Updated December 26, 2022

Robinhood Review: Is it Safe?

By Kim P, personal finance expert at CreditDonkey
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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 $5 and $200)

Overall Score

4.1

Stock Trading

5.0

Options Trading

4.0

Minimum Deposit

5.0

Customer Service

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
  • 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

© CreditDonkey

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

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 card account
  • SIPC protected

CONS:

  • Limited research and tools
  • No mutual funds or bonds
  • Weak customer service

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.

Compare Investing App Promos

Who Robinhood is Good For

© CreditDonkey

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 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.

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.

They offer first trade recommendations but you won't receive any investment advice if you have already invested in your recommended portfolio. You still need to do some research to select your 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 (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: $0.000130 per share (rounded up to the nearest penny and up to $6.49).[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?
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
  • Cryptocurrencies (ETC, ETH, BSV, BCH, BTC, DOGE, LTC, COMP, MATIC, SOL, SHIB, AVAX, ADA, LINK, XLM, UNI, USDC)

Robinhood offers an individual taxable account and retirement account. There are no college and education savings options.

If you're looking for a more robust crypto alternative, check out Coinbase. This popular exchange supports more cryptocurrencies and has an easy-to-use interface.

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.

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 ($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.

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

  • IRA Instant Deposit up to $1,000
  • Custom recommended portfolio of ETFs
  • No commission-fees

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.

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.

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 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 means trading from 7:00 to 9:30 a.m. or 4:00 to 8:00 p.m. ET

  • 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). The fees and minimums are:

  • $2,000 minimum balance to trade on margin
  • $5/month account fee

Your first $1,000 of margin is included. If you borrow more than that, you'll pay 7.75% yearly interest on the amount you use above $1,000.[4]

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 Card

Robinhood offers a Cash Card. There is no account service fee or minimum balance requirement.

Some features include:

  • Free debit card
  • Earn cash back on purchases
  • Earn weekly bonuses on round-ups
  • No fees at 90,000+ Allpoint and MoneyPass ATMs
  • No overdraft fees
  • Get direct deposits up to 2 days early

You can choose to automatically invest part of your paychecks in stocks and crypto. Plus, you can round up your purchases and invest the change.

This account provides FDIC insurance up to the federal limit of $250,000.

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 for a call through the Robinhood app, and an agent will get back to you. 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 their poor customer service. So we love to see that it has stepped up in this department and is making customer needs a priority.

Robinhood also has 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.

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 get more advanced and plentiful research through E*TRADE and save on commissions on your stock trades through Robinhood.

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. Robinhood also has this "spare change" investing feature via Robinhood Cash Card.

Acorns automatically selects your investments and manages your portfolio for you. You don't get choose to the stocks like you would with Robinhood.

There is a monthly fee of $3 per month, but if you usually have trouble saving and don't know much about investing, then that could be worth it.

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.

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 2022, Retrieved 10/1/22
  2. ^ FINRA. Section 1 Member Regulatory Fees, Retrieved 10/1/22
  3. ^ Robinhood Financial Fee Schedule, Retrieved 12/22/2022
  4. ^ Robinhood, Paying for Robinhood Gold, Retrieved 12/22/2022
Robinhood

Get a Free Stock (worth between $5 and $200)

Get a Free Stock
Acorns

$20 Investment Bonus

Get $20 Investment Bonus
  • Open an Acorns account (new users only)
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Stash

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

Paid non-client endorsement. See Apple App Store and Google Play reviews. View important disclosures. 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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