Can you really invest for free?
Actually, you can, using the Robinhood Investment app. And not only can you invest for free, but you can do it directly from either your mobile device or your desktop.
They’ve also expanded beyond stocks, and now offer options trading – also free.
Why would you pay to buy stocks or trade options when you can do both free with Robinhood?
Our Robinhood Review: Is It Really Free Investing?
Robinhood was actually developed by two Stanford University graduates who started out selling trading software to hedge funds.
They came to realize that the big brokerage firms pay something close to nothing to trade stocks. At the same time, they charged investors a fee for every trade.
With that realization, they built Robinhood, as a company that leverages technology. It enables everyone to invest without the fees charged by traditional investment brokerages.
Their mission is no less than to democratize access to the American financial system. To do that, they developed an investing platform enabling you to buy various investment securities commission-free.
How the Robinhood Investment App Works
You can buy and sell securities directly through the Robinhood investment app.
The app offers the ability to buy and sell more than 5,000 stocks and exchange traded funds (ETFs). You can also buy and sell options.
The app allows you to get information on individual securities.
This information appears on the “Details” page for each security. There you can check the earnings per share of a company.
You’ll also have a description of your position in each investment.
This will include the number of shares you own, the value of those shares, the average cost paid for them, the percentage of your portfolio represented by that security, as well as the daily and total gains and losses from that investment.
You’ll also get basic information, such as a security’s trading statistics for the day, as well as dividend yield, price-earnings ratio, and 52-week high and low prices.
But perhaps the most interesting option, and what sets Robinhood apart from other investment platforms, is that you can also trade cryptocurrencies.
This is done through Robinhood Crypto, and is available in 27 states (they’re working to add more states).
Current cryptocurrencies available include Bitcoin (BTC), Bitcoin Cash (BCH), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC), and Litecoin (LTC).
No day trading allowed. This restriction is hardly a surprise since the absence of trading commissions would seem to invite the practice.
There are specific trading patterns that can get flagged as day trades.
For example, if you execute four trades in five days, your account will be flagged as pattern day trading for 90 days. If your account value is less than $25,000, you won’t be able to trade until the value closes above $25,000, or 90 days passes
Robinhood Investment App Features
Robinhood Investment Mobile App
The app is available on Google Play for all Android devices running 5.0 Lollipop and newer and available on iOS devices (10.0 or later) on the App Store. Compatible with iPhone, iPad, iPod touch and Apple Watch.
Robinhood Fees
Robinhood has no fees. That’s no fees, as in no trading commissions and no monthly account fees.
The platform makes money through Robinhood Gold, which is its margin trading service that starts at $6 per month.
They also receive interest income from customer cash and stocks, in much the same way a bank collects interest on its deposits as well as receiving rebates from executing brokers.
Account withdrawals
Just as you can transfer money into your account from a linked bank account, you can also transfer money from Robinhood into your bank account. You can withdraw up to $50,000 per business day from your account.
However, any funds withdrawn must come from uninvested funds, and any deposits need to stay in your account for a minimum of five trading days before they will be eligible for withdrawal.
Account Security – Is Robinhood Safe?
If you’re new investor you’re probably wondering “Is Robinhood safe?” The short-answer is: yes. Here’s some considerations as to why:
Robinhood Financial is an SEC-registered broker-dealer.
That means your account is covered by SIPC, for up to $500,000 in securities and cash, including up to $250,000 in cash.
The platform also provides a number of high-level measures and industry best practices to protect your account.
For example, sensitive information, like your Social Security number, is encrypted before being stored.
They also don’t store your online banking credentials. And both the mobile and web applications securely communicate with their servers using the Transport Layer Security (TLS) protocol.
Refer Friends, and Get Free Stock
If you refer a friend to the app, both you and the friend will get a free stock once your friend’s application is approved.
By referring multiple friends, you can earn up to $500 in free stocks.
The stocks are chosen randomly from Robinhood’s inventory of settled shares. They are generally selected from the most popular companies on the Robinhood platform, based on the total value and the price of each share.
The value of a share can be anywhere between $2.50 and $200.
Start investing with Robinhood today>>
How Does Robinhood Make Money?
Robinhood, a popular trading app, makes money primarily through its premium subscription service called Robinhood Gold and through payment for order flow. Robinhood Gold is a premium subscription service that offers additional features such as margin trading, extended trading hours and larger instant deposit limits. The subscription service is paid for on a monthly basis.
Payment for order flow is a practice where Robinhood receives payments from market makers for routing customer orders to them for execution. This is a common practice among many brokerage firms and helps to offset the cost of providing commission-free trading.
Additionally, Robinhood also makes money through interest earned on cash and securities held in its customers’ accounts, and through its cash management program which offers a debit card and ATM access with a high yield savings account.
It’s important to note that, Robinhood’s business model is controversial, as the company has been criticized for its practice of selling its customers’ order flow to high-frequency trading firms, which may lead to less favorable trade execution for its customers, and also for its lack of transparency in disclosing its revenue sources.
How to Trade on the Robinhood Investment App
The platform enables you to trade stocks, exchange traded funds, cryptocurrencies, and options.
You can also trade American Depositary Receipts (ADRs) for more than 250 globally listed companies.
Trading is done through your Robinhood Cash (non-margin) account.
Stocks and ETFs
You can invest in more than 5,000 different stocks and ETFs on the platform. Trades can be executed from your mobile device, by navigating the stock’s Detail page, then tapping Trade, Buy, and Order Type. You then confirm your order and swipe up to submit it.
Selling stocks or ETFs works the same way, except instead of tapping Buy, you tap Sell from the stock’s Detail page.
Options
Options trades are even easier.
To buy, you go from the stock’s Detail page, tap Trade, then Trade Options, then Buy, and you’re done. Selling works the same way, except rather than tapping Buy, you tap Sell.
When you trade options on Robinhood, there are no base fees, no exercise and assignment fees, and no per contract commission.
However, they do require that you have stock trading experience before you can begin trading options.
Cryptocurrencies
Trading cryptocurrencies works the same as other securities.
From the cryptocurrency’s detail page, you tap Trade, then Buy, then Order Types. You then select your preferred order type, confirm your order, then swipe up to submit the order.
Selling works the same way, except instead of tapping Buy, you tap Sell.
Robinhood Gold
This is Robinhood’s premium margin account. It offers commission-free trades, gold buying power, and larger instant deposits (larger than $1,000). The Gold account also allows you to double your buying power.
For example, $10,000 in cash gets you $20,000 in buying power.
Since Robinhood Gold is a premium service, there are fees attached to it.
There are still no commissions for this account type. But there is a monthly fee of $5.
And if you borrow over $50,000, interest is charged at a rate of 7.5% APR. And as an added bonus, your first consecutive 30 days are fee-free and interest-free.
The service also offers extended trading hours, allowing users to trade select securities outside of regular market hours. Additionally, it also offers larger instant deposit limits, enabling users to deposit more money into their accounts more quickly.
Users can access Robinhood Gold by paying a monthly subscription fee, which is based on the size of the margin balance. The subscription fee is charged on a monthly basis and can be cancelled at any time.
It’s important to carefully consider the suitability of margin trading and read the margin agreement before signing up for Robinhood Gold.
How to Sign Up with the Robinhood Investment App
To sign up for Robinhood, you must meet the following requirements:
- Be at least 18 or older.
- Have a valid Social Security number – they will not accept a taxpayer identification number.
- Have a legal US residential address within the 50 states or Puerto Rico. They may make exceptions for active US military personnel stationed abroad.
- Be a US citizen, US permanent resident, or have a valid US visa.
To open an account, you complete an application in the Robinhood app. You’ll receive an email within one trading day, either confirming your application’s been approved or requesting additional information.
Typical documentation requested will be evidence verifying your identity.
You’ll be able to upload the documents securely by taking a photo of the documents using your mobile device. The documents can also be uploaded online to Robinhood’s secure file portal.
Once your application account has been approved, your account will be opened within five to seven business days.
Funding your RobinHood account. You can fund your account by linking it to a bank account and making electronic transfers. You can transfer up to $50,000 per business day.
Deposits up to $1,000 are instant, but larger deposits will take four or five business days to complete.
What are Robinhood alternatives?
There are several alternatives to Robinhood for commission-free trading, some of the most popular options include:
- Webull: A trading platform that offers commission-free trading, real-time market data, and research tools. It also offers margin trading for eligible clients with a minimum deposit of $2,000.
- E*TRADE: A well-established online broker that offers commission-free trading on over 4,000 stocks and ETFs. It also provides a wide range of investment options, research tools, and educational resources.
- TD Ameritrade: A leading online broker that offers commission-free trading on over 100 ETFs. It also provides a wide range of investment options, research tools, and educational resources.
- Charles Schwab: A full-service brokerage that offers commission-free trading on a wide range of ETFs and stocks. It also provides a wide range of investment options, research tools, and educational resources.
- Fidelity: A full-service brokerage that offers commission-free trading on a wide range of ETFs and stocks. It also provides a wide range of investment options, research tools, and educational resources.
- Public: A commission-free trading platform that also offers fractional shares, enabling users to invest in companies they might not otherwise be able to afford.
These alternatives to Robinhood offer similar features such as commission-free trading, research tools, and educational resources, but they also have some differences in terms of the investment options they offer, the fees they charge, and the level of customer service they provide.
It’s important to research and compare these alternatives to find the one that best suits your investment goals and needs.
Additionally, it’s important to remember that while commission-free trading is a great feature, it shouldn’t be the only factor to consider when choosing a broker.
Other important factors to consider include the broker’s fees, platform usability, research tools, and customer service.
Robinhood Investment App’s Pros and Cons
Advantages
- No fee trades.
- You can trade stocks, ETFs, options and cryptocurrencies.
- There’s no minimum investment required, opening the platform to investors at all levels.
- After hours trading.
- Now offer IRA’s
Disadvantages
- Limited investment options. There’s no ability to trade individual bonds, mutual funds, real estate investment trusts, or many of the other investment classes available with traditional brokerage services.
- Certain securities are unavailable for trading. Those include foreign stocks, select over-the-counter equities, preferred stocks, and securities purchased on foreign exchanges.
- The platform generally gets poor ratings on customer service, which likely is a soft cost paid in exchange for free trading.
- Robinhood accounts don’t permit day trading, if you might plan to take advantage of no commissions for that practice.
Should You Sign Up for the Robinhood Investment App?
Robinhood isn’t an all-purpose investment platform. For example, you won’t be able to purchase and hold mutual funds, fixed income securities, or foreign securities.
But it is an excellent platform to purchase stocks, ETFs, and options using commission-free trades.
The platform may be of particular interest to anyone who wants to invest in cryptocurrencies. You can trade in six popular cryptocurrencies, including Bitcoin and Ethereum.
Robinhood may best be used as an investment platform for new investors, who are looking to begin investing with very little money and don’t want to pay trading fees.
More experienced investors may use the platform for its commission-free trades, while maintaining assets not offered by Robinhood on a different investment platform.
Of course, as mentioned in this review, you won’t be able to use Robinhood as a day trading account, which might be a natural assumption given that there are no trading commissions.
Also, it’s not one of the more sophisticated trading platforms in the industry. It lacks many of the tools and features of major investment brokerages. All that aside, there’s nothing quite like commission-free trade.
That’s what Robinhood does best, and along with cryptocurrencies, it’s a compelling reason use the app.
If you’d like more information, or you’d like to sign up for the app, visit Robinhood today.
Robinhood App Review
Product Name: Robinhood App
Product Description: Robinhood is a popular trading app that offers commission-free trading on a wide range of stocks, options, and ETFs.
Summary
Robinhood is a great option for beginners and casual investors who are looking for a commission-free trading platform with a user-friendly interface. However, more advanced traders may find the lack of research tools and customer service to be a drawback.
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Cost and Fees
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Customer Service
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User Experience
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Product Offerings
Overall
Pros
- Commission-free trading: One of the biggest advantages of using Robinhood is the ability to trade stocks, options, and ETFs without paying any commission fees. This can save traders a significant amount of money in the long run.
- User-friendly interface: The app has a clean, easy-to-use interface that makes it simple for beginners to navigate and execute trades.
- No account minimum: Unlike many other brokerage firms, Robinhood does not require a minimum deposit to open an account.
- Diversified investment options: The app offers a wide range of investment options, including stocks, options, and ETFs, which allows users to diversify their portfolios.
- Robinhood Gold: The premium subscription service, Robinhood Gold, offers additional features such as margin trading, extended trading hours and larger instant deposit limits.
Cons
- Limited research tools: While the app provides some basic information on stocks and other securities, it does not offer the same level of research tools and analysis that other brokerage firms provide.
- Payment for order flow: Robinhood has been criticized for its practice of selling its customers’ order flow to high-frequency trading firms, which may lead to less favorable trade execution for its customers.
- Limited customer service: The app’s customer service is limited, and it may be difficult to get help with more complex issues.
- Limited option trading: Robinhood has limited options trading features, it does not offer advanced options trading strategies such as spreads or covered calls.
