The Modest Wallet is a free digital publication delivering its readers simple personal finance solutions. We regularly partner with brands that have products and services that will help our readers. When you buy through links on our site, we may earn a small commission at no extra cost to you. For more information, please read our full disclosure.
Let’s introduce you to a new version of Robinhood. This one does not take from the rich and give 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 users as well. It offers fee-free stock trades with plans to introduce a range of accounts in the future.
It may not be the biggest 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 this stockbroker in this Robinhood review.
Quick Summary: Robinhood allows you to make unlimited commission-free trades in stocks, funds, options and crypto. You can access professional research reports, trade on margin, and make bigger instant deposits with Robinhood Gold for $5 a month.
What is Robinhood?
Launched in 2015, Robinhood is a discount stockbroker with over 5 million users. Valued at about $5.6 billion, the platform has over $150 billion in transactions 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 2018 was no different.
The company introduced some new features last year 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 Cash Management. Plus, the platform will also offer 3% interest on savings accounts. This is unheard of and will give Robinhood a major boost as the average bank rate is only 0.09%.
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 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 page and decide if you are interested in making the purchase. The process is simple and only takes a few seconds. Select the number of shares you want to purchase and you are good to go.
The platform offers support limit orders, market orders, limit orders, stop orders, and stop-limit orders with good-till-canceled 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.
While Robinhood defines all of them, it may not be enough. Hence, we suggest you take the time and go through different sites to gain some extra knowledge.
It can be difficult to control the temptation, especially since Robinhood offers free trade, but make sure to be responsible.
Do not dive into the world of free trading unless you’re sure of how much money to put on the line.
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.
In fact, new investors should not try their hands at options since it’s a risky business. Robinhood offers excellent margins, making it tempting, but make sure to be responsible.
If you haven’t heard of Bitcoin and other cryptocurrencies then have a look at Google. These digital 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. You will find the six of the biggest cryptocurrencies out there including:
- Bitcoin Cash
- Ethereum Classic
The company plans to introduce more currencies in the future but these six are quite good to begin with. However, since it is a new option, it is not yet available throughout the country. Only about half of the US population presently has access to Robinhood Crypto but the app is growing fast.
You can go here to request Early Access or wait until it reaches you as it’s moving from state to state. You can have a look at the market data and how the platform works even if you don’t yet have the ability to buy and sell cryptos on the platform.
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.
However, make sure to do a lot of research before investing in cryptos. We all know how Bitcoin nearly hit the $20,000 mark over a year ago and is now down to about $7,000.
Robinhood only gives you the platform to make money, it does not provide guidance or help. Hence, do your own research and take responsible decisions.
This is a new 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.
|Cost||Free but there’s also a paid version|
|Minimum investment requirement||$0|
|Access||Apple watch, website, Android app, iOS App|
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 – 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:
- 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.
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.
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.
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.
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.
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.
Download our FREE
“Stock Market Playbook” eBook
Learn everything you need to know to invest your first $500 in the stock market and become a do it yourself investor