Robinhood Evaluation: Execs, Cons, and If It's The Proper Platform for You

Robinhood is an funding platform providing commission-free buying and selling of shares, ETFs, cryptocurrency, and choices—all by means of a cell app or web site. The corporate is understood for its easy-to-use, streamlined platform and attraction to buyers new to the funding recreation.

Robinhood is seemingly excellent for these seeking to delve into inventory trades, exchange-traded funds (ETFs), and crypto buying and selling, all on one platform. It has an easy-to-use cell app and fee-free service, and is steadily ranked as the most effective on-line brokers.

On this assessment, we’ll be weighing the info that can assist you decide if Robinhood is an effective match for you.

TIME’s Take

Robinhood has grown steadily in recognition lately, but it surely’s not the best platform for everybody. Although it markets itself primarily towards new buyers, the options supplied—together with the constraints of the app—make Robinhood extra appropriate for seasoned, energetic merchants who’re extra assured of their investing expertise and fewer depending on customer support and investor assets.

 Execs

•  Doesn’t require a month-to-month charge or account minimal.
• Simple to make use of.
• Presents commission-free crypto buying and selling with no markups and markdowns.
• One of many few brokers providing entry to Preliminary Public Choices (IPOs).
• Excessive-interest money choice.
• Permits fractional share buying and selling.

Cons 

• Doesn’t supply joint brokerage or custodial accounts.
• A Gold tier subscription, which supplies analysis and information that’s typically free at most brokerage corporations, prices $5 monthly.
• Doesn’t supply bonds or mutual funds.
• The app encourages energetic buying and selling and margin buying and selling, that are high-risk actions for its goal market of latest buyers.
• Permits cost for order stream, decreasing a few of the advantages of commission-free buying and selling.
• Buyer assist is restricted: Robinhood doesn’t supply direct cellphone assist or dwell chat until requested by means of the app or its web site.
• Restricted instruments for buying and selling, analysis, and training.

Who ought to select Robinhood?

Robinhood is greatest fitted to intermediate or superior buyers. This can embody skilled buyers who’re much less reliant on buyer assist, dealer investor instruments and academic assets.

The platform is designed primarily for energetic buying and selling, together with day buying and selling. It’s one of many prime brokers for choices buying and selling since there isn’t any per-contract charge, as is frequent with most brokers.The app additionally seems to encourage margin buying and selling. This isn’t a observe really helpful for brand new and small buyers, because it magnifies the potential for funding losses.

Robinhood isn’t an optimum platform for the type of long-term, buy-and-hold index investing technique really helpful by the vast majority of monetary advisors and adopted by most buyers. 

How did we assessment Robinhood?

When evaluating Robinhood we thought of the next elements:

•  Accessible accounts and investments.
• Commissions and costs.
• Ease of platform use.
• Options and instruments supplied.
• Customer support availability.
• The varieties of buyers greatest served by this platform.
• Firm status.
• Particular or uncommon options.

Robinhood in-depth

Commissions and costs

Robinhood presents commission-free trades of shares, choices, ETFs, and cryptocurrencies. While you buy international shares on U.S. inventory markets, often known as American Depositary Receipts (ADRs), there could also be a charge of $0.01 to $0.03 per share.

Like all brokers, Robinhood is topic to regulatory charges, that are handed on to buyers.These embody a regulatory transaction charge of $8 per $1 million of principal on promote orders, a buying and selling exercise charge of $0.000145 per share on fairness sells, and $0.00244 per contract on choices sells—the latter two are topic to a most of $7.27 per commerce.

Robinhood, like many brokers, additionally makes use of a cost for order stream system. That will end in buyers getting a less-than-optimal worth on each the acquisition and sale of securities inside their accounts. It’s a charge construction wherein the worth of the safety is marked up on buy or discounted on sale, with the “unfold” going to the dealer.

Margin charges

Robinhood’s present margin rate of interest is 11.75% every year on normal accounts. Nonetheless, if you’re a Robinhood Gold member, the margin price drops to 7.75%.

As is the case with all brokers, margin charges are variable and topic to vary based mostly on prevailing rates of interest whereas the mortgage is in power.

Platform and know-how

Robinhood ranks excessive on ease of use as a consequence of its simplicity. However a part of that simplicity is because of its lack of investing instruments in contrast with many opponents. Among the many frequent instruments that the platform lacks: buying and selling simulators, safety screeners, and alerts.

Robinhood does supply superior charting, serving to you to establish traits utilizing technical indicators reminiscent of quantity, transferring averages, and the relative energy index (RSI). It additionally presents candlestick, line, and quantity charting.

Extra superior instruments can be found should you take part in Robinhood Gold. That plan presents skilled analysis from Morningstar, in addition to Stage II market information from NASDAQ in actual time.

Robinhood is kind of well-regarded by customers of the app. It has a score of 4.2 out of 5 stars amongst 4.1 million iOS customers on The App Retailer, and 4.1 out of 5 stars amongst 472,000 Android customers on Google Play.

Vary of choices

Robinhood presents a restricted variety of account sorts and investments. It specializes within the following:

Choices buying and selling: Like most funding brokers, Robinhood fees no fee for choices trades. Nevertheless it additionally doesn’t levy a per-contract charge, which is often $0.65 per contract. By waiving that charge, Robinhood makes choices buying and selling somewhat bit extra worthwhile than the competitors.

Cryptocurrency buying and selling: Robinhood presents buying and selling in quite a few currencies, together with Bitcoin and Ethereum. You may start buying and selling with as little as $1, and trades are commission-free.You may also make the most of the Robinhood Pockets to carry your crypto property freed from community charges. You’ll maintain and keep the personal key to the pockets, which is a part of the Polygon and Ethereum networks.

Preliminary Public Choices (IPOs): Robinhood is likely one of the few funding brokers to supply participation in IPOs. IPOs give you a chance to be among the many first to purchase shares in a personal agency earlier than they change into accessible on the open market.

Get your first inventory free: While you open a brand new Robinhood account, you’ll earn a specified greenback quantity, providing you with the flexibility to select a present inventory from a listing of 20 main U.S. corporations. The money worth can be utilized to buy fractional shares in any of the businesses supplied.The reward is value between $5 and $200, however Robinhood clarifies that roughly 98% of members will obtain between $5 and $10.

Analysis and training

Whereas Robinhood is working to enhance on this space, it’s nonetheless trailing the competitors.

The location does present a “Be taught” part, which helps buyers higher perceive find out how to use the platform and change into simpler buyers. Furthermore, Robinhood Snacks supplies a e-newsletter and podcasts to prospects with updates on the monetary markets which are “simply digestible.” 

Robinhood Gold members have entry to extra superior analysis, however it’s a premium program that comes at a value (see description under). 

Customer support and safety

Whereas Robinhood doesn’t present a direct cellphone quantity to contact, assist is offered by means of e mail at [email protected]. You may also use the app or web site to speak or request a cellphone name. Robinhood supplies a really detailed FAQ web page that may typically reply most questions.

Account safety is offered by two-factor authentication (2FA). That requires two sources of verification to signal into your account, making entry by unauthorized events a lot much less probably.

The corporate additionally makes use of a number of industry-standard measures to guard your account and your info. That features hashing your account passwords utilizing the {industry} normal BCrypt hashing algorithm and encrypting delicate info earlier than it’s saved. In the meantime, each cell and net purposes present safe communication utilizing the Transport Layer Safety (TLS) protocol.

Lastly, Robinhood is a member of the SIPC (Securities Investor Safety Company). This implies you’re protected in opposition to dealer failure for as much as $500,000 in money and securities, together with $250,000 of money. Nonetheless, the protection doesn’t prolong to funding market losses or cryptocurrency positions.

Cell app

The Robinhood cell app is offered for iOS customers on the App Retailer and for Android customers on Google Play. It comes with all of the options of the net model and receives excessive rankings from customers.

Extra options  

IRA accounts: Robinhood presents conventional and Roth IRA accounts. You’ll get a 1% match on each greenback you contribute, together with transfers from different IRAs or 401(okay) accounts.

Robinhood IRA accounts can help you make investments commission-free and make the most of a custom-recommended portfolio. All investments, besides cryptocurrencies, can be found by means of an IRA account.

Excessive-Yield Financial savings Account (HYSA): Robinhood presents an account paying curiosity in your uninvested money. You may earn 1.5% APY (4.65% on Gold plan accounts) on balances as much as $1.5 million by means of associate banks. All funds as much as that restrict are insured by the Federal Deposit Insurance coverage Company (FDIC).

Robinhood Money Card: Robinhood presents a debit card that gives money again whenever you buy taking part manufacturers. It additionally offers you the flexibility to routinely make investments a few of your paychecks in a preselected alternative of shares or cryptocurrencies. You may then earn a bonus of between 10% and 100% in your weekly roundups.

The Money Card additionally comes with 24/7 cellphone assist, entry to 90,000 fee-free ATMs, the flexibility to ship checks, and no overdraft or month-to-month charges. 

Robinhood Gold: Robinhood presents this as a premium plan, for $5 monthly. The plan comes with the next upgrades:

• Skilled analysis from Morningstar.
• Stage II real-time market information from NASDAQ.
• 4.65% APY on uninvested money (vs. 1.5% on normal accounts).
• Decrease margin rates of interest: 7.75% vs. 11.75% for traditional accounts.
• Bigger prompt deposits (as much as $50,000), based mostly in your account standing.

Robinhood Gold is an non-obligatory plan, which you might be free to downgrade out of at any time.

Options to Robinhood

In case you are contemplating Robinhood—or every other funding dealer—you owe it to your self to take a look at different platforms.

Robinhood is an effective platform for energetic buying and selling and supplies commission-free trades on all investments.  Nevertheless it’s missing in some areas, such because the variety of accounts it presents and the actual fact it doesn’t allow you to spend money on sure fashionable asset courses reminiscent of bonds and mutual funds.

Fortuitously, there are many different competitively-priced choices on the market to fulfill buyers’ wants. Two examples are TradeStation and J.P. Morgan Self-Directed Investing*. Each of those platforms give customers entry to a larger number of funding and account sorts, together with retirement accounts.

Every dealer excels specifically areas. For instance, Robinhood is best for choices and fractional share buying and selling, whereas J.P. Morgan Self-Directed Investing* is nice for investing in mutual funds and prospects who search cellphone assist however doesn’t, for instance, enable cryptocurrency investing. TradeStation, alternatively, presents wider funding and account choices, together with the flexibility to spend money on futures. 

All three are good platforms however won’t be proper for all buyers. The desk under summarizes the most important options of every of them:

Robinhood status

 It’s commonplace for brokers to expertise customer support points and regulatory challenges. Nonetheless, Robinhood appears to have encountered greater than the standard quantity, particularly given the platform’s relative youth.

For starters, the Higher Enterprise Bureau offers Robinhood its lowest “F” score. The nonprofit group cites authorities regulatory motion in opposition to the corporate, in addition to a sample of complaints from prospects a few lack of response from buyer assist and an lack of ability to entry accounts.

Examples of regulatory actions embody the next:

• SEC, December 17, 2020: The Securities and Trade Fee (SEC) fined Robinhood $65 million for making deceptive statements and omissions in buyer communications and FAQ pages about the way it earns its income. The positive was associated to the cost for order stream referenced earlier on this assessment.
• FINRA, June 30, 2021: Robinhood was fined $57 million and ordered to pay $12.6 million in restitution, plus curiosity, to hundreds of harmed prospects for offering false or deceptive info concerning its systematic outages in March 2020. It was the biggest monetary penalty ever ordered by the Monetary Business Regulatory Authority (FINRA). 
• New York Division of Monetary Companies (DFS), August 2, 2022: NY DFS imposed a $30 million penalty on Robinhood Crypto for vital anti-money-laundering, cyber-security, and consumer-protection violations.

These fines signify actions in opposition to Robinhood by three regulatory our bodies, every for a unique infraction.

Incessantly requested questions (FAQs) 

Is Robinhood for newbies?

Robinhood is usually a good match for starting buyers. The corporate is arguably the most effective with regards to making the market extra accessible and is commission-free with most trades. Nevertheless it does lack the client assist and investor assets of extra conventional brokerages {that a} newbie might have.

What are good alternate options to Robinhood?

In the event you’re not sure Robinhood is the best funding app for you, there are many alternate options. 

For instance, should you’re a brand new investor additionally seeking to accumulate funds to speculate, Acorns is a superb alternative. It lets you hook up with a spending account that can spherical up your purchases and switch the turn into your funding account. 

In the event you’re in search of the next degree of buyer assist, platforms like Constancy and TD Ameritrade are higher decisions. Alternatively, in case your major plan is to commerce cryptocurrencies, crypto exchanges like Coinbase or Gemini could also be a better option.

Is Robinhood secure?

Robinhood is a member of SIPC (Securities Investor Safety Company). Because of this, if it goes below, as much as $500,000 of your funds held by the dealer will likely be protected. 

Notice that this safety is for dealer failure, not for losses as a consequence of investing actions.   

Are you able to lose cash with Robinhood?

Sure, you may lose cash with any funding dealer, particularly should you interact in sure varieties of buying and selling. The issue is magnified whenever you make investments utilizing borrowed cash (margin buying and selling). 

How lengthy till you commerce after you open an account?

Normal ACH transfers take as much as 5 days to course of. Nonetheless, with Robinhood Instantaneous Deposits you’re given quick entry to as much as $1,000 whereas your ACH switch is processing.

Not everybody will qualify for Instantaneous Deposits, particularly upon opening a brand new account. In the event you don’t qualify, you’ll want to attend till your ACH switch completes to start making trades.

*INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE