Updated September 6, 2023

Robinhood Review

By Kim P, personal finance expert at CreditDonkey
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.

5-point scale (the higher, the better)

Pros and Cons

  • Commission-free trades
  • No minimum
  • Extended trading hours
  • 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.

What's New?
Robinhood is always adding new features and updates to its platform. Here are a few of the latest things you can expect from the app.

  • 24-Hour Market
    Robinhood now allows investors to trade selected stocks and ETFs 24 hours a day, 5 days a week. This is a significant change from 9:30 AM to 4:00 PM trading hours.

  • Robinhood Cash Card
    Robinhood launched a debit card called the Robinhood Cash Card in 2022. The card lets users spend uninvested cash and earn cash back on purchases.

Who Robinhood is Best For

Robinhood was originally invented to help Millennials start investing without giving up most 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 cryptocurrency.
  • Self-employed or gig workers who want to grow their retirement savings.

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.

Get started with Robinhood: Claim your free stock today.

Pros & Cons

Before you sign up with Robinhood, here are some of the things that you need to consider:

  • Commission-free
  • Offers fractional shares
  • User-friendly app
  • 24 Hour Market
  • Free cash card account
  • SIPC & FINRA protected
  • Limited research and tools
  • No mutual funds or bonds
  • Poor customer support
  • Limited investment options

If you're looking for a more beginner-friendly alternative, check out Acorns. The platform helps you get started fast, even if you're not an investing expert yet.

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Range of Offerings

Robinhood offers a variety of investment products and services, including:

  • Stocks
    Robinhood is a great way to buy and sell stocks without paying any commissions. They offer over 5,000 stocks to choose from.

  • ETFs
    ETFs are investments that track a particular market index, sector, or commodity. This means that when you buy an ETF, you buy a basket of stocks representing that index, sector, or commodity. ETFs are a good way to diversify your investment portfolio and reduce risk. Robinhood offers over 5,000 securities which include ETFs.

  • Options
    Robinhood is not just for trading U.S. stocks. You can also trade options and access over 650 global stocks through ADRs. This gives you a wider range of investment opportunities. But this is a risky investment, and you should only trade options if you understand the risks involved.

  • Cryptocurrencies
    Cryptocurrencies are like digital coins or tokens that use codes to keep them safe. They are not controlled by governments or banks, so they differ from regular money. These are volatile investments, and their prices can fluctuate wildly.

    Robinhood offers 15 cryptocurrencies: AAVE, AVAX, BTC, BCH, DOGE, ETH, ETC, LTC, SHIB, XLM, XTZ, UNI, LINK, COMP, and USDC.

  • IRAs
    You can open a traditional or Roth IRA account with Robinhood. Both types of accounts offer tax advantages, so it's a great way to save for retirement

Robinhood also offers a few special features and benefits, such as:

  • Cash card
    The Robinhood Cash Card is a debit card that is linked to your Robinhood account. You can use the Cash Card to withdraw cash from ATMs, make purchases, and online payments. The Cash Card does not charge any ATM fees and offers cashback rewards on eligible purchases.

    The Robinhood Cash Card is available to all Robinhood users.

  • Cash sweep
    Cash sweep is a feature that automatically sweeps any unused funds in your Robinhood account into a high-yield savings account. This can help you earn more interest on your money.

  • DRIP
    DRIP stands for dividend reinvestment plan. With DRIP, you can automatically reinvest your dividends into the same stock or ETF. This can help you grow your investment over time.

Pricing & Fees

Robinhood is a popular investment app that offers commission-free trading. However, there are still some fees that you may be charged, such as exchange fees and transfer fees.

  • 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 (non-IRA), 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: $22.90 per $1,000,000 of principal (rounded up to the nearest penny).[1]
  • FINRA Trading Activity Fee: $0.000145 per share (rounded up to the nearest penny and up to $7.27).[2]

Some account fees you may encounter are:[3]

  • $100 account transfer fee (Outgoing)
  • $20 domestic overnight mail
  • $50 international overnight mail
  • $2 per month for paper statements
  • $25 returned check - IRA Rollovers
  • Early IRA Match Removal Fee (variable)

How does Robinhood make money?
Robinhood generates revenue in these ways:
  • From their paid Robinhood Gold account, which is their premium subscription. This costs $5 a month.
  • From interest earned on your cash balances.
  • Rebates from market makers and trading venues

Stop overpaying commissions. Use Robinhood instead

Types of Accounts

Robinhood offers different 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 (Paid Features)

Robinhood Gold is the premium account. The fees and minimums are:

  • $5/month account fee

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 include:

  • 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 $20,000 buying power.

    You can also set a margin limit to 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 IRA

With the Robinhood Retirement, you can choose to invest in stocks and ETFs through traditional or Roth IRA.

  • Traditional IRA
    A traditional IRA allows you to deduct your contributions from your taxable income in the year you make them. This can save you money on your taxes. However, you will have to pay taxes on the money when you withdraw it in retirement.

  • Roth IRA
    A Roth IRA is funded with after-tax dollars. This means you do not get a contribution deduction. But you will not have to pay taxes on the money when you withdraw it in retirement.

Requirements for IRA accounts
  • U.S. citizen or resident
  • Social Security number
  • At least 18 years old.
  • Must have earned income in the amount that you are contributing

Robinhood Platform and Technology

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

  • 24-hour market
    Robinhood offers 24/5 trading on a limited number of stocks and ETFs. You can place trades outside the traditional 9:30 AM to 4:00 PM trading hours. The 24/5 trading hours are from 8:00 PM ET on Sunday to 8:00 PM ET on Friday.

  • Extended trading hours
    You can trade 2.5 hours earlier before the market opens and 4 more hours after it closes. Traditionally, markets are open from 9:30 AM to 4:00 PM, extended-hours mean trading from 7:00 to 9:30 a.m. or 4:00 to 8:00 p.m. ET

  • Margin rates
    Margin rates are the interest rates that Robinhood charges on borrowed money. Margin rates will vary based on a customer's margin balance, ranging from 5.7% to 6.75%.

  • Watch list and cards
    The Robinhood Watchlist is a tool that allows you to track stocks, ETFs, and cryptocurrencies that you are interested in. You can create multiple watchlists and customize them to your liking.

    The Robinhood Cards feature allows you to create custom charts and graphs of your investments. You can use the cards to track your performance, compare investments, and identify trends.

  • News
    The Robinhood News feature provides real-time news and analysis from various sources. You can customize your news feed to focus on the topics you are interested in.

  • Charting
    The Robinhood Charting feature lets you view historical price data and technical indicators for stocks, ETFs, and cryptocurrencies. You can use the charts to analyze trends and make trading decisions.

  • Learning center
    The Robinhood Learning Center is a resource that provides educational content on investing and personal finance. The center includes articles, videos, and quizzes to help you learn about the basics of investing.

  • Robinhood snacks
    Robinhood Snacks is a daily newsletter with market news and analysis. The newsletter is sent to your inbox every morning and includes a brief overview of the day's top stories. Robinhood Snacks is now managed by Robinhood's media arm, Sherwood Media, LLC, a subsidiary of Robinhood Markets Inc.

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 that tells 3 business stories in 15 minutes.

How do I get my money out of Robinhood?

You can withdraw your funds into your linked bank account for up to $50,000 per day via ACH transfers and up to $5,000 with instant transfers. From your account options, just select "Transfer" and then "Transfer to Your Bank" to initiate the withdrawal. There is no fee to withdraw.


Robinhood Security

Is Robinhood safe?
59% Yes
41% No
Source: CreditDonkey poll, December 22, 2021 to December 23, 2021

Robinhood takes security seriously and has several measures in place to protect your data and investments. These include:

  • Data encryption
    Robinhood encrypts sensitive information, such as your Social Security number, before storing it. This means that only authorized parties can access your data.

  • Password security
    Robinhood uses a secure hashing algorithm to store your passwords. This makes it difficult for anyone to crack your password, even if they were to get access to Robinhood's systems.

  • Two-factor authentication (2FA)
    2FA adds an extra layer of security to your account by requiring you to enter a code from your phone in addition to your password when you log in.

  • Regulation Compliance
    Robinhood is regulated by the SEC and FINRA, which helps to ensure that it complies with industry standards for security.

  • Cash and security insurance
    Robinhood is a member of the SIPC, which protects your securities up to $500,000 (including $250,000 for claims for cash) in the event of bankruptcy or other financial difficulty. Robinhood has also purchased an additional insurance policy to supplement the SIPC coverage.

By taking these measures, Robinhood is committed to protecting your data and investments. However, it is important to remember that no security system is perfect. You can also help to protect your account by using a strong password, enabling 2FA, and being careful about what information you share online.

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. However, 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).

Customer Service

Robinhood offers 24/7 live phone support. A live human will help with any questions, from your account to options to crypto. Just request a call through the Robinhood app, and an agent will reply. Support will be personalized based on your question.

Note that only existing users can talk to customer service. There's no general number that anyone can call.

Robinhood has had a lot of criticism for its poor customer service. So we love seeing that it has stepped up in this department and prioritizes customer needs.

Robinhood also has an extensive FAQ section in its Help Center. That may be enough if you're okay with finding answers alone.

How It Compares

  1. Robinhood vs E*TRADE:
    E*TRADE is a full service brokerage. It offers various investment products and account options (including IRAs). It also has two robust platforms and 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 get more advanced and plentiful research through E*TRADE and save on commissions on your stock trades through Robinhood.

  2. 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.

    Also every time you make a purchase, Acorns rounds up the purchase and invests the change. Robinhood also has this "spare change" investing feature via the Robinhood Cash Card.

    Acorns automatically selects your investments and manages your portfolio for you. You also have the option to pick individual stocks for your portfolio, but it is only available with the highest plan.

    A monthly fee starts at $3 per month, but if you usually have trouble saving and don't know much about investing, that could be worth it.

  3. 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 $3 per month. Like Robinhood, Stash also allows you to purchase fractional shares, which lowers the amount you need to start investing.


FAQs

  • Can you actually make money from Robinhood?

    Yes, you can make money from Robinhood by buying and selling stocks, options, and cryptocurrencies. However, it is important to remember that investing is risky, and you could lose money.

  • Can you lose money with Robinhood?

    Yes, you can lose money with Robinhood. The value of stocks, options, and cryptocurrencies can go up and down, and you could lose money if you sell them for less than you paid.

  • Can I day trade stocks on Robinhood?

    Yes, you can day trade stocks on Robinhood. Day trading is buying and selling stocks within the same day. Robinhood does not charge commissions for day trading, but you may be subject to other fees, such as exchange fees.

  • Can I trade immediately after opening my Robinhood account?

    No, you cannot trade immediately after opening your Robinhood account. You must wait for your account to be approved, which can take a few days.

  • What is the downside of Robinhood?

    One of its biggest downsides is the customer support. It can be slow and unresponsive. And you can only contact them through chat or email. They have a phone support option, but you must fill out a request form first and wait for them to call you back. Robinhood has also been criticized for its lack of educational resources for investors.

  • Does Robinhood have hidden fees?

    Robinhood does not charge commissions for stock, options, and cryptocurrency trades. However, there are some other fees that you may be charged, such as exchange fees and margin interest rates.

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. ^ Securities and Exchange Commission. Fee Rate Advisory #1 for Fiscal Year 2023, Retrieved 09/3/23
  2. ^ FINRA. Section 1 Member Regulatory Fees, Retrieved 10/1/22
  3. ^ Robinhood Financial Fee Schedule, Retrieved 12/22/2022
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