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Robinhood is an online-only stock-trading platform that offers stocks, options, ETFs and cryptocurrencies. Robinhood is ideal for self-directed investors who prefer to forego the traditional path of using a stockbroker and trade stocks on their own by phone or online instead.
Robinhood was the first popular platform to offer commission-free trades, though in 2019 many other brokers followed suit, including TD Ameritrade, Charles Schwab and E*TRADE. Although you’ll have to pay a $5 monthly subscription to get the most out of Robinhood’s research offerings, its mobile app and web platform have intuitive, streamlined interfaces that make trading fun.
Robinhood at a glance
|Broker||Account Minimum||Stocks and ETFs per trade||Bonds||Mutual Funds||Key Benefit|
|Robinhood||$0||$0||Not offered||Not offered||Commission-free trading and a gorgeous platform|
What we like about it
Robinhood is rolling out a new program called Cash Management with a variable APY on uninvested cash through your brokerage account. This gives access to a Mastercard® debit card that allows investors to spend the un-invested cash in their account. There are no fees for transfers, account minimums, and foreign transactions. Your cash is also insured with up to $1.25 million of FDIC insurance or up to $250,000 per bank. The program is now accepting waitlist requests.
Robinhood is a reputable brokerage firm that’s ideal for younger or thrifty investors who want to take advantage of commission-free trades and a streamlined platform. It also offers a free share of stock when investors first open their accounts and when they invite friends to the platform. There’s no minimum requirement for opening Robinhood Gold accounts, but investors will be charged $5 every 30 days which includes $1,000 of margin and 5%* for margin over $1,000. Accounts for margin trading are also required to be funded at a minimum of $2,000 per FINRA guidelines. Newer investors will like the user-friendly mobile app because it lacks the bulky features and customization tools they may not need.
*Please Note: The margin interest rate charged by Robinhood Financial is 5% as of October 8, 2019. The rate might change at any time and at Robinhood Financial’s discretion
Things to consider
March 2020 brought serious losses to Robinhood investors when, during heavy Coronavirus trading, the entire Robinhood app crashed — several times. March 2 brought outages for over 16 hours, leading fcustomers to miss trading on the largest one-day point gain in Dow Jones Industrial Average history. A second crash was to follow, only lasting about 90 minutes, but on March 9, 2020, it happened again, the entire app was down for over five hours. Robinhood blamed the crashes on “stress on our infrastructure” and assures customers that it has taken the necessary steps to prevent outages in the future. To help make up for some of the losses sustained during these heavy trading times, Robinhood is offering its affected customers credits to be determined on a case-by-case basis.
Robinhood also doesn’t offer mutual funds, bonds or retirement accounts. Its only account option is an individual taxable account. However, investors usually only open these once they have between 10% and 15% income saved in retirement accounts, including IRAs and 401(k) accounts.
For a long time, Robinhood did not accept fractional shares, but it has since changed policy. Now investors can buy stocks for as small as 1/1000000 a share. Fractional shares are also traded in real-time without any commission fees. However, it is still an extremely limited service with a long waiting list and a slow rollout throughout 2020.
Customer support is mostly through email, not chat, making it harder for investors to get live support. Furthermore, to get advanced research tools like Level 2 Market Data and Morningstar reports, you’ll need to subscribe to Robinhood Gold for $5 per month.
Robinhood stock and ETF trading
With Robinhood, there are no commissions on stocks or more than 2,000 ETFs transactions. Trading for ETFs includes U.S. exchange-listed ETFs and options contracts. There is support for about 250 global stocks in the ADR and Canadian and Israeli exchanges. Robinhood supports about 5,000 stocks in total, including some penny stocks.
Robinhood bond trading
Bonds are not supported on Robinhood. If you’re interested in bond trading, take a look at TD Ameritrade. It charges $1 for bond trades and its web platform has an excellent educational center. A general search for bond topics might yield about 28 different results. TD Ameritrade also incorporates video tutorials into the site. Investors can explore topics like bond ladders, how they work, the level of risk and how they generate income. TD Ameritrade has a helpful tool called Bond Wizard for making bond purchases. It walks investors through the steps for bond purchases and will help you explore topics like the tax status for the bonds, the maturity, call status and bond type.
Robinhood options and futures trading
For investors ready to go long or short, Robinhood lets you trade options without being charged a commission. This means that there are no per-contract fees, assignment fees or exercise fees. This is a bonus for options traders who pay base fees and other fees per contract. The options features include filters and strategies to help traders if they have a multi-leg option strategy for a single order. There are also features to help monitor complex contracts all at once. Advanced traders will have access to strategies including iron condors, strangles and straddles. Traders will also find that they can increase their margins with Robinhood.
Robinhood trading platform
Robinhood offers a simplified web platform that is gorgeous and easy to use. With its sleek UX/UI design, Robinhood is capable of producing all sorts of reporting and charting with the click of a button. Account management is also simple, with your account statements and tax documents readily available. Signup is also simple, taking only about ten minutes when using the online site. When you’re ready to start trading, Robinhood has tons of resources and instructions for not only how to use the platform but how to improve your trading, as well.
On the other hand, advanced and professional traders may find the platform’s tools less impressive than some of its full-service competitors, like TD Ameritrade. If investors are looking for phone support for help with the platform, they won’t find it at Robinhood. There are no available phone lines, and email is the preferred means of communication.
Robinhood mobile app
The mobile app has an intuitive interface and integrates with Apple’s Siri. Investors can ask questions like, “Hey, Siri, what is my current Robinhood balance?” or “Hey, Siri, open my Robinhood investing account.” Traders can link their bank data and conveniently add account numbers. The mobile app is also available for Apple Watch and Android Wear. The mobile app’s streamlined platform displays tickers and stock prices, as well as a plethora of news sources, graphs and candlestick charts.
Robinhood’s mobile app now also includes access to your cash management account, allowing you to transfer, invest and sell from your phone. You can also track your earnings, which is especially important given the variable-rate APY. There is a waiting list for this program, but Robinhood has been aggressively rolling out the program, adding new customers regularly.
Robinhood research and resources
Robinhood’s easy account management tools and new cash management program are attractive perks, but the truth is that Robinhood’s capabilities are limited. Without paying $5 per month for Robinhood Gold, Robinhood doesn’t offer many research options beyond price history and recent news. There are basic research, news and analyst ratings on stocks and ETFs, as well as several chart options. For in-depth reports and real-time news and analysis, you might be better off with a full-service broker, though those services might cost more than $5 per month elsewhere.
The bottom line
Robinhood is especially popular with millenials for its commission-free stocks, ETFs and options trades. You should note, however, that here your accounts are taxable, because Robinhood doesn’t offer IRAs. Securities include stocks, ETFs, options and cryptocurrencies, but there are no mutual funds, bonds or retirement accounts.
The new cash management program is an enticing incentive, offering greater flexibility and more control over your finances. Just beware of service outages — Robinhood aspires to be a leader in the digital space, but if its March 2020 outages are any indication, it still has some work ahead.
The platform also doesn’t quite match the investment services offered by full-service brokers to draw in professional traders. Traders may need to explore other brokerage firms for research and trading tools and then loop back to Robinhood to execute their trades. However, with $0 account minimums and no fees as primary selling points, these are allowances investors might be willing to make.