of a stock even with a few dollars.

There is a monthly fee of $1 per month, but if you usually have trouble saving and don't know much about investing, then that could be worth it.

 AcornsRobinhood
 Visit SiteVisit Site
 

Acorns

Robinhood

SPECIAL OFFER
$10 Sign-Up Bonus - Learn More

OFFER
Get a Free Stock (worth between $2.50 and $200) - Learn More

 

Benefits and Features

Stock TradingPart of service fee. No add-on trading fees.
$0
Options Trading
No
$0
Annual Fee$1/mo for Acorns Lite (taxable account only)
$3/mo for Acorns Personal (includes IRA and checking account)
$5/mo for Acorns Family (includes investment accounts for kids)
All trades are commission-free. No platform fees.
Minimum Deposit
$0
$0
Mutual Fund Trading
No
No
Phone Support
Yes
No
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
No
Tax Loss Harvesting
No
No
Goal Tracker
Yes
No
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes (4 stars, 3.2m ratings)
Android App
Yes
Yes (1.4 stars, 360k ratings)
Banking$3/mo for Acorns + Acorns Later + Acorns Spend checking. Free debit card, no minimum balance, no overdraft fees, and unlimited free or fee-reimbursed ATMs nationwide.No service fees for Robinhood Cash Management account. Free debit card with no in-network ATM fees or foreign transaction fees
Mobile App
Yes
Check
Fractional Shares
Yes
Yes
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
No
Roth IRA Accounts
Yes
No
SEP IRA Accounts
Yes
No
Trust Accounts
No
No
529 Plans
No
No
 Visit SiteVisit Site

Acorns: Pricing information from published website as of 09/28/2020.

Robinhood: Pricing information from published websites as of 04/18/2020.

Robinhood vs Stash:
Stash offers thematic investing options by letting you choose stock and ETF categories that matter to you. It's aimed towards beginners and will guide you into making smart investment choices for you. But it is not a robo-advisor and will not manage your portfolio.

Stash has no minimum opening balance or investment requirements. It does cost $1 per month for taxable accounts and $2 per month for retirement accounts. Stash allows you to purchase fractional shares, which lowers the amount you need to start investing.

 StashRobinhood
 Visit SiteVisit Site
 

Stash

Robinhood

SPECIAL OFFER
Sign Up and Get $5 - Learn More

OFFER
Get a Free Stock (worth between $2.50 and $200) - Learn More

 

Benefits and Features

Stock Trading
Check
$0
Options Trading 
$0
Annual FeeSTASH Beginner ($1/mo)
STASH Growth ($3/mo)
STASH+ ($9/mo)
All trades are commission-free. No platform fees.
Minimum Deposit
$0
$0
Mutual Fund Trading 
No
Phone SupportYes - normal business hours, plus Sat & Sun 11a-5p ET
No
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
No
Tax Loss Harvesting
No
No
Goal Tracker
Yes
No
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes (4 stars, 3.2m ratings)
Android App
Yes
Yes (1.4 stars, 360k ratings)
BankingAll users get a cash account with a debit card. No minimum balance, no overdraft fees, and free ATM access at 19,000+ ATMS.No service fees for Robinhood Cash Management account. Free debit card with no in-network ATM fees or foreign transaction fees
Mobile App
Yes
Check
Fractional Shares
Yes
Yes
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
No
Roth IRA Accounts
Yes
No
SEP IRA Accounts
No
No
Trust Accounts
No
No
529 Plans
No
No
 Visit SiteVisit Site

Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details.

Stash: Pricing information from published website as of 08/14/2019

Robinhood: Pricing information from published websites as of 04/18/2020.

Bottom Line

Is Robinhood the only app you should use, even as a beginning investor? We don't think so, but we do think it could be a great way to supplement your investments with other brokers. Without a commission fee, you do stand to save some money on your investments.

If nothing else, it's a great way to get your feet wet and learn how the stock market works without breaking the bank in fees. As always, you should invest with caution, conducting as much research as possible before choosing your investments.

Remember: All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Securities offered through Robinhood Financial LLC and Robinhood Securities LLC, which are members of FINRA and SIPC. CreditDonkey is not a member of FINRA or SIPC.

References

  1. ^ Robinhood Financial Fee Schedule, Retrieved 12/15/2020
  2. ^ Robinhood, Paying for Robinhood Gold, Retrieved 12/15/2020

Write to Kim P at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

CreditDonkey is a paid Affiliate/partner of Stash. Investment advisory services offered by Stash Investments LLC, an SEC-registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.

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