Robinhood is an online stock brokerage that you access through a mobile app to purchase stocks and ETFs. You’re completely in control of the transactions you make. Robinhood doesn’t invest for you, unlike other popular micro investing apps like Stash and Acorns.
If you’re intimidated by the stock market, but you want to maintain some control over where your money is invested, Robinhood is a good way to get started.Here’s why it’s my favorite app for investing in the stock market.Note: I haven’t gotten paid for this review. We’ll both get a free stock if you decide to sign up through my referral link, more on that below.
No commissions on trades.
Honestly, I could probably stop there. I was sold on Robinhood when I found out I could buy and sell stocks without having to pay a commission. The platform I was using charged $6.95 for each trade. This is the amount for most brokerages, but some charge as much as $20.
Robinhood doesn’t charge a commission when you buy or sell stocks, ETFs, or options, no matter how many you buy or sell at a time or how many trades you make in a day.
The more fees you pay on trades, the lower your return on your investment. For example, if you purchase a share of a stock for $100 and pay a $7 fee, the stock has to rise more than 7% above $107 to offset the fee you paid. It needs to rise above $114 to also offset the fee you’ll have to pay when you sell.
Warning: Be careful not to overtrade just because you’re not paying any fees. It’s an investment account, not a savings account, so get into investments that you can see yourself in long-term.
There are no fees.
Not only do you skip fees on trades, Robinhood doesn’t charge any monthly or annual account maintenance fees.
You can make free ACH transfers into and out of your account.However, if you want to transfer your stock holdings to another brokerage firm, you’ll have to pay a $75 fee. You’ll also have to pay a fee if your deposit is reversed. More on that below.
There’s no account minimum.
Many brokerages require you to make a minimum deposit to get started investing. That minimum can be between $500 and $100,000 depending on the brokerage you’re choosing.
Since Robinhood doesn’t have a minimum deposit requirement, you can start investing with any amount.Not having a minimum deposit makes it much easier for newbies to get started investing.
Instant deposits.
Many brokerages make you wait four to five business days for a bank transfer to complete before you’re able to use those funds to buy or sell a stock.Robinhood offers instant bank transfers. If you transfer $50, you can immediately invest that $50 by purchasing shares of stock.
Instant deposit is available for up to $1,000. The ability to increase your buying power right away gives you the best opportunity for maximizing returns. Having to wait for the funds to be available can cause you to miss out on potential gains.
You can increase your instant deposit amount above $1,000 by upgrading to Robinhood Gold – a subscription service that starts at $10 per month.Make sure you have the money available in your bank account. If your instant deposit reverses, you’ll be charged a $30 fee and you’ll lose access to instant buying power for 30 days.
You can set up automatic deposits to “save up” for investing.
Robinhood also gives you the option of making automatic deposits on a periodic basis, similar to what you might do with a savings account.
You can choose to deposit funds weekly on Monday, twice a month on the 1st and 15th, monthly on the 1st day of the month or quarterly on the 1st of January, April, July, and October.
You can only set up one automatic deposit for each bank account you have connected to your Robinhood account.
Your automatic deposits aren’t invested for you. The funds stay in your account until you use them to buy stock or you transfer back out to your savings account.
Trades settle instantly.
Just as with instant deposits – if you sell shares of a stock, the funds are available for trading right away. You can use this as a way to rebalance your portfolio – say if you’re too heavily invested in a particular stock – or if you see a stock that’s priced just right and you want to jump on it right away.
High volatility stocks are an exception. The funds from these sales may not be available until the next day.
Get a free stock when you sign up and when you refer others.
Besides not charging commissions on trades, the free stock is another feature that attracted me to Robinhood. When you sign up through a referral, you get a free share of a stock. I’ve gotten Sprint, Zynga, Chesapeake Energy, Sirius, and Groupon. I know of people who’ve gotten Microsoft and Facebook.
Even if you get a $4 or $5 stock, it’s better than nothing at all. It’s a great way to jumpstart your portfolio. You can hold the stock or you can sell it and trade it for something else after three days.
Use my referral link to signup for Robinhood and we’ll both get a free stock. Once you’re signup, share your referral link with your friends and family to get more free stocks. You have to set up your account, but you don’t have to purchase any stock to get your free stock. You can receive a maximum of $500 in free stock in your lifetime.
The mobile app is super user-friendly.
Robinhood is available for iPhone and Android. The user interface is simple and clean, easy to navigate.
Once you’ve signed up, you can update your security settings to require a four-digit PIN to see your portfolio. And each time you open the app you’ll see how your portfolio has performed that day. You can select different timeframes to see how you’re performing over the week, month, three months, and the previous year.
You’ll also be able to keep an eye on the stocks you’re currently invested in and the ones you’re interested in.
If you want, you can receive push notifications of stock movements and other stock-related news and you can listen to quarterly earnings calls directly within the app.
Easy orders and quick execution.
Trades placed during market hours execute almost instantly. This is key if you want to purchase a stock at a certain price.
You can choose to buy or sell at market price. Or you can use various order types to buy or sell a stock at a specific price. Choose between a limit, stop limit, or stop order.
They’re constantly improving and adding features.
Since I’ve been using Robinhood the app as continued to improve the user experience and the services it offers.
They’ve added options, crypto trading (for certain states), extended trading hours, and added stocks from foreign markets.
Downside: no technical analysis, research, or education.
Robinhood gives you some basic information about where the stock currently stands: current share price, market capitalization, last earnings per share, and volume, but beyond that, you won’t get much more information about a company’s performance.
You also don’t get a good look at the price movement of the stock. For example, you can’t get an hourly or minute view of stock movement. This information is useful if you’re doing a price analysis for trading.
I use other apps or website, like Trading View or Morning Star to dig more into the technical price movement or historical look at the company’s finances.
Downside: no bonds, mutual funds, or partial shares.
Right now, Robinhood only supports stocks and ETFs (exchange-traded funds). If you want to trade bonds or mutual funds, you’ll have to choose another broker.
Some trading platforms will let you buy partial shares. Say, for example, you want to purchase just $50 of Netflix stock, you couldn’t do that with Robinhood. It’s full shares or nothing at all so you have to be prepared to pay the full price.
How does Robinhood make money?
We know that nothing is ever really “free,” so how does Robinhood make money?’
They do have a subscription service – Robinhood – that starts at $10 per month for access to increased instant deposit amounts, the ability to trade on margin, extended trading hours and more.
They earn money on cash that’s sitting in your account not invested in any stocks.
Finally, they earn rebates from directing order flow to broker dealers.
The founders have said in interviews they do not sell user data to anyone. There are tight laws around the information financial companies can sell that would land the founders in jail if they make a misstep.
