Review of: Robinhood
Reviewed by: Eric Rosenberg
Last modified: August 15, 2018
If you think free stock trades are a fantasy, think again! Robinhood offers commission-free stock trades. No fees, really! If a free, simple, basic stock trading app with no extras sounds good to you, Robinhood might be the broker you’ve been looking for.
- Active traders
- Low minimums
- Options traders
- Cybercurrency traders
- New investors
- Smartphone users
Robinhood is a brokerage that aims to bring stock investing to a wider audience. With a name that sounds like it will take from the rich and give to the poor (although it doesn’t actually do that), Robinhood offers fee-free stock trades geared particularly for Millennial investors who want a smartphone-based trading platform without any bells and whistles.
Robinhood has been a smartphone-first brokerage, with Android and iPhone apps as the primary methods to log into your account and place trades. However, there is now a fully functional web version available to all users.
The Roninhood platform doesn’t offer the same in-depth research and tools of larger, traditional brokers, but with much of that information now available for free from sites like Google Finance, Morningstar, MarketWatch and others, this free stock trading platform may be all you need.
Or at least, it may be all you need to dip your toe into the pool of stock investing to test the waters.
What Is Robinhood?
Robinhood is a discount stock broker that has certainly been a hit from its inception in 2015. Currently, the platform boast more than 5 million users. That surpasses the number of people who use popular brokerage E*TRADE. As of May 2018, Robinhood’s platform has hosted more than $150 billion in transactions. And the company has been recently valued at $5.6 billion.
2018 has been a huge year for Robinhood. The company has expanded its web version, built up its Options Trading service and rolled out Robinhood Crypto, which lets you trade some of the most popular cyber currencies.
We’ll get to all of that in a minute. First, let’s take a look at how this fee-free brokerage works.
Robinhood Fees & Features
|Investment Types||Stocks, Options, ETFs, Cryptocurrencies|
|Access||Website, iOS App, Apple Watch, Android App|
|Broker Assisted Trade|
|No Fee ETFs|
- Scheduled Deposits – You can schedule automatic transfers on a weekly, biweekly, monthly or quarterly basis.
- Advanced Order Support – Robinhood supports market orders, limit orders, stop limit orders and stop orders. You can enter some orders as good for the day or good till canceled (GTC).
- Robinhood Instant – Instant access to deposits (under $1,000) and immediate access to your funds after selling stocks. You don’t have to wait the typical three business days.
- Day-Trade Tracking – Although we’re not big fans of day trading, Robinhood will let you track up to three trades in a rolling five-day period.
- Robinhood Gold (New) – This features introduces after-hours trading, line of credit and larger amounts of instant deposits.
- Options Trading (New) – Robinhood has rolled out the ability to trade options with no commission fees.
- Cryptocurrency Trading (New) – Robinhood will now allow you to invest in Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin and Dogecoin, as well as allowing users to track a list of other currencies.
How Does Robinhood Work?
Hop into the app on your phone with your password or fingerprint (on fingerprint-enabled devices) to access your account. There is no “trade” option in the menu, which I found disorienting at first. To trade a stock, click on the “search” icon and search for the stock you have in mind. It really is simple and free once you pull up the page showing basic details about the company and recent price information.
I tested it out myself buying shares of CCL and ON through the Android app, and the experience was as easy as advertised. After years with a big discount broker, I found the fee-free experience refreshing. I bought just $30 of ON, which I would not have done if it had required a $5 fee — 16.7% of the purchase price.
The platform supports market orders, limit orders, stop-limit orders and stop orders with good-for-the-day or good-till-cancelled parameters.
Because trades are free, you may be tempted to dive into the risky world of day trading. That is something we at Investor Junkie advise against. However, the Robinhood account screen does show you the number of day trades on your account, which may tempt you to give it a try.
Options is a new product for Robinhood. It gives you access to no-fee contracts. That includes no commissions and no per-contract fee, no exercise fee and no assignment fees. It’s tough to beat free.
Robinhood’s Options Trading includes helpful filters and advanced trade strategies. You can now also trade multi-leg options strategies in a single order and monitor these complex contracts together, as well.
The typical investor should not be trading options at all, but if you are an experienced investor who wants to trade in the options space, you can increase your margins by trading at Robinhood.
The biggest buzz is probably around the new cryptocurrency trading service Robinhood is rolling out for its users. It allows access to buy and sell six popular currencies: Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin and Dogecoin.
Access is rolling out on a state-by-state basis. Currently, about 50% of the U.S. population can use Robinhood Crypto.
Even if you don’t get access to buy and sell, all Robinhood users now have access to price and market data for 16 popular cryptocurrencies. The big benefit of Robinhood over Coinbase and other well-known digital wallet providers is that Robinhood extends its no-fee trading to cryptocurrencies as well. And you also have the ability to trade 24/7. That is, if you are one of the lucky few allowed in so far.
(Editor’s Note: Before plunging in, you might want to read Investor Junkie’s opinion of bitcoin trading.)
|Stock Trades||Free||$4.95/trade ($3.95/trade – 30 trades per quarter or $100k+ balance)||$6.95/trade|
|Promotions||None||Get up to a $3,500 Cash Bonus||Trade Free for 60 Days + Get Up to $600 Cash|
|Review||—||Read the Review||Read the Review|
For more serious traders, Robinhood offers a fee-based service called Robinhood Gold. This is similar to rival broker Motif’s BLUE service. Apparently, these low-cost brokerage firms are hoping to make up on the lost revenue via monthly subscription fees.
Gold is really a better fit for the more active trader. The biggest power of Robinhood Gold is that it upgrades your account to a margin account to give you access to buy and sell stocks on credit, but this is not recommended for inexperienced investors. If you don’t already know what a margin call is, you should probably skip Robinhood Gold and stick with the free version.
If you do decide to opt into a margin account, note that there is a $2,000 minimum balance required to open the account. This is per federal regulations.
Gold also gives you access to extended-hours trading for pre-market (30 minutes before market open) and after-hours trades (2 hours after market close). This is useful when big news hits the market and you want to quickly enter a trade before everyone else has an opportunity to react to the news. Gold also offers instant access to deposits, an upgrade over the standard three-day hold on deposited funds.
Gold comes in multiple tiers starting at $6 per month. Pay $10 per month for a $2,000 margin account up to $50 per month for $10,000 of credit, with no interest. Over $50,000 of buying power requires paying 5% interest on the borrowed balance.
Is Robinhood Risky?
In a past review, Investor Junkie founder Larry Ludwig pointed out that most other companies that have attempted free or freemium investments have not fared well. While Robinhood accounts are SIPC insured, there is a slight risk Robinhood won’t be around as long as the old guard of online investment firms.
Free stock brokerage Loyal3 threw in the towel after failing to earn consistent profits, and formerly free trading platform Zecco became part of TradeKing, which has since been bought by Ally Financial and turned into Ally Invest.
How Does Robinhood Make Money?
OK, so let’s cut past all the do-gooder sentiment that’s wrapped up in the the company’s self-identification with Robin Hood. It’s not a friend to the over-taxed people of Nottingham; it’s a business. And businesses make money. So where is Robinhood’s coming from?
Robinhood earns its money through its Robinhood Gold subscription fees and interest on cash balances of user accounts. For example, I have about $8 in cash in my account, which Robinhood pools with other cash balances and earns interest. If I had that cash in a savings account, I could earn interest. But because it is sitting with Robinhood, Robinhood keeps the interest.
Pros and Cons
- Free Trades — Zero, zip, nada, naught, zilch for any trade.
- Easy to Use — The service was easy to sign up for and use when making trades.
- Options Trading — Robinhood recently introduced Options available at no cost.
- Market News Notifications — Get a notification on your mobile device for earnings announcements and other major news on stocks in your portfolio and watch list.
- Crypto — For those of you who want to trade — or even just track — cryptocurrencies 24/7, this feature will have you covered.
- No-Fee ACH Transfers — Robinhood doesn't charge any fees on any ACH transfers to or from your account.
- No Minimum Deposit — For most accounts, there is no minimum deposit or balance required.
- No Retirement Accounts — Currently, only individual taxable accounts are available. Joint or custodial accounts aren't available either.
- Poor Customer Service — Based on comments on this site and from other forums, customer service with Robinhood is poor.
- Limited Functionality — Robinhood doesn't have much in the way of creating complex trading options and therefore isn't for the advanced trader.
- Not Intuitive — I’m a Millennial and a digital native, and I had trouble figuring out how to get to enter a trade the first time. Finding what you want in the app is not always intuitive. But once you figure out how to trade, it’s easy as pie.
- Potentially Delayed Data — Quote data may be delayed by as much as 20 minutes.
- No Mutual Funds or Bonds — Currently, Robinhood doesn't support mutual fund or bond investing.
Robinhood is a great way to get your feet wet with investing with no fees. The platform is regularly adding new features, including the web-based platform, options trading and Robinhood Crypto. While it is not powerful enough to be your only investment platform, it does work well for your individual stock trading account. It’s far from perfect, but it is a great value. After all, you can’t beat free.
Other Stock Broker Promotions
|Stock Broker||Promotion||Visit Site|
|Trade Free for 60 Days + Get Up to $600 Cash||Learn More|
|Trade FREE for 60 Days + Get Up to $2,500 in Cash||Learn More|
|Up to $600 Cash Bonus||Learn More|