Learn to Invest in the Stock Market For Free With Robinhood

Last Updated on October 6, 2018 Last Updated on October 6, 2018
robinhood-review

Thanks to the proliferation of smartphones, mobile banking, and investing, financial monitoring has transformed the way millions of people manage their money, build their wealth, and plan for the future.

It seems there’s always a new app or online management dashboard being released. It can be challenging to determine which one is right for your specific needs. Many are useful, while others are not. Like my favorite, the iPhone Blower, for those too lazy to blow out their own candles.

Seriously. It’s a thing, and it costs a dollar.

On the personal finance side of things, one of the most popular brokerage tools to come out in recent years is Robinhood. This is a dashboard that offers no commission stock market trading from an easy-to-use interface.

Although it comes with numerous advantages, there are some downsides to Robinhood. We’ve put together this comprehensive analysis of the pros and cons of this highly used financial tool.

Robinhood basics

Robinhood was founded in 2013 and has since raised more than $176 million in funding. The company offers stock trading to users from the convenience of a free mobile app.

Unlike trading platforms like Ally Invest and E-Trade, Robinhood has a minimalist structure designed to empower first-time or novice investors. This allows them to get their feet wet with stock trading without the extra bells and whistles—or the extra fees.

The app’s creators aim to keep it as simple and straightforward as possible. This streamlining makes the trading app easier to use, reduces costs, and enables Robinhood to continue offering its services free of charge.

Features and functionality

Robinhood is by no means a comprehensive investment interface. But, it does offer some key features and functionality that may suit your investment needs.

The truth is you cannot use the tool to invest in mutual funds, bonds, fixed-income trades or OTC equities. However, there are several great investment options that are available for free by trading through the interface.

Securities trading options

There are several categories of securities that can be traded through the Robinhood app, including stocks, ETFs, and as of this year, cryptocurrency trading. Finally, some of that ethereum and bitcoin is within your grasp and your annoying brother-in-law Steve can shut the f*%$ up about it.

robinhood review - crypto

Despite this offering, however, Robinhood’s selection of securities for trading is still limited when compared with other investment tools.

Here is a breakdown of the trading features offered by Robinhood.

Stock trading

Stock trading makes up the bulk of the service Robinhood provides. For most novice investors, it is the free stock trading that draws them to the service in the first place.

Mobile app and online dashboard

The mobile application for Robinhood is available on Android and iPhone devices. With the app, users may access a news feed and even listen to live earnings calls as they desire.

The app may also be configured to send notifications and alerts based on account changes and activity. Although Robinhood used to be exclusively accessible from the mobile app, the company has since rolled out a web version, as well.

From the online dashboard, you can see everything from market news to aggregated data about stocks gathered from other Robinhood users.

Data

The company emphasizes data in its mobile and online applications. This data allows users to review analyst ratings, earnings, price paid for stocks and company fundamentals.

This data is available in real time. Which can help users make informed choices about their stock trading and investment activity?

Customer service

Customer support for Robinhood users is available via email or through a help form submission online or on the mobile app.

Robinhood Gold

There is also a premium service called Robinhood Gold for investors looking for additional capabilities and versatility. The primary benefit of Robinhood Gold is the fact that it gives investors access to extended-hours trading from 9 a.m. to 6 p.m. EST.

Robinhood Gold also enables investors to trade on margin, or dollars borrowed from the broker. This margin account trading is only available to Robinhood Gold subscribers with a minimum balance of $2,000. And, it comes with an additional flat monthly fee based on the size of the margin account.

While this option provides experienced investors with some additional versatility, it can be risky and is not recommended for investment novices. It could result in losses that outweigh investments.

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Robinhood Pros

When reviewing the services and capabilities of Robinhood, it’s important to consider the various benefits and drawbacks of the tool. Below is a rundown of the most important factors to keep in mind:

 robinhood-review-pros

Robinhood Pro: Zero Commissions

Robinhood’s greatest appeal for investors is its no commissions trading. For active day traders who make frequent stock trades, even small commissions and fees can add up significantly over time. Free stock trades are a big draw for young investors and active day traders alike.

They enable users to make the most of every dollar that they invest.

Robinhood Pro: Account Minimums

Another attractive feature of Robinhood’s service is that there is no brokerage account minimum. Considering that many online brokerage services require $1,000 or more just to open an account, this is a significant detail for investors who are just getting started.

It’s another reason why Robinhood is so appealing to new investors.

Robinhood Pro: Interface Structure

Robinhood is all about streamlining investments for users and keeping the interface as simple as possible. This means easy stock searching, watchlist creation, a stop limit, limit orders, ticker tracking, and more.

You can easily complete trades from the mobile app, or you can consult the web interface to get more detailed information about market patterns and specific stock options. Initially, the trading platform was developed as a mobile application, and so it’s fully optimized for mobile use.

Many Robinhood users find the mobile trading app offers all the tools they need and choose not to use the web interface.

Robinhood Pro: Account Setup

You can set up a Robinhood brokerage account in just a few minutes from the mobile app. You’ll need to provide some information. This includes contact details, Social Security number, and a funding source for your account.

Robinhood will verify your bank accounts instantly before approving your account. The approval process is usually completed within an hour of submitting your information. After being approved, you can fund your account and begin investing.

Robinhood Cons

robinhood-review-cons

Robinhood Con: Customer Service

While these customer service features are easy to find and relatively easy to navigate, it is worth noting that many users experience long waiting times for inquiry responses.

Because Robinhood no longer offers customer service via phone, it can be difficult to follow up on unanswered inquiries. Thankfully, Robinhood offers a fairly robust FAQ forum online where you can get some basic questions answered.

Robinhood Con: Versatility

One of the downsides of Robinhood is the fact that its securities options leave something to be desired. Although there are several basic options available for investing, there are several securities—including mutual funds and bonds—not offered through the interface.

Another detail to consider is the fact that Robinhood does not support automatic dividend investing. This means you will receive a cash account credit for dividends. Once received, you can choose to reinvest back into your portfolio.

The good news is that Robinhood has demonstrated a consistent improvement in the range of services it offers and is on a path to expand its offerings in the future.

Robinhood Con: Account Options

Another disadvantage of using Robinhood over other brokerage services is the fact that your account options are very limited. An individual taxable account is the only option users have for their investment account. For an investor who wants to maintain a retirement account like an IRA or 401(k), this means using multiple investment interfaces for his or her various accounts.

Robinhood Con: Research

Robinhood offers a wealth of data for users to access but does not offer the same level of research as other online brokerage services. Therefore, investors who rely on comprehensive research and detailed analysis might find that Robinhood falls short in this area.

ProsCons
Easy account setupFewer research features
Zero feesLimited account options
Easy to use interfaceNo automatic dividend investing
Desktop and mobileMany securities trading options not available
No account minimumsMore limited customer service

Robinhood vs Ally vs Vanguard vs E*Trade vs TD Ameritrade: Fees

There are so many trading platforms out there, sometimes it’s hard to differentiate between them all. As a new or novice investor, one of the big factors is commissions. That is, how much am I going to be charged when I make a trade?

For ballers with millions in their account, this doesn’t matter. But for people like you and I, this matters a great deal. Here’s a breakdown of the commission fees of some of the major trading platforms.

PlatformPer TradeAccount Minimum
Robinhood$0$0
Ally$4.95$0
TD Ameritrade$6.95$0
E*Trade$9.99$0
Vanguard$7$0

New developments in Robinhood

Robinhood has only been around for about five years, and so the company still has plenty of room to grow and increase its services and capabilities.

It has a number of new developments in the works to boost the value users can get from the app. This year, the company expanded its web version to improve its user-friendliness.

Another recent development has been the bulking up of the Robinhood Options Trading service. This enables users to quickly search stock markets and trade out options manually without any commission fees.

Robinhood has also released Robinhood Crypto, allowing cryptocurrency trading from a single interface.

robinhood_review-crypto

It is clear the company is taking steps in the right direction, but there are still some areas where the application and interface are lacking.

If you really want a more comprehensive and robust way to invest, you might consider a paid brokerage service that’s better suited to your needs.

Robinhood: The verdict

The bottom line is that for new investors who want to make their first foray into the investment world, Robinhood could be a terrific option for you. With a sleek, streamlined interface and easy mobile accessibility, you can manage accounts on the go and view your investments at a glance from a simple visual dashboard.

Robinhood is a free tool and offers commission-free trading, which means that it cannot support all the same tools, features, and services as other investment tools. If you want a comprehensive investment management tool, you will likely have to pay for it.

Still, Robinhood’s service is worth trying out if you are looking for something without all the bells and whistles. Or, if you are an active trader who aims to avoid costly fees and market order commissions, Robinhood is worth it.

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