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Robinhood Review 2020: Is This The Best Commission-Free Trading App?

Robinhood Review

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Let’s introduce you to a new version of Robin Hood. This one does not take from the rich and gives to the poor, but it promises to change your fortune by using your own money.

The app is mainly designed for Millennial investors but is perfect for other investors as well. It offers commission-free stock, ETF, crypto and options trades with plans to introduce a range of other asset classes in the future.

It may not be the biggest online stockbroker out there, but it’s gradually making a mark in the industry by offering some amazing features. Let’s get to know more about Robinhood in this review.

4.5
4.5/5

on Robinhood’s website

Quick Summary: Robinhood allows you to make unlimited commission-free trades in stocks, ETFs, options and crypto. You can access professional research reports, trade on margin, and make bigger instant deposits with Robinhood Gold for $5 a month.

Pros:

Cons:

What is Robinhood?

Launched in 2015, Robinhood is a discount online stockbroker with over 10 million users. Valued at about $8.3 billion, the platform has over $50 billion in assets under management (AUM) making it a big player in the game.

Robinhood is one of the fastest growing online stockbrokers. It has constantly and consistently updated the platform and 2020 was no different.

The company has recently introduced some new features including Robinhood Crypto. It also improved options trading and expanded the web-based version of the app.

The company is working on offering savings and checking accounts with no associated fees under its Cash Management feature. Plus, the platform will also offer 0.30% APY on your cash. This is unheard of and will give Robinhood a major competitive advantage against banks and other competitors.

However, it may be a while before the company officially launches these new features as legalities are yet to be taken care of.

How Does Robinhood Work?

Robinhood presently offers a variety of services. Let’s get to know how each works:

Stock Trading

Stock trading through the app is simple, however you will not see the ‘stock’ option anywhere. What you need to do is use the search icon and look for the stock that you are interested in.

It may sound a little difficult on paper but you’ll get used to it in a few days. The stock page will show you details about the stock including company information and price.

Look at the stock price and other metrics within the app, and decide if you are interested in buying that stock, The process is simple and only takes a few seconds. Select the number of shares you want to buy and you are good to go.

The platform supports limit orders, market orders, stop orders, and stop-limit orders with good-till-cancelled or good-for-the-day parameters. It is important that you familiarize yourself with the jargon so you can understand what you’re dealing with.

Not knowing what these different parameters mean or choosing the wrong parameter can lead to problems.

Invest in Stocks, ETFs, Options and Crypto

Options Trading

When Robinhood was first launched, it did not offer options trading but today it is one of the biggest features of the company.

You can enjoy no-fee contracts under options trading. This is great because you can make money without having to worry about contract fees or commissions. Plus, there are also no assignments or exercise fees, which is a common occurrence on other platforms.

The company offers a bunch of advanced strategies to help you understand options trading and make the right decision. In addition to this, there are also a variety of filters so that you do not have to waste time looking for what you need.

Moreover, there’s also the option to trade multi-leg options in a single order while getting to monitor all these contracts at once. This is a great feature that may be more suitable for experienced traders.

Cryptocurrencies

Currencies have set the world on fire. While the opinion on cryptos appears to be divided, you cannot deny the fact that they can help you make a good amount of money.

Robinhood is one of the few brokers to offer cryptos. Some of the biggest cryptocurrencies you can trade in the Robinhood app include:

  • Bitcoin
  • Ethereum
  • Bitcoin Cash
  • Litecoin
  • Ethereum Classic
  • Dogecoin

The company plans to introduce more currencies in the future but these are quite good to begin with.

Robinhood is writing history here as it is one of the few options that offer no-fee crypto trading. Coinbase and the likes will face stiff competition as Robinhood plans to offer 24/7 trading with some other benefits.

Robinhood only gives you the platform to invest, it does not provide guidance or advice when it comes to investing. Hence, do your own research and make responsible decisions.

ETFs

This is another great feature offered by the company. It lets you invest in a group of companies all at once. The platform offers a variety of ETFs focusing on different sectors like social impact, technology, and clean energy.

ETFs can be a good way to diversify your portfolio and reduce the risk.

Robinhood Features

Robinhood Features

Robinhood is jam-packed with great features.

Minimum Investment

$0

Stock & ETF Fees

$0 per trade

Options Fees

$0 per contract

Mutual Fund Fees

N/A

Inactivity Fee

$0

Withdrawal Fee

$0

Investment Types

Stocks, ETFs, Options and Crypto

Account Types

Taxable

Platform

Web-based, Mobile (iOS / Android) and Watch (watchOS)

Account Funding

Bank Transfer

Paper Trading

SIPC Protection

Banking Services

Support

Email

Scheduled Deposits: The app lets you schedule automatic transfers. You can choose from quarterly, monthly, biweekly, or weekly deposits.

Instant Deposit: This paid feature lets you access your deposits (if under $1,000) right away which is great as you have to otherwise wait for three business days for the funds to become available.

Margin: You can enjoy margin trading to get more without having to invest more. However, this is a paid feature.

Information: The app offers candle charts and true figures to help you understand your portfolio and make educated decisions.

Tracking: Robinhood allows users to track up to three trades in a rolling five-day period.

Customer Support: Email is the only way to get in touch with the company. There is no phone or live chat support for now, which can be quite a bummer for some users.

Robinhood Gold

Robinhood Gold – For Serious Traders

If you’re serious about making money, consider using Robinhood Gold. This paid service gives you access to special features, mainly margin trading, which is recommended only for expert traders.

You must have a minimum of $2,000 in your account to upgrade to the paid version. This is the law, there is nothing the company can do about it.

Some other benefits of going premium include:

  • Trade 30 minutes before the market opens
  • Trade 2 hours after the market closes
  • Instant access to funds

The cheapest package starts as low as $6. We think $10 is the best as it gives you $2,000 more of buying power.

The most expensive package costs $200 and gives you $50,000 buying power. Moreover, you will be charged 5% APR on borrowing over $50,000.

How Does Robinhood Make Money?

Robinhood is actually free but since it’s a business hence it has to cover costs. The company makes money by selling paid packages. Plus, it also makes money by using your money to earn interest.

Here’s how it works: The money you deposit with the company is used by the platform to earn interest. You could’ve earned interest by keeping the money with a bank or other financial institution.

Pros of Robinhood

  • Free: This obviously is the biggest benefit of using the platform. There are no fees to worry about, however you can enjoy a paid version of the tool for more features.
  • Simple: The tool is easy to use and is available on a variety of platforms.
  • News: There is a news section that keeps you aware of market conditions and what’s going on around you.
  • Before and After Market Trades: This paid feature is great and gives you more control as you can buy or sell assets before the market opens or after the market closes.
  • 24/7 Crypto Trading: Robinhood doesn’t only offer free crypto-trading, but it also offers 24/7 trading for cryptos.
  • Start As Low As You Want: There is no minimum balance, unless you want to have a paid account.
Cons of Robinhood

Cons of Robinhood:

  • Customer Service: The company does not offer phone support or live chat, which can be very inconvenient for some users.
  • Wait: You have to wait for three days for funds to be available.
  • Supports One Account Type: The company only offers taxable accounts, hence it is not suitable for joint, custodial, or retirement accounts.
  • Delayed Data: Quotes are often delayed by about 20 minutes.

Who is Robinhood For?

Robinhood is great for users who want to try their hands at trading ETFs, options, stocks, and cryptos without having to worry about fees or commissions.

It’s suitable for both newcomers and experienced users – thanks to a paid version that offers more benefits. Moreover, it can be very lucrative for serious traders and crypto lovers due to the additional perks it offers in the form of 24/7 crypto trading and before/after market trading.

Who is Robinhood Not For?

The company is only licensed to sell securities to US citizens/residents, hence you may not be able to use it if you’re not a US resident or citizen. You will have to submit documents proving you’re in the US or are a US citizen. It only takes a few days to get approved.

Other than this, it may not be suitable for users looking for a retirement account as it only offers taxable account right now.

Robinhood Pricing Plan

While the basic service is free, here’s the pricing plan for the paid Gold package.

Best Robinhood Review

Are There Robinhood Alternatives?

Ally Invest and Ameritrade are some great alternatives but they’re not free. In fact, you will not find any other stockbroker that is 100% free to use and offers such a large variety of investment options.

4.5
4.5/5

Minimum Investment

$0

Fees

$0

Promotions

Stock and ETF Trades

$0/trade

Options Trades

$0/contract

Investor Protection

$500,000 (securities up to $500,000, cash up to $250,000)

Webull Logo
4.4
4.4/5

Minimum Investment

$0

Fees

$0

Promotions

Stock and ETF Trades

$0/trade

Options Trades

$0/contract

Investor Protection

$500,000 (securities up to $500,000, cash up to $250,000)

4.6
4.6/5

Minimum Investment

$0

Fees

$0

Promotions

None

Stock and ETF Trades

$0/trade

Options Trades

$0.5/contract

Investor Protection

$500,000 (securities up to $500,000, cash up to $250,000)

Is Robinhood Safe to Use?

This is an important question since most free trading platforms in the past have failed to stay afloat. However, Robinhood appears to be doing quite well as its paid version is popular, hence it’s not having much of a difficulty sustaining the model.

Similarly, the accounts are SIPC insured, hence the risk is very low. Additionally, the company uses proper security and encryption to ensure data remains safe and secure.

Robinhood

A free-trading app that lets your trade stocks, options, ETFs and cryptocurrency without paying commissions or fees. Robinhood is a pioneer of commission-free investing.

on Robinhood’s website

Summary

Robinhood is a good platform for both beginners and experienced users. We suggest you opt for the paid version if you are aware of trading and understand leverage trading. The ability to trade before and after markets close is great.

The company is going in the right direction and with some new features expected to hit the marquee soon, it may get even bigger in the future. However, customer support needs to improve and the app also requires some upgrades.

Final Verdict

Robinhood is cool with one downside – it allows you to trade but doesn’t educate you much about trading. It’s best to understand how trading works before you dabble in it.

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