Robinhood; Alyssa Powell/Business Insider
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- Robinhood is an online brokerage offering commission-free trades on stocks, ETFs, options, and cryptocurrencies.
- This stock-trading app is best for active investors looking for commission-free trading opportunities and mobile investing access.
- Robinhood also offers fractional shares and cash management accounts.
- Click here to open an account with Robinhood.
Is Robinhood right for you?
When it comes to its advisory services, Robinhood is best for active investors interested in placing commission-free trades in stocks, options, ETFs, and cryptocurrencies. The brokerage has no minimum account size requirements for most of its investments, but you’ll have to pay minimum opening deposits for its fractional shares and margin trading offerings (you’ll also need at least $25,000 for pattern day trading.)
Not only is this platform a good fit for active and day traders, but it’s also a competitive option for margin traders. You can invest on margin with Robinhood Gold, meaning you’ll be borrowing money – or margin loans – from the brokerage to pay for higher-value investments.
Robinhood’s web platform and mobile offerings are also straightforward and easy to navigate. And you’ll get one share of free stock when you open an account. You’ll also get a free stock whenever you make successful referrals.
One thing to look out for is that Robinhood primarily offers individual taxable brokerage accounts; this might be an issue for married couples or other individuals who want to invest together. The brokerage offers a cash management account, but it doesn’t provide retirement accounts, joint accounts, custodial accounts, or education savings plans. This means you’ll be limited in terms of the financial goals you can save toward.
Another drawback is that Robinhood doesn’t provide as much research and trading tools as other popular brokerages. Though the company offers an educational blog, you can only take advantage of professional research if you’re a Robinhood Gold member.
In addition, while some brokerages like Fidelity allow you to assign beneficiaries to your accounts, Robinhood currently doesn’t. If you’re looking to passively invest your money, or employ buy-and-hold strategies, Robinhood may not be the best choice. The platform also doesn’t offer automated investment advice or professionally managed portfolios.
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Robinhood |
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| Editor’s rating | 4.1 out of 5 |
| Trading fees | 0% |
| Account minimum | $0 ($1 for fractional shares; $2,000 for gold) |
| Promotion | Get a free stock when you open account; free stock for every successful referral. |
| Open Account | |
Robinhood pros and cons
Pros
- Free stock, option, ETF, and cryptocurrency trades
- Fractional shares and margin investing
- Cash management accounts available
- Website is easy to navigate
Cons
- Lack of investing research and trading tools
- No retirement accounts, joint accounts, education savings accounts, or mutual funds
- Limited customer service availability
- Doesn’t offer automatic transfer on death or allow users to name beneficiaries
How does Robinhood compare to other investment platforms?
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Robinhood |
Fidelity Investments |
SoFi |
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Min. Investment $0 ($1 for fractional shares; $2,000 for Robinhood Gold) |
Min. Investment $0 |
Min. Investment $0 |
|
Trading fees 0% |
Trading fees 0% (up to 0.35% for automated investment advice) |
Trading fees 0% (1.25% markup for cryptocurrency) |
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Investment choices Stocks, ETFs, options, cryptocurrencies, and ADRs |
Investment choices Stocks, ETFs, options, mutual funds, bonds, CDs, annuities, and IPOs |
Investment choices Stocks, ETFs, and cryptocurrencies |
| Open an account | Open an account | Open an account |
Is active trading right for you?
Active trading is great for those who value a DIY, or hands-on, approach to investing. Unlike passive investing, where you buy and hold investments for the long term, active trading consists of regular securities transactions. Active investors typically aim to capitalize off of short-term stock market trends, so you’ll likely be buying and selling your investments more frequently if you choose this route.
Passive investing, on the other hand, allows you to park your money into long-term investments such as mutual funds, index funds, ETFs, or real estate. This form of investing is generally safer – and usually costs less – than active investing.
You can do both, though. If you’re interested in utilizing both active and passive investing strategies, you certainly can. In fact, many financial experts recommend diversifying your portfolio among multiple asset classes to reduce overall risk.
If you like the sound of active trading, and don’t mind doing a bit of your own research on your investments, Robinhood’s low fees and commission-free securities could be a good fit for you.
Ways to invest with Robinhood
Stocks and funds
As mentioned earlier, Robinhood grants you access to unlimited commission-free stock, ETF, and options trades. You can make trades using the company’s web platform or mobile app. The brokerage provides mobile access for both iOS and Android devices.
Robinhood also offers fractional shares. This means that you can purchase portions of stock in companies without paying the full share price. You’ll only need $1 to get started with fractional shares.
Options
Robinhood’s commission-free option trading comes with a notable perk: no per contract fees. Many brokers charge under $1 per options contract, and some platforms use tiered pricing structures that charge lower fees for more active traders and higher fees for less active traders.
But with Robinhood, you’ll incur no such fees. It’s worth pointing out, though, that options investing carries more risk than stock and ETFs. Robinhood offers options risk disclosures on its website.
Cryptocurrency
This platform’s commission-free rule applies to cryptocurrencies as well. The Robinhood Crypto service lets you trade an array of digital currencies such as Bitcoin, Dogecoin, and Ethereum.
You can use any funds you’ve deposited into your brokerage account to purchase cryptocurrencies through Robinhood Crypto.
Gold
Robinhood Gold allows you to trade on margin and access Morningstar professional research reports and NASDAQ market data. The account carries a $5 monthly fee, and you can make instant deposits of up to $50,000. You’ll need at least $2,000 to get started.
With margin trading, you’re essentially borrowing money from a brokerage to invest in securities or other financial assets you can’t afford. Your investments serve as collateral for the margin loan, and you’ll have to pay back your borrowed funds.
Is Robinhood trustworthy?
Robinhood has received an F in trustworthiness from the Better Business Bureau. This is the lowest BBB a company can receive, and it generally signifies the company has had some issues in how it interacts with customers, as well as how it deals with customer complaints.
Currently, Robinhood is under intense scrutiny after it halted trading on several stocks – namely GameStop (GME) and AMC Entertainment (AMC) – whose share prices skyrocketed due to members of a Reddit forum called r/WallStreetBets. The investment app reopened trading on some of the stocks it had temporarily restricted, but it now faces major lawsuits and user retaliation.
Further back, in 2020, following the suicide of a young user who’d amassed significant financial loss from an options transaction, Robinhood announced that it was expanding its educational content on options trading. The company also hired an options education specialist and pledged to improve its user interface.
If you’re interested in stock trading but aren’t encouraged by the latest headlines, consider the top investment app alternatives to Robinhood.
What is Robinhood?
Robinhood is an online investing platform offering commission-free trading on several US-listed investment types. Robinhood also has a high-yield cash management offering, but it’s important to remember that the company mainly offers individual brokerage accounts.
As for eligibility requirements, you can take advantage of the brokerage’s active trading opportunities as long you’re at least 18 years old with a US residential address. US citizens, US permanent residents, and individuals with valid US visas all qualify.
Robinhood was established in 2013 and is headquartered in Menlo Park, California. In 2017, the brokerage placed #7 on Fast Company’s ranking of the World’s Most Innovative Companies.
The company has raised $2.2 billion in funding, according to Crunchbase.
Rickie Houston is a wealth-building reporter at Personal Finance Insider who covers investing, brokerage, and wealth-building products.
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