Robinhood Overview: Professionals, Cons, and If It's The Proper Platform for You

Robinhood is seemingly good 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 incessantly ranked as among the finest on-line brokers.

On this evaluate, we’ll be weighing the details that will help you decide if Robinhood is an efficient match for you.

TIME’s Take

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

What’s Robinhood?

Robinhood is an funding platform providing commission-free buying and selling of shares, ETFs, cryptocurrency, and choices—all by way of a cell app or web site. The corporate is understood for its easy-to-use, streamlined platform and attraction to traders new to the funding recreation. Its Robinhood Retirement affords IRAs, each conventional and Roth.

Robinhood professionals & cons

Professionals

• Doesn’t require a month-to-month payment or account minimal to open or preserve a brokerage account (aside from Gold account).
• Straightforward to make use of.
• No international transaction, inactive account, switch or card substitute charges.
• Provides 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 possibility.
• Permits fractional share buying and selling.
• The Gold tier subscription affords a really aggressive 5.0% APY in your uninvested brokerage money (it’s 1.50% with out Gold).

Cons

• Doesn’t provide joint brokerage or custodial accounts.
• A Gold tier subscription, which supplies analysis and knowledge that’s typically free at most brokerage corporations, prices $5 per 30 days.
• Doesn’t provide 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 recent traders.
• Permits fee for order circulation, decreasing a few of the advantages of commission-free buying and selling.
• Buyer assist is restricted: Robinhood doesn’t provide direct cellphone assist or reside chat except requested by way of the app or its web site.
• Restricted instruments for buying and selling, analysis, and schooling.

Who ought to select Robinhood?

Robinhood is finest fitted to intermediate or superior traders. It will embody skilled traders who’re much less reliant on buyer assist, dealer investor instruments and academic sources.

The platform is designed primarily for energetic buying and selling, together with day buying and selling. It’s one of many high brokers for choices buying and selling since there isn’t a per-contract payment, as is frequent with most brokers.The app additionally seems to encourage margin buying and selling. This isn’t a follow advisable for brand spanking new and small traders, because it magnifies the potential for funding losses.

Robinhood shouldn’t be an optimum platform for the type of long-term, buy-and-hold index investing technique advisable by the vast majority of monetary advisors and adopted by most traders.

How did we evaluate Robinhood?

When evaluating Robinhood we thought-about the next elements:

• Accessible accounts and investments.
• Commissions and costs.
• Ease of platform use.
• Options and instruments provided.
• Customer support availability.
• The kinds of traders finest served by this platform.
• Firm repute.
• Particular or uncommon options.

Robinhood in-depth

Commissions and costs

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

Like all brokers, Robinhood is topic to regulatory charges, that are handed on to traders. These embody a regulatory transaction payment of $8 per $1 million of principal on promote orders, a buying and selling exercise payment 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 fee for order circulation system. Which will end in traders getting a less-than-optimal worth on each the acquisition and sale of securities inside their accounts. It’s a payment construction during which the value 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 customary accounts. Nonetheless, in case you are a Robinhood Gold member, the margin charge drops to 7.75%.

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

Platform and know-how

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

Robinhood does provide superior charting, serving to you to establish tendencies utilizing technical indicators corresponding to quantity, transferring averages, and the relative energy index (RSI). It additionally affords candlestick, line, and quantity charting.

Extra superior instruments can be found when you take part in Robinhood Gold. That plan affords skilled analysis from Morningstar, in addition to Degree II market knowledge from NASDAQ in actual time.

Robinhood is sort of well-regarded by customers of the app. It has a ranking 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 affords a restricted variety of account sorts and investments. It specializes within the following:

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

Cryptocurrency buying and selling: Robinhood affords buying and selling in quite a few currencies, together with Bitcoin and Ethereum. You possibly can start buying and selling with as little as $1, and trades are commission-free.You too can reap the benefits of the Robinhood Pockets to carry your crypto belongings freed from community charges. You’ll maintain and preserve the non-public 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 non-public agency earlier than they turn into out there on the open market.

Get your first inventory free: If you open a brand new Robinhood account, you’ll earn a specified greenback quantity, supplying you with the power 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 provided.The reward is value between $5 and $200, however Robinhood clarifies that roughly 98% of individuals will obtain between $5 and $10.

Analysis and schooling

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

The positioning does present a “Study” part, which helps traders higher perceive use the platform and turn into simpler traders. Furthermore, Robinhood Snacks supplies a publication and podcasts to prospects with updates on the monetary markets which might be “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 way of electronic mail at [email protected]. You too can use the app or web site to talk 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 possible.

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} customary BCrypt hashing algorithm and encrypting delicate info earlier than it’s saved. In the meantime, each cell and net functions 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 lengthen 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 scores from customers.

Further options

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

Robinhood IRA accounts mean you can make investments commission-free and reap the benefits of a custom-recommended portfolio. All investments, besides cryptocurrencies, can be found by way of an IRA account.

Excessive-Yield Financial savings Account (HYSA): Robinhood affords an account paying curiosity in your uninvested money. You possibly can earn 1.5% APY (4.65% on Gold plan accounts) on balances as much as $1.5 million by way of accomplice banks. All funds as much as that restrict are insured by the Federal Deposit Insurance coverage Company (FDIC). See extra of the most effective HYSA charges.

Robinhood Money Card: Robinhood affords a debit card that gives money again if you buy taking part manufacturers. It additionally offers you the power to routinely make investments a few of your paychecks in a preselected selection of shares or cryptocurrencies. You possibly can 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 power to ship checks, and no overdraft or month-to-month charges.

Robinhood Gold: Robinhood affords this as a premium plan, for $5 per 30 days. The plan comes with the next upgrades:

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

Robinhood Gold is an elective plan, which you’re free to downgrade out of at any time.

Alternate 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 efficient 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 affords and the very fact it doesn’t allow you to spend money on sure standard asset courses corresponding to bonds and mutual funds.

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

Every dealer excels particularly areas. For instance, Robinhood is healthier 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, permit cryptocurrency investing. TradeStation, alternatively, affords wider funding and account choices, together with the power to spend money on futures.

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

Robinhood repute

It’s common 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” ranking. The nonprofit group cites authorities regulatory motion in opposition to the corporate, in addition to a sample of complaints from prospects a couple of lack of response from buyer assist and an incapacity to entry accounts.

Examples of regulatory actions embody the next:

• SEC, December 17, 2020: The Securities and Change 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 superb was associated to the fee for order circulation referenced earlier on this evaluate.
• FINRA, June 30, 2021: Robinhood was fined $57 million and ordered to pay $12.6 million in restitution, plus curiosity, to 1000’s of harmed prospects for offering false or deceptive info concerning its systematic outages in March 2020. It was the most important monetary penalty ever ordered by the Monetary Business Regulatory Authority (FINRA).
• New York Division of Monetary Providers (DFS), August 2, 2022: NY DFS imposed a $30 million penalty on Robinhood Crypto for important 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 special infraction.

Ceaselessly requested questions (FAQs)

Is Robinhood for learners?

Robinhood could be a good match for starting traders. The corporate is arguably among the finest in relation to making the market extra accessible and is commission-free with most trades. Nevertheless it does lack the shopper assist and investor sources of extra conventional brokerages {that a} newbie may have.

What are good alternate options to Robinhood?

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

For instance, when you’re a brand new investor additionally seeking to accumulate funds to take a position, Acorns is a superb selection. It permits you to hook up with a spending account that can spherical up your purchases and switch the grow to be 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 beneath, 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 because of investing actions.

Are you able to lose cash with Robinhood?

Sure, you’ll be able to lose cash with any funding dealer, particularly when you have interaction in sure kinds of buying and selling. The issue is magnified if you make investments utilizing borrowed cash (margin buying and selling).

How lengthy till you commerce after you open an account?

Commonplace ACH transfers take as much as 5 days to course of. Nonetheless, with Robinhood Instantaneous Deposits you’re given rapid 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