With Robinhood, you can trade stocks, options, ETFs, and cryptocurrencies for free. With no minimum balance requirement and a straightforward user interface, it is an entry-level mobile trading option.
This Robinhood review examines the pros, cons, costs, and features of the platform.
Penny Stocks on Robinhood
A number of different strategies and platforms are available to you when it comes to investing, from online platforms to traditional brokerage firms.
In most brokerage companies, you will be required to pay a commission fee for every trade that you make, which can range from $5 to $10 per trade, depending on the brokerage company. Those commissions can have a big impact on your profits as well as your losses as a trader, if you choose to be an active trader.
Fortunately, there are alternatives like Robinhood, which is a mobile brokerage company that offers no-fee trades, making it an excellent choice.
Robinhood – What Is It And What Does It Do?
The Robinhood trading app, launched in 2013, allows investors to trade stocks, ETFs, options, and cryptocurrencies without paying commissions. It’s possible to manage your cash, but you have to join a waiting list to get access. Also, Robinhood does not offer bond, mutual fund, preferred stock, and tracking stock trading.
With new account, get free stock
With Robinhood, investors can trade stocks, cryptocurrencies, options, and ETFs commission-free. Besides being easy to use, it also has no annual fees, which makes it a good choice for new investors due to its streamlined design.
Pros:
- Fee-free trading
- It is not necessary to maintain a minimum balance
- Interface that is easy to use on mobile devices
- Diverse securities trading experience
- There is an option to trade on margin
Cons:
- Account types other than retirement accounts are not available
- Bonds and mutual funds cannot be traded
- Customer support is difficult to obtain
There is no minimum opening deposit for brokerage accounts, but $2,000 for margin accounts. Regulatory requirements are not unique to Robinhood, so it is not unique to the company. FINRA is responsible for regulating the minimum, which is governed by the Securities and Exchange Commission.
Is Robinhood a Safe Investment?
The Securities Investor Protection Corporation (SIPC) protects Robinhood customers up to a maximum of $500,000, including $250,000 for cash claims.
The company offers commission-free trading, an intuitive mobile app, and no opening balance requirement, but users complain about poor customer service, frequent outages (including one in March 2020 that has been under investigation by the Securities Exchange Commission), and problems with trades, account closures, and money transfers. As a result, they have received more complaints from users than many of their competitors.
In light of the fact that they don’t offer much guidance or make stock recommendations, and customer reports indicate that the support is substandard, it’s crucial you learn the basics of investing before opening an account. You will be able to navigate the stock market and make informed investment and trade decisions if you understand how it works, including its risks.
Creating An Account with Robinhood
Download the Robinhood app and register for an account to get started, as it is a mobile brokerage.
As soon as you download the app, you’ll need to complete an application, which you can complete within the app itself. Your application will be approved instantly, and you will receive an email with instructions on how to get started as soon as it is approved. Robinhood may ask for additional information if your application is not approved immediately. In order to protect your personal data, they’ll explain what you need to send and how you can do so securely.
A decision on your application will be made within five to seven days after we receive it.
The opening deposit does not require a substantial amount of money since there is no minimum balance requirement.
New Robinhood users also receive a free, randomly chosen stock valued between $2.50 and $225 deposited directly into their accounts. Having free stock means you can start trading right away, without having to buy anything.
In order to claim this free stock, you must open your account within 60 days.
Robinhood: Investing in Stocks and Bonds
There are four primary trading options offered by Robinhood: stocks, ETFs, options, and cryptocurrencies. Despite the fact that Robinhood doesn’t charge commissions, other fees may apply. Review their fee schedule before they appear in your account so you don’t get surprised by them.
Investing in stocks and shares
Investing in stocks is one of the simplest ways to start investing, and Robinhood is a great place to start if you are new to investing. Stocks can be bought and sold quickly and easily with their streamlined platform. Simply open the app, search for the company’s name or ticker symbol, and enter the number of shares you want to buy. Similar to selling stocks from your portfolio, you can also sell stocks from your portfolio.
Besides being a good choice for novice investors, Robinhood is also a good choice for those who do not have much money to invest initially. Investing in stocks with Robinhood is as easy as investing $1.
Over 250 global stocks listed on foreign exchanges are available on Robinhood, along with approximately 5,000 American stocks.
Shares of fractional ownership
Fractional shares are exactly what they sound like: pieces of a stock. If you purchase a fractional share, you are purchasing a portion of a stock rather than buying the whole stock. By offering fractional shares, companies like Robinhood help investors afford stocks they wouldn’t otherwise be able to afford.
Apple stock, for example, can be bought at a price that works for your budget if you don’t have enough money to buy a full share. Fractional shares cannot be traded on their own; you must wait until the company has enough pieces to make a whole share before you sell them.
It is possible to diversify your investment portfolio with fractional shares even when you do not have a large investment budget.
ETF purchases and sales
Robinhood also offers exchange-traded funds (ETFs) for sale and purchase. It is the same as buying and selling stocks that you can do with ETFs. Buying and selling ETFs is free with Robinhood’s trading services. People who own ETFs are, however, charged management fees.
Investing in an ETF can cost you anywhere from .05% to 1% or more.
Optional purchases and sales
Investing in options is also possible through Robinhood. You can bet on whether the value of a stock will increase or decrease by buying options. An option that lets you sell a $10 stock at $9 can be purchased if you think the stock’s price will fall. Buying the option at a lower price will make you money if the stock drops below $9 before it expires.
As with ETFs and stocks, Robinhood’s options trading is commission-free, and you can conduct your trades directly from the app. As an option investor, you may not want to take advantage of this product if you have a low risk tolerance.
Cryptocurrency purchases and sales
Bitcoin and Ethereum can be purchased and sold through Robinhood, unlike many of its competitors. The app allows you to buy and sell cryptocurrency commission-free, just like other trading options.
You should be aware that Robinhood Crypto – which oversees Robinhood’s cryptocurrency branch – is not a member of FINRA, the Financial Industry Regulatory Authority, if you decide to invest in cryptocurrency through Robinhood. It might not be the best investment option for those who are risk-averse or do not fully understand the risks associated with cryptocurrency investment.
Robinhood’s Features Review
Robinhood also offers users a number of other features besides trading stocks, options, and cryptocurrency:
Robinhood Gold
In Robinhood Gold, margin accounts are similar to brokerage accounts. Trading on margin means borrowing money, which is commonly known as borrowing money.
A free 30-day trial of this service is available if you are interested. A monthly fee of $5 is then charged after that. Despite this, the free trial only covers the $5 monthly fee, not the margin interest. In other words, if you borrow more than $1,000, you will have to pay interest. It’s completely up to you whether you want to continue using Robinhood Gold or not.
Investing on margin is quite risky, just like trading cryptocurrencies and options. Understanding what you’re getting into is crucial. Before signing up for Robinhood Gold, read the explanation provided by Robinhood.
FINRA regulations also require a minimum balance of $2,000 to have a Robinhood Gold account.
Cash management and high-yield savings accounts
You can join the waitlist for Robinhood’s cash management account if you have a Robinhood account. All uninvested cash in your brokerage account earns 0.30% APY, as well as access to 75,000 ATMs.
Cash in this account can be used for making purchases, paying bills, or even withdrawing money. There is an FDIC insurance limit of $1.25 million on the money.
Share this page with your friends
By referring a friend who signs up for an account, you are eligible to receive free stocks. As part of your account opening, you will receive these benefits as well.
During the course of a calendar year, you will be able to earn up to $500 in free stocks. Nevertheless, if you reach the $500 threshold and the lowest-priced stock they have in their inventory is more than $500, you will no longer be eligible for free stocks once you reach the $500 threshold. The least expensive stock they have is $6, so if you earned $495 in free stocks and the least expensive stock they have is $495, then you will not be eligible to receive it.
You cannot earn free stocks for your friends if you do this.
Transfers in a flash
Robinhood is able to provide users with the option of transferring up to $1,000 that is instantly available for investment thanks to its relationship with several national banks. The process of processing and releasing larger deposits may take up to five business days after the deposit has been received.
Direct deposits are the only way to deposit money into your account. You can transfer up to $50,000 into your account. Checks mailed to them will not be accepted.
Summary of Robinhood’s Review
A taxable portfolio of stocks and ETFs can be created with Robinhood for new investors. Additionally, you can learn about cryptocurrency and trading options on this platform. Users who do not have a lot of money to invest can also benefit from the commission-free trades, fully mobile platform, and fractional shares available.
Users who are comfortable with mobile banking will appreciate the easy-to-use, streamlined app with advanced search features.
Nevertheless, since it’s mobile-based, users need to understand all the risks associated with managing their finances through an app. Trades and access to your money can also be affected by outages, poor internet connections, and bugs. Acorns or M1 Finance might be better alternatives to Robinhood, given its poor customer service and technological issues.
