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Account Minimum: $0  –  Fees: $0  –  Best for: Beginning Investors

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If you’ve listened to a podcast in the last 3 years, odds are you’ve heard of Robinhood. They advertise as an easy to use, free stock trading app for first time investors. Before giving a full recommendation, we wanted to review Robinhood, outline the features and learn more about the product.

 

What is Robinhood?

Robinhood is a mobile application that allows you to invest in stocks, ETFs and cryptocurrencies with no commissions or fees. For first-time investors, to buy and sell stocks online you usually need to pay a per-trade fee. Traditional stock brockers charge a commission fee for putting together the purchase or sale of stocks. With Robinhood, you don’t have to deal with any of this.

Robinhood let’s you easily check stock prices on your phone, set price alerts, get news about the market, transfer funds to and from your bank account and they say “cash management” is coming soon.

 

Robinhood’s Amazing & Simple Features.

For first time investors, the stock market seems overwhelming and incredibly complex. Even though the market is pretty simple once you break things down, these factors can scare off investors from ever putting money into the market. Robinhood was well aware of that and have positioned themselves as the friendly, easy to use investing app.

Here are 6 of the reasons we love Robinhood:

  1. Easy Set Up – All you have to do to get a Robinhood account is download the app with this link. From there, sign up is super simple and you can fund a Robinhood account with most bank accounts. If you can’t find your bank on the list, you can manually enter your account and routing number. There are some banks they don’t support, but they’re working on adding more banks all the time. 
  2. Free Trading – This is their biggest selling point. Free trading is almost unheard of in investing so this is amazing. This sets Robinhood apart from companies like eTrade, Schwab and many others.
  3. No Account Minimum – Most companies require a minimum deposit to get started investing. This can range anywhere from a couple hundred to upwards of $25,000! Obviously most of us don’t have $25,000 lying around to invest. Thankfully, with Robinhood you don’t have to. There is no minimum account balance required so only put in what you’re comfortable with.
  4. Cheap Margin Loans – If you want to use Robinhood passively, skip this section. Margin loans are a loan where you use current shares or funds as security. In plain English, you’re asking for more money using the money you have currently as a guarantee. Margin loans are usually in the 8-10% range. Robinhood offers 5% margin loans which is crazy low compared to industry average. To reiterate, if you are not a serious investor do not use margin loans. It’s an easy way to lose money quickly if you aren’t careful.
  5. Rewarding Affiliate Program – If you get a friend to sign up for Robinhood, you can be rewarded. On the Robinhood app, go to the home screen and tap the “Free Stock” button at the top right. From there you can send a link, message, email, or whatever method of communication you use to friends, family and coworkers. If they sign up you each get a free stock. Normally the stocks are a $4-$5 value but some people have gotten stocks worth hundreds of dollars.
  6. Extra hours trading – The New York Stock Exchange is traditionally open from 9:30am EST – 4:00pm EST. With Robinhood you can begin Pre-Market trading 9:00am EST and continue After-Hours trading until 6:00pm EST. You might be asking why one would trade before or after hours. That’s too complicated to get into in this article.

 

What is Robinhood Gold?

Robinhood Gold is the paid version of the app ($10/month) that comes with a much more robust feature set. This is targeted at more serious investors who want to take a hands on approach with managing their portfolio.

Let’s break down features offered to Robinhood Gold users:

  1. Professional research – Robinhood partners with Morningstar to get independent research from investment professionals. They provide clear reports on 1,700 stocks and are updated “frequently.” These reports cover everything from the companies fair market value to leadership. While this information is incredibly valuable in the right hands, it does not provide the insight the average person needs to make an investment decision. 
  2. Bigger instant deposits – Normally, money takes 3 days to clear from your Robinhood account. With instant deposits you get your money faster. This is a huge help if you are making split second decisions with your money. If you don’t have gold, you are limited to $1,000 in instant deposits. Here are the instant deposit limits for Gold users:
    • $50k instant deposit limit if your portfolio is over $50k
    • $25k instant deposit limit if your portfolio is over $25k
    • $10k instant deposit limit if your portfolio is over $10k
    • $5k for everyone else
  3. Margin Investing – See point 4 in the section above.
  4. Level II Market Data – Robinhood partners with NASDAQ to give users Level II Market Data. Without going into too much detail, this basically allows people to better determine the availability or desire for stock at a certain price. For the informed investor, this information can guide the decision making process.

 

How Robinhood Lacks

  1. Limited Research – While Robinhood says they will soon provide Level II Market Data to Gold users. While they offer a very limited amount of information from MorningStar, it is nothing in comparison to the in-depth information you can get from E-Trade or Charles Schwab.
  2. Few Account Types – If you are trying to build a retirement fund, or any fund besides an individual taxable account, Robinhood is not the place for you. They do their one thing, and nothing else. 
  3. Customer Support – Most financial institutions have decent customer service. Robinhood’s access to customer service is INCREDIBLY limited. Contact support@robinhood.com other than that good luck talking with a human being.
  4. Poor Trading Experience – Buying stocks has traditionally complicated process, while Robinhood makes it easier, they don’t tell you WHY. The irony of the name is that Robin Hood stole from the rich and gave to the poor. Ironically, the app sells your trading information to high frequency traders. This allows Robinhood to buy stocks from you at a lower price, and sell at a higher price. – TL;DR Robinhood steals from the poor and gives to the rich.
  5. Doesn’t Integrate with Other Apps – Robinhood doesn’t integrate with Mint, Quicken or many other budgeting apps, making it difficult if not impossible to view all of your finances in one place.

 

Robinhood Review: The Bottom Line

At the end of the day, Robinhood is a simple and free investing app. It’s simple and free because it lacks many of the features full investment platforms have. If you are just getting into the stock market Robinhood is a great place to start. Keep in mind that it might not be the best place to stay.Â