June 24, 2024

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

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 cellular app and fee-free service, and is steadily ranked as among the best on-line brokers.

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

TIME’s Take

Robinhood has grown steadily in recognition lately, however it’s not the precise platform for everybody. Although it markets itself primarily towards new buyers, 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 assets.

 Execs

  •  Doesn’t require a month-to-month price or account minimal.
  • Simple to make use of.
  • 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 choice.
  • Permits fractional share buying and selling.

Cons 

  • Doesn’t provide joint brokerage or custodial accounts.
  • A Gold tier subscription, which gives analysis and knowledge that’s usually free at most brokerage corporations, prices $5 per thirty 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 buyers.
  • Permits cost for order circulation, lowering a few of the advantages of commission-free buying and selling.
  • Buyer help is proscribed: Robinhood doesn’t provide direct telephone help or stay chat until requested via the app or its web site.
  • Restricted instruments for buying and selling, analysis, and training.

Who ought to select Robinhood?

Robinhood is greatest suited to intermediate or superior buyers. This can embody skilled buyers who’re much less reliant on buyer help, 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 high brokers for choices buying and selling since there isn’t any per-contract price, 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 is just not an optimum platform for the type of long-term, buy-and-hold index investing technique really helpful by nearly all of monetary advisors and adopted by most buyers. 

How did we overview Robinhood?

When evaluating Robinhood we thought of the next elements:

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

Robinhood in-depth

Commissions and costs

Robinhood presents commission-free trades of shares, choices, ETFs, and cryptocurrencies. Whenever you buy international shares on U.S. inventory markets, also called American Depositary Receipts (ADRs), there could also be a price 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 price of $8 per $1 million of principal on promote orders, a buying and selling exercise price 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 circulation 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 price 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 commonplace accounts. Nonetheless, in case you are a Robinhood Gold member, the margin fee 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 expertise

Robinhood ranks excessive on ease of use as a result 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 provide superior charting, serving to you to establish tendencies utilizing technical indicators equivalent to quantity, shifting averages, and the relative power index (RSI). It additionally presents candlestick, line, and quantity charting.

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

Robinhood is sort 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 varieties and investments. It specializes within the following:

Choices buying and selling: Like most funding brokers, Robinhood expenses no fee for choices trades. However it additionally doesn’t levy a per-contract price, which is usually $0.65 per contract. By waiving that price, Robinhood makes choices buying and selling a bit 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 possibly can 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 belongings freed from community charges. You’ll maintain and keep the non-public key to the pockets, which is a part of the Polygon and Ethereum networks.

Preliminary Public Choices (IPOs): Robinhood is among 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 develop into obtainable on the open market.

Get your first inventory free: Whenever you open a brand new Robinhood account, you’ll earn a specified greenback quantity, supplying you with the flexibility to select a present inventory from an inventory 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 price 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 positioning does present a “Study” part, which helps buyers higher perceive learn how to use the platform and develop into simpler buyers. Furthermore, Robinhood Snacks gives a e-newsletter 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 telephone quantity to contact, help is on the market via e mail at [email protected]. You may also use the app or web site to speak or request a telephone name. Robinhood gives a really detailed FAQ web page that may usually reply most questions.

Account safety is supplied 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 doubtless.

The corporate additionally makes use of a number of industry-standard measures to guard your account and your data. That features hashing your account passwords utilizing the {industry} commonplace BCrypt hashing algorithm and encrypting delicate data earlier than it’s saved. In the meantime, each cellular and internet 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 cellular app is on the market 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 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 permit you to make investments commission-free and make the most of a custom-recommended portfolio. All investments, besides cryptocurrencies, can be found via an IRA account.

Excessive-Yield Financial savings Account (HYSA): Robinhood presents 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 via 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 robotically 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 telephone help, 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 per thirty days. The plan comes with the next upgrades:

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

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

Alternate options to Robinhood

If you’re 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 gives commission-free trades on all investments.  However 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 in style asset courses equivalent to bonds and mutual funds.

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

Every dealer excels particularly 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 telephone help however doesn’t, for instance, permit 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 may not be proper for all buyers. The desk under summarizes the main options of every of them:

Particular person brokerage accounts; conventional Roth, and rollover IRAs

Particular person and Joint brokerage, Conventional IRA, Roth IRA, or SEP IRA, and Entity

Common Funding, Retirement Account (Conventional IRA, Roth IRA)

Shares, ETFs, choices, cryptocurrencies, and IPOs

Shares, ETFs, crypto, choices, futures, mutual funds

Shares, ETFs, Choices, Mutual Funds and Fastened Revenue

$0 for shares, ETFs, choices, and cryptocurrencies

$0 shares, ETFs, Inventory Choices (+ $0.60 per contract), Futures (+ $1.50 per contract, per aspect), mutual fund $14.95 per commerce

$0 shares, ETFs, load mutual funds, U.S. treasury payments, notes and bonds, and choices (+$0.65 per contract)

E mail, chat, and restricted telephone help

E mail, chat, and restricted telephone help

Cellphone help Monday-Friday 8 AM – 9 PM and Saturday 9 AM – 5 PM ET, in department help

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” score. 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 help and an lack of ability 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 fantastic was associated to the cost for order circulation referenced earlier on this overview.
  • 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 data concerning its systematic outages in March 2020. It was the biggest monetary penalty ever ordered by the Monetary Trade Regulatory Authority (FINRA). 
  • New York Division of Monetary Companies (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 symbolize actions in opposition to Robinhood by three regulatory our bodies, every for a special infraction.

Incessantly requested questions (FAQs) 

Is Robinhood for newcomers?

Robinhood generally is a good match for starting buyers. The corporate is arguably among the best in the case of making the market extra accessible and is commission-free with most trades. However it does lack the client help and investor assets of extra conventional brokerages {that a} newbie might have.

What are good options to Robinhood?

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

For instance, for those who’re a brand new investor additionally seeking to accumulate funds to speculate, Acorns is a superb selection. It lets you connect with a spending account that can spherical up your purchases and switch the grow to be your funding account. 

In the event you’re on the lookout for the next stage of buyer help, platforms like Constancy and TD Ameritrade are higher selections. Alternatively, in case your major plan is to commerce cryptocurrencies, crypto exchanges like Coinbase or Gemini could also be a more sensible choice.

Is Robinhood secure?

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

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

Are you able to lose cash with Robinhood?

Sure, you may lose cash with any funding dealer, particularly for those who have interaction 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 Prompt Deposits you’re given fast entry to as much as $1,000 whereas your ACH switch is processing.

Not everybody will qualify for Prompt 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

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