This article will review the app Robinhood and answer some frequently asked questions.
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Table of Contents
Robinhood Markets, Inc is a US-based company providing financial services to its customers. It offers commission-free stock, ETF and options trades to its customers. They provide good discounts while charging no fees. It was established in the year 2013 and the headquarters is located in ‘Menlo Park, California, United States’.
The customers are able to trade in stocks, ETFs and options with the help of ‘Robinhood Financial’ and trade with cryptocurrencies with the help of ‘Robinhood Crypto’.
They operate completely online with the help of an online trading website and mobile apps for both android and IOS, without any storefront offices.
The Robinhood brokerage is regulated by the ‘US Securities and Exchange Commission (SEC)’ and ‘Financial Industry Regulatory Authority (FINRA)’. It is also a member of ‘Securities Investor Protection Corporation (SIPC)’, which is a non-profit organization meant for the protection of the investors.
It was mentioned as the best online broker available for beginners as it provides quality education for investors who are new to trading. It also doesn’t charge any type of fees such as the inactivity fees or the withdrawal fees which is considered as a great option available to the customers.
As there are many online brokers who provide commission-free trades, Robinhood decided to offer its customers a well-established trading platform and crypto trading free of cost.
Robinhood does not provide joint accounts, custodial accounts, trusts, IRAs (Individual Retirement Accounts), etc.
The overall ratings given to Robinhood by some famous websites is as follows:
|Brokerchooser||4.6 out of 5 stars|
|Nerdwallet||5.0 out of 5.0 stars|
|Investopedia||1.8 out of 5.0 stars|
|Stockbrokers||2.5 out of 5 stars|
Robinhood’s Commission & Fees:
Robinhood does not charge any type of commission charges or fees while the investor is trading with the stocks, ETFs, cryptocurrencies or options. When it comes to discussing the pros and cons of the costs that are applicable, Robinhood has a lot of advantages and no disadvantages. It offers low trading/non-trading fees and commission-free trading with US stocks.
‘Trading Fees’ – Trading fees are the fees that are applicable when the person is making a trade. Trading fees can occur in the form of commissions, spreads, conversion fees, and financing rates. Robinhood charges no commissions to its customers when they opt to trade with the US stocks, options, ETFs and cryptocurrencies.
The stock and ETF fees that are applicable while trading on Robinhood are very low compared to other online brokers. There are no charges for US stocks. While trading with foreign stocks (other than the US stocks) with the help of ADRs (American Depositary Receipts), a fee of $50 is charged per each trade which is very high.
Financing rates or margin rates are the interest rates of the amount that is repaid when a customer trades on margin or is short on a stock and borrows money or stocks with the help of the broker. Financing rates on Robinhood are comparatively low and may vary depending on the actual currency of the margin account. The USD margin rate on Robinhood is 5.0%.
The financing rates for options trading is the same as the financing rates for stocks. Another point to take into consideration is that the options trading on Robinhood is also commission-free. The stock index options commission of 10 contracts for US stock index options on Robinhood is $0.0.
Cryptocurrency trading is also one of the best options available on Robinhood. Just like the stocks and the options, the investor is able to trade with cryptocurrencies for free. Crypto trading is available for all US states.
‘Non-trading fees’ – Non-trading fees are charges and commissions which are not based on the trading. Examples for the non-trading fees are withdrawal fees, inactivity fees, deposit fees, etc.
Withdrawal fees are the fees that are charged to the investor while withdrawing the money from their account. Robinhood does not charge any withdrawal fees to its customers.
Inactivity fees are the fees that are charged when the account remains inactive for a certain time. There are no inactivity fees for the investors while having an account with Robinhood.
In addition to these, there is no minimum deposit amount or account fee for having an account with Robinhood. Hence, by considering all the above-mentioned factors, Robinhood provides the best costs and commissions to its customers when compared to other online brokers.
The pricing on Robinhood is as follows:
|US Stock Trade fee||$0.00|
|US ETF Trade fee||$0.00|
|Options base fee||$0.00|
|Options per Contract fee||$0.00|
There are three types of accounts available to the customers within the Robinhood. They are 1.) Robinhood Standard/Instant Account, 2.) Robinhood Gold Account, and 3.) Robinhood Cash Account. A person might be able to open an instant account and then can be able to upgrade to the Cash account or the Gold account depending on their necessities.
‘Robinhood Standard Account’ – when a person signs up for a new account, they start automatically with a Robinhood Instant account, which is a margin account. The investor is able to invest an amount up to $1000 and gets access to extended – hours trading through a Robinhood Instant account.
The person also doesn’t have to wait for the funds to process, when they decide to sell their stocks or make a deposit into their account (only up to $1000). The downside is that the Day trading for the customers having the instant account is limited and there is no leverage for the instant account.
‘Robinhood Gold Account’ – The Robinhood Gold account is similar to the Robinhood Instant account but has more buying power as well as larger instant deposits. The limit for instant deposit with the Gold account is up to $50,000.
The leverage ratio for the Gold account is 2:1 and has access to extended hours trading just like the Instant account. The disadvantage of the Gold account is that Day trading is limited.
‘Robinhood Cash Account’ – The Cash account from Robinhood allows the investor to make trades commission-free during the trading time of the usual hours as well as the extended-hours. There is no limit for Day trading.
Money transfers within the Cash account from Robinhood usually take up to 4 – 5 days. Leverage is not available with the Cash account. People with an Instant account or Gold account are able to downgrade to a Cash account whenever they want.
The primary difference between these three types of accounts is the limitations for the day trading (buying and selling a respective stock on the same day). The people who have a Gold account or a Standard account might not be able to make three trades per week (except for cases where the person has a minimum of $25,000 in their account).
The Cash account does not have any type of limits while making a day trade and the investor is able to do as many day trades as they wish. There is no requirement for any sort of minimum account balance to perform day trades using the Cash account.
Another noteworthy difference is the Leverage (the money or stocks that can be borrowed from the broker). This is also known as ‘Buying Power’. Investors with Cash or a Standard account might not be able to trade with the help of leverage, only the Robinhood Gold account grants its customers a ratio of 2:1 leverage.
‘Opening an account’ – The account creation process on Robinhood is considered to be quite seamless, easy to understand and entirely digital. The time taken for creating an account might be as low as 10 minutes and the time for verification would usually be within a day.
The requirements for opening an account with the Robinhood are:
- The individual should usually have an age of 18 years or more.
- The person should have a valid social security number.
- The person should be a resident of the US with valid citizenship and should have a US residential address.
The steps for opening an account with Robinhood are:
- The investor/customer should be able to provide their personal information i.e. address of the individual, date of birth and their valid social security number.
- They should be able to provide the information/knowledge they possess regarding the investing experience.
- They should be able to verify their valid proofs of Identity such as Driver’s License or National Identity Card or International Passport. Scanning the documents or taking a photo with the help of their mobile can also be done as an alternative option.
‘Withdrawals and Deposits’ – the investor/customer can make their transactions (withdrawals or deposits) without any effort. The only backdrop is that they are only able to make the transactions with the help of bank transfer.
There is no type of deposit or withdrawal fee while having an account with Robinhood. This is considered to be one of the best available options when compared to other online brokers.
The limit for Instant deposit is up to $1000 ($50,000 in case of Robinhood Gold account) per week and the person opts to make any larger deposits that exceed the instant limit takes a much longer time. If the deposit amount does not exceed the limit of $1000 ($50,000 for Robinhood Gold account), the money would arrive immediately. For example, If a person deposits an amount of $2000 then they would instantly get an amount of $1000 and after a few days, they would be able to get the remaining $1000 (except for the Gold account users).
It would have been considered as a great option if there was an availability of a Credit card/Debit card or an e-wallet because when it comes to withdrawal from a wire transfer is a little bit pricey.
In addition to this, investors are able to transfer stocks into their account or out of their accounts. The incoming stock transfers are absolutely free but the outgoing transfers are charged $75 per each transaction. Transfers are usually done from one investor to others and the person won’t be charged any fee if they are selling their investments or withdrawing their funds to their bank.
Markets and Products available:
The types of asset classes that are available within Robinhood are ‘Stocks’, ‘ETFs’, ‘Options’, and ‘Cryptocurrencies’. The investor is able to select from a wide variety of cryptocurrencies, but the options for Stocks and ETFs are limited.
‘Stocks’ – User gets access to 5,000 stocks and ETFs on Robinhood, which are listed on major US stock exchanges. Investments in non-US stocks can be made with the help of ADRs.
If an investor is willing to make a trade in the small US stocks or Non–US stocks, it is highly suggested to contact the customer support to know the details (such as availability).
Penny stocks that are issued by some small scale companies are much more volatile than the normal stocks and therefore considered to be riskier than them.
‘Options’ – Trading with options is only possible if the investor chooses to make a trade with in stocks and stock index options of bigger stocks.
‘Cryptos’ – There is an availability of various options for trading with cryptos at Robinhood. Some of the major cryptocurrencies like the Bitcoin, Ethereum, etc. and some small cryptos like Stellar and Monero are made available to the investor.
Robinhood has access to 17 cryptos available in 46 states.
The Robinhood trading platform is considered to be user-friendly and can be understood easily even by beginners. It provides an optimum user experience along with an excellent design. Robinhood is available in the form of both Website (Web trading platform) and mobile application.
‘Web-Trading Platform’ – Robinhood’s web trading platform is very easy to understand and has a clear and simple interface. It has a great design that can be easily understood by anyone. If the person is not satisfied with the initially available design, they are able to customize it according to their necessities.
It has a two–step safe login, which is also provided by many other online brokers, which is a great and safe login feature.
The investor is able to find the desired results that they are searching for by using the search function. The search can be performed by searching the tags, asset names, etc. Using the search feature’s functionality, the user is able to find and compare the results as well.
With the help of Robinhood, Investors are able to use some specified order types, which are ‘Market’, ‘Limit’, ‘Stop-Loss’, ‘Stop Limit’, and ‘Trailing Stop’. The investor can also order terms ‘good-till-day (GTD)’ and ‘good-till-canceled (GTC)’. The investor is also aided with the help of the estimated cost tab when they place an order.
The user is able to receive push notifications and alerts while using the web trading platform. They receive alerts and notifications for ‘Dividends Payments’, ‘Movement of the prices’, ‘Money Transfers/Transactions’, ‘Announcements related to Earnings (details of the gains and losses declared by the company for a specific time period)’, ‘Corporate actions (such as Stock splits)’, and ‘Orders’.
The web trading platform also has a unique and easily understandable portfolio, where the average costs and returns can be viewed regarding the stock portfolio of the respective investor. A pie chart is also available displaying the details of the diversification of the portfolio.
Robinhood doesn’t have a specified Desktop application and the users who wish to access Robinhood Brokerage are able to succeed with the help of their website (web trading platform).
‘Mobile Trading Platform’ – The Mobile application of Robinhood is excellent, very simple to understand by the user, and easy to use. Many features are available within the Mobile trading platform such as ‘Watch Lists’, ‘Stock Charts’, ‘Price Alerts’, etc. It also comes with a user-friendly interface, safe login feature, exceptional search functionality, etc.
The mobile platform is available for both Android and IOS users and can be downloaded from the Play Store or the App Store. The features are almost very similar to that of the web trading platform.
It also provides the user with a safe two–step user authentication feature which additionally comes with the biometric verification option (preferred as a good login feature).
Using the Watch Lists feature on the mobile application, the investor is able to get familiar with the details such as the last price, change in the percentage, etc.
With the help of the Stock charts feature, investors are able to pull stock quotes that can be modified up to six default date ranges. Although it is suggested as the best alternative to pulling the stock quotes with the help of much superior options like Yahoo Finance.
User is able to receive all the alerts related to their positions or the stocks in their watch list. Alerts can only be received if the shares are owned by the user for the respective stock. This usually is somewhat a burden and exhausting process for the investors.
‘Research and Analysis’ – Investors are provided with recommendations for trading, useful news, and the necessary fundamental data using the research tool. The disadvantage is that there is only limited availability of technical indicators.
Just like the trading platforms available on Robinhood, Research tools are also very easy to understand for the user. Negligible differences can be observed when comparing the research tools on mobile and web trading platforms.
Investors can make better decisions related to investments with the help of analyst ratings of different products, which have been given by experts. There is also a section called ‘people also bought’ where products related to the current product viewed by the customer.
Fundamental data related to the company such as the number of employees working with the company, capitalization, etc. can be found with the help of the research tools.
Past movements of the price and technical indicators for the stock desired to be traded by the user are available within the Charting feature. Detailed analysis can be hard to obtain with Robinhood’s research tools.
News can be accessed by clicking on a product and the quality of the news is considered to be high. Basically, the news is provided by some third parties such as Yahoo Finance.
By acquiring a Robinhood Gold account, the investor is able to get access to some high prioritized reports (such as Research Reports from Morningstar, NASDAQ Level 2 Market Data, etc.)
‘Education’ – Robinhood gives access to some educational articles containing high-quality educational texts which can be easily understood even by investors with minimum experience.
Unlike many other online brokers, Robinhood does not provide any sort of tutorials related to trading platforms, demo account or educational videos which is considered to be a huge backdrop.
Is Robinhood safe?
Yes, it is safe. Most brokers are though, these days!
The Customer Support of Robinhood is very backward when compared to other online brokers as it does not have Live Chat or Telephone Support. It does not even provide 24/7 support for the user.
The investor is able to get the information/answers related to their queries via email. It might take up to one day for the customer support to get back to the user via email. But the response from the support team is very effective and considered to provide all the required information.
Even having reliable customer support (via email), Robinhood is considered a little bit disadvantageous when compared to some other online brokers as it does not have Live Chat or Phone Support features which are considered to be effective when it comes to Customer Support.
Pros and Cons:
The main pros and cons can be summarized as:
|Availability of free US stocks and ETF||Limited range of products and markets|
|Effortless account opening process||Below average customer support|
|User – friendly trading platforms along with excellent design||Lack of efficient educational tools|
It also has to be remembered that RobinHood isn’t available in many locations.
When it comes to aspects such as Commissions, Fees, and Trading Platforms, Robinhood Brokerage is considered to provide optimum experience to the Investor with its exquisite features. But it also has some disadvantages such as limited access to markets and products, lag of efficient customer support, etc.
Although it provides some good research tools which are considered to be very helpful to beginners, it is always suggested to contact and discuss the details related to the investment with your financial advisor before making any decisions related to investment.
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