Robinhood App Review: Robinhood Stock Trading App (Guide for 2020)
The Robinhood App offers commission-free stock, ETF and options trades. Since the trading app was introduced, many competitors also offer free trades. However, this investment app stands out most for offering a streamlined trading platform and free cryptocurrency trading. The Robinhood App provides free stock, options, ETF and cryptocurrency trades. Also, its account minimum is $0. Mutual funds and bonds aren’t offered, and only taxable investment accounts are available. Still, if you’re looking to limit costs or trade crypto, the Robinhood app is a solid choice.
Pros & Cons
Pros
- No account minimum – Robinhood is very efficient at getting your cash into the market. All customers have instant access to deposits and immediate access to funds after closing positions. Your buying power is increased as soon as you initiate a deposit into your account.
- Streamlined interface – Both the Robinhood app and the website are extremely easy to use
- Cryptocurrency trading – Robinhood allows cryptocurrency trades to be placed in very small quantities. Most other cryptocurrency-friendly platforms require certain minimums in order to trade.
Cons
- No retirement accounts. mutual funds or bonds.
- Time Delay – Though prices update on the Robinhood app and the website, they lag other real-time data providers by several seconds.
- Limited customer support.
- Wide Spreads – There is no commission charged by Robinhood for trades, but the spread for cryptocurrency transactions was considerably wider than those on other platforms.
What Is Robinhood App?
Robinhood is a discount stock broker that has certainly been a hit from its inception in 2013. Currently, the platform boasts more than 5 million users. As of May 2018, Robinhood’s stock trading platform hosted more than $150 billion in transactions. The company has been recently valued at $5.6 billion. In 2018, the company expanded its web version, built up its Options Trading service and rolled out Robinhood Crypto. This lets you trade some of the most popular cyber currencies. The company further announced in December 2018 that it will start offering checking and savings accounts with no associated fees. The interest rate on savings is a pretty impressive 3%.
How Robinhood App Works
Stock Trading
You can download Robinhood app to your phone, secured with your password or fingerprint, on fingerprint-enabled devices. Once you log into your account, there is no trade option in the menu, which can be confusing at first. To trade a stock, click on the search icon and search for the stock you have in mind. It really is simple and free once you pull up the page showing basic details about the company and recent price information. The experience is as easy as advertised.
The platform supports market orders, limit orders, stop-limit orders and stop orders. You can also enable good-for-the-day or good-till-canceled parameters. Because trades are free, you may be tempted to dive into the risky world of day trading. Don’t get carried away and proceed with caution. Day trading is very risky business, even for experienced traders.
Options Trading
Options trading is a new offering for Robinhood. The trading app gives you access to no-fee contracts. That includes no commissions, no per-contract fee, no exercise fee, and no assignment fees. It’s tough to beat free. Robinhood’s Options Trading includes helpful filters and advanced trade strategies. You can also trade multi-leg options strategies in a single order and monitor these complex contracts together. The typical novice investor should not be trading options at all. But, if you are an experienced investor who wants to trade in the options space, you can increase your margins and trade for free via the Robinhood app.
Crypto Trading
The most excitement surrounds the cryptocurrency trading service Robinhood has rolled out for its users. It allows access to buy and sell six popular currencies: Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, and Dogecoin. Access is available on a state-by-state basis. Currently, only about half of the U.S. population can use Robinhood Crypto. Even if you don’t get access to buy and sell, all Robinhood users can access price and market data for 16 popular cryptocurrencies. The big benefit of Robinhood over Coinbase and other well-known digital wallet providers is that Robinhood extends its no-fee trading to cryptocurrencies. Once enabled, you have the ability to trade 24/7. Source: investorjunkie.com
Robinhood App – Overview
Robinhood is a free-trading app. It lets investors trade stocks, options, exchange-traded funds and cryptocurrency without paying commissions or fees. Until recently, Robinhood stood out as one of the few brokers offering free trades. To stay competitive, many big-name online brokers followed suite and eliminated trading commissions and fees in late 2019. However, Robinhood still remains a solid choice. It is one of the few brokers that gives investors the opportunity to trade cryptocurrency on its free trading platform. Robinhood offers both web and mobile trading. The platforms are purposely bare bones to keep costs down. Still, some investors may find the range of tradable securities and account options lacking.
Robinhood App is best for:
- Mobile users.
- Individual taxable accounts.
- Margin accounts.
- Cryptocurrency.
Where Robinhood App Stands Out
Free trading
Stocks, ETFs, options, and cryptocurrency. You can trade them all for free on Robinhood. That’s a huge advantage to investors, especially options investors. While investors can find free stock and ETF trades at most brokerages, the real differentiator for Robinhood is its free options trading. As options traders know, it’s easy to rack up a huge bill if you’re trading in and out of the market. That’s because brokers charge a fee for each contract. That structure quickly piles on the costs. Robinhood charges no per-contract fee. It’s a great choice for options investors looking to get into the market. Of course, beyond all these freebies, Robinhood allows you to trade some cryptocurrencies commission-free, too. The service is available in most states, and the company is adding more all the time.
Zero Commissions
What’s better than free? Robinhood’s commitment to providing zero commission stock, options, ETF and cryptocurrency trades is impressive. The savings for investors who trade frequently is significant. After all, every dollar you save on commissions and fees is a dollar added to your returns. Still, many big-name brokers also offer free trades. So it makes sense to compare other features when picking a broker. Robinhood also seems committed to keeping other investor costs low. The Clearing by Robinhood service allows the company to operate on its own clearing system, which reduces some of the service’s account fees. One of the biggest fees Robinhood charges is the $75 outgoing account transfer fee, but that’s not an unusual fee among brokers. An account transfer is when you want to transfer your investments to another broker. But, there’s no fee for selling your investments and having the money transferred via ACH to your bank. (Source: nerdwallet.com)
No Account Minimum
Robinhood doesn’t have an account minimum. This means investors can get started right away. Even thought there is no account minimum, in order to invest, you’ll need enough to purchase the investment you want. Also, like other brokers, Robinhood requires a $2,000 minimum portfolio balance to open a margin account. This is not a requirement implementes solely by Robinhood. This is a Financial Industry Regulatory Authority regulation.
Quick Funding
With no account minimum, Robinhood is super-friendly to investors, but it’s funding process is even better. If you’ve ever tried to fund a brokerage account before, you know it can take a while to get the funds into the account, even if you move the cash right as you’re opening the account. That’s why Robinhood’s funding stands out. Robinhood gets money into your account immediately. By using instant verification with major banks, Robinhood allows you to avoid the hassle of traditional verification of reporting tiny deposits into your bank account. This means the app can move up to $1,000 of any deposit into the account immediately, with the rest following a few days later. It gets you in the game faster. (Source: bankrate.com)
Fractional Shares
Like some other brokers, including Interactive Brokers and Charles Schwab, Robinhood has introduced fractional shares. That means you can pay as little as $1 for a portion of a share, even if that share’s full price is in the hundreds of dollars. This feature makes it much easier to build a diversified portfolio. You’re able to buy many more companies, even if you don’t have a lot of money to invest.
High-yield Savings
In December 2019, Robinhood started offering a cash management account that currently pays 0.30%. The account comes with a debit card and free ATM withdrawals from more than 75,000 ATMs. The account offers up to $1.25 million of FDIC insurance thanks to Robinhood’s agreements with several banks.
Ease of Use
If you’re accustomed to using a smartphone — and Robinhood’s target user base obviously is — you’ll find the sign-up and account funding process quick and painless. It all happens within the app in a matter of minutes, with just a few quick questions that gather your personal information, contact details, Social Security number and means of funding your account. The company says approved customers are notified in less than an hour, at which point they can initiate bank transfers.
Robinhood uses instant verification with many major banks, sparing users the hassle of reporting micro-deposits to an account to verify information. Bank transfers of up to $1,000 are available instantly for investing, as are proceeds of up to $1,000 from selling stocks. Deposits larger than $1,000 will take four to five business days to process. Users can set up automatic deposits on a weekly, biweekly, monthly or quarterly schedule.
Streamlined interface
This could be a negative, as the service doesn’t offer all the bells and whistles of a typical online stock broker. But for investors who know what they want, the Robinhood platform is more than enough to quickly execute trades. It supports market orders, limit orders, stop limit orders and stop orders. Both the mobile and web platforms also include a feature called collections, which are stocks organized by sector or category. Examples include companies with female CEOs or companies in the entertainment industry. On web, collections are sortable and allow investors to compare stocks side by side. The app also offers a tab bar at the bottom, which offers quick access to portfolio values, watch lists, transaction history and account statements. (Source: nerdwallet.com)
Margin Trading – Robinhood Gold
Robinhood Gold is the company’s program to provide research and allow you to buy securities with borrowed money, or margin. The company charges $5 a month for the program, which offers research on 1,700 companies from Morningstar, Nasdaq Level II quotes and access to margin loans.
The subscription price includes the interest on your first $1,000 in borrowing, and subsequent amounts are charged a 5 percent annual rate. The broker charges loan interest to your account every 30 days. If you don’t have cash in the account to pay the monthly fee, it’s rolled into your margin balance. Potential borrowers should note that any margin account must have at least $2,000 in it, per industry rules.br
Robinhood Gold offers investors the ability to trade with borrowed money, on margin. New investors should be aware that margin trading is risky. You’re trading on money you borrowed from the broker. This means you can lose more than you initially invested.
Improved Research Offerings
Though Robinhood’s offerings still pale in comparison to other brokers, the company has made strides to increase the tools and research available for customers. They do offer analyst ratings, lists of top movers, earnings calendars and links to earnings calls. Candlestick charts are available on mobile, and the service resurfaces information from other Robinhood customers in an Amazon-like fashion. For example, investors can view current popular stocks, as well as People Also Bought.
Where Robinhood App Stumbles
Limited Securities
Mutual funds and bonds aren’t supported. Robinhood also lacks an automatic dividend reinvestment program, which means dividends are credited to accounts as cash rather than reinvested in the security that issued them. The company has said it hopes to offer this feature in the future.
One Account Option
For investing, Robinhood supports only individual taxable accounts (often called brokerage accounts; you can learn more about these accounts here). For most investors, investing through a taxable brokerage account should come only after they have invested 10% to 15% of their income for retirement in a tax-advantaged account like a 401(k) or IRA.
Extremely Limited Account Types
Robinhood is not a full-service brokerage, so don’t expect the same level of account types that you’d find at rivals. In fact, expect just one account type, the individual taxable account. So no IRAs, no joint accounts, no 529 accounts, etc.
Customer Support
Many brokerage customers understandably expect phone support, and they won’t find it here. Robinhood’s customer support is almost exclusively done through email. The company does not publish a phone number. It does have a useful and well-organized help center online, and the website is easy to navigate and transparent.
Robinhood’s customer support is fine if you have one of the many questions that’s easily answered by the prepackaged set of responses on the broker’s help page or that is available by the chatbot. Move farther afield, however, and you may be hard-pressed to find a solution without emailing customer service. Those needing an immediate response via phone may have to search a bit to find the number, however.
Limited free research and educational components
You can’t have it all when you’re not paying anything for trades. It really shows in the limited free research and educational components being offered at Robinhood. This is not a killer for the right kind of investor – savvy and experienced – but may be a turnoff to newer investors who often need more direction from their broker. Of course, as part of its Gold program, the broker provides ratings from Morningstar, while offering a feed of news and analysis from popular websites for each stock. And the app does offer some basic charting functionality too. But it’s just not nearly at the level of full-service brokers such as Charles Schwab or E-Trade. Both of these also offer solid free education for investors who want to power up their skills and knowledge.
Selling your order flow
So here’s one of the secrets to how Robinhood can offer you free trades. The company is selling its order flow to high-frequency traders so that they can anticipate the market. This upfront information lets them get better prices on their trades from people like you. That is, Robinhood’s practice allows these traders to front-run you (or other clients) to squeeze out pennies (or fractions of pennies) on each trade. They can buy from you at a lower price and sell to you at a higher price. For long-term investors, this is not a substantial issue. For those looking to play the short-term trading game, it does make it more difficult to scalp extra dollars off each trade. Source: bankrate.com
How Robinhood App Makes Money From You
With most fees for equity and options trades evaporating, brokers have to make money somehow. Fees and commissions are visible to customers, but there are other methods that you cannot see. Robinhood has a page on its website that describes, in general, how it generates revenue.
Robinhood App Revenue Sources
- Interest on cash: Like most brokers, Robinhood generates interest income from the difference between what you are paid on your idle cash and what they can earn on customer cash balances. Robinhood clients, once they make it off the waitlist and design their own Mastercard debit card, can earn modest interest on their uninvested cash, which is swept to its network of FDIC-insured banks. On several pages of the website, the cash feature is labeled “Coming Soon.”
- Payment for order flow: Quite a few brokers generate income by accepting payment from market makers for directing their customer’s equity and options orders to those trading venues. This is called payment for order flow (PFOF). It is worth repeating that this appears to be a major revenue stream for the broker. Robinhood is selling your order flow – the right to fill your order, to wholesale market makers. Thus, Robinhood is not really free. That said, in today’s world of $0 trades, nearly all brokers engage in the same practice of accepting payment for order flow.
- Stock loan programs: Stock loan programs generate revenue for brokers when the stock held in your account is loaned to another trader or hedge fund, usually for the purposes of selling that stock short. Robinhood retains all the income it generates from loaning out customer stock and does not share it with the client.
- Margin interest: Robinhood’s margin interest rates are lower than average, though using margin requires paying $5/month for their Gold program whether you are using margin or not.
- Portfolio Margining: Portfolio margining, which can lower the amount of margin you may need, is not offered by Robinhood. Source: investopedia.com
Fees you should know About – Robinhood App
To be perfectly clear, Robinhood doesn’t charge commissions for stock, ETF, and options trades placed through its online and mobile platforms. However, that doesn’t mean that Robinhood is completely fee-free; there are some things you might still have to pay for. Here a few of the more common charges you might face:
- Returned check or ACH fee: $9
- Domestic/International wire transfers: $25/$50
- Domestic overnight check delivery: $20
- Paper statements: $5
- Paper trade confirmations: $2 (Source: fool.com)
How to open a Robinhood App Account
Opening a Robinhood Account is user-friendly, fast and fully digital. It takes around 10 minutes to submit your application, and less than a day for your account to be verified.
Robinhood App Account – US Requirements
- 18 or older
- have a valid social security number
- have a legal US residential address
- US citizen, US permanent resident, or have a valid US visa
To complete your Robinhood account:
- Fill in your personal information, such as your address, date of birth and social security number.
- Answer short questions relating to your trading experience.
- Verify your identity with your driver’s license / identity card / passport. A photo of the documents taken with your mobile will do.
Login and security
Robinhood provides a two-step login, which is safer than using only a username and password.
Search functions
The search functions are great in that you will always find the assets you are looking for. You can do a simple search in the search bar, or search based on tags. If you click on a stock, you can see some related tags under the ‘Collections’ tab, e.g. the name of the sector where the company is active. If you click on a tag, you will see all stocks that share the same tag. It is a helpful feature if you want to make side-by-side comparisons. For example, if you are interested only in social media companies, you just click on that tag and you get the full list.
Placing orders
You can use the following order types:
- Market
- Limit
- Stop Loss
- Stop Limit
- Trailing Stop
You can also set good-till-day (GTD) and good-till-canceled (GTC) order terms. Furthermore, you can find a very useful estimated cost tab when you place an order.
Alerts and notifications
You can set alerts and push notifications for a large variety of events:
- Dividends payments
- Price movements
- Money transfers
- Earnings announcements
- Corporate actions
- Orders
In their regular earnings announcements, companies disclose their profits or losses for the period. Corporate actions include events like stock splits or corporate mergers.
Portfolio and fee reports
Robinhood’s web trading platform has an easy-to-understand portfolio and fee report function. You can view the average cost of and the returns on your stock portfolio. You can also find a pie chart showing how diversified your portfolio is. Source: brokerchooser.com
Robinhood App – Markets and Products
Robinhood’s product portfolio is limited, as it offers only stocks, ETFs, options and cryptos. Additionally, assets are limited mainly to US markets. Robinhood has a great selection of cryptocurrencies, but its stock and ETF product lineups lag behind.
Stocks and ETFs
Robinhood gives you access to around 5,000 stocks and ETFs. The majority of these stocks and ETFs are listed on major US stock exchanges. You can also find some non-US stocks, which are provided through ADRs rather than indirectly through foreign exchanges. Robinhood is not transparent in terms of its market range. If you are planning to trade small US stocks or non-US stocks, it is best to contact Robinhood’s customer support first.
A further note about low-priced stocks or “penny stocks”: these are stocks that have a price of less than $5 and are usually issued by small companies. Penny stocks are more volatile and therefore riskier.
Options
Within options, you can only trade stock and stock index options. These options are not available for all stocks, only for bigger ones.
Cryptos
You can trade a broad selection of cryptos at Robinhood. You can find major cryptocurrencies like Bitcoin or Ethereum, but also the minor ones like Monero or Stellar. Source: brokerchooser.com
Robinhood App Q&A
Is Robinhood App completely free?
For commissions, the short answer is yes. Technically Robinhood is free and charges $0 for stock, options, and cryptocurrency trades. However, certain features require a $5/mo subscription to Robinhood Gold and Robinhood does accept payment from third parties for order flow (PFOF).
How do I get my money out of Robinhood without paying any fees?
First, sell all your stocks and any other positions. Next, transfer all your cash via ACH to your bank account (ACH transfers are free). Finally, contact Robinhood to close your account. If you transfer stock holdings to another broker, Robinhood will charge you a $75 ACAT fee.
Can I day trade stocks using Robinhood?
You need at least $25,000 in your account to day trade with Robinhood (all brokers require at least $25,000 by law), otherwise your account is restricted to just three day trades every rolling five business days. That said, even if you had $25,000, I wouldn’t recommend Robinhood. Daytrading is risky business.
Can I buy and sell Bitcoin with Robinhood?
Yes. Robinhood currently offers seven tradeable cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Dogecoin (DOGE), Ethereum Classic (ETC), and Bitcoin SV (BSV). Ten additional cryptocurrencies can be added to any watch list.
Can you trade penny stocks with Robinhood?
No. You cannot trade penny stocks on Robinhood. Over-the-counter (OTC) securities are not supported. However, Robinhood customers can trade company shares listed on the NASDAQ and NYSE whose stock price is currently below $1.00.
Can you trade international stocks with Robinhood?
Yes. Robinhood offers customers the opportunity to buy and sell over 250 popular American Depositary Receipts (ADRs), including shares in companies such as Adidas (ADDYY), Tencent (TCEHY), and Nintendo (NTDOY).
Is Robinhood App safe?
Like its competitors, Robinhood is regulated by the SEC and is a registered member of the SIPC and FINRA (CRD #165998) in the United States. The company has its headquarters in Palo Alto, California, and has had no reported security breaches since its launch in 2013.
Do any of Robinhood’s competitors offer $0 trading?
Yes. TD Ameritrade, E*TRADE, TradeStation, and Charles Schwab, among others, all offer $0 stock trades. Compare Robinhood vs TD Ameritrade.
Can I trade immediately after opening my Robinhood account?
When you open and fund an account with Robinhood, the broker is unique in that it provides you access to up to $1,000 in funds, available immediately for trading while your ACH transfer deposit processes. Under normal ACH transfers, the average processing time is two to three days. Source: stockbrokers.com
Is Robinhood App right for you?
If a streamlined trading platform or the ability to trade cryptocurrency are important to you, Robinhood is a solid choice. But now that plenty of online brokers have joined Robinhood in offering commission-free trades, casual investors can afford to shop for the broker that suits them best.
Robinhood App can be the right choice:
- Trade for free: Robinhood not only offers free web- and app-based stock trading, but it also offers free options and cryptocurrency trading.
- Simplicity: Robinhood’s trading platform was designed with simplicity in mind. It’s not packed with features, but what it lacks in features, it makes up for in user-friendliness.
- Trade cryptocurrencies: Few brokerages allow investors to trade cryptocurrencies, but Robinhood allows clients to trade 17 different cryptocurrencies in the same trading app.
- Newer investor with limited capital: With the ability to buy fractional shares of stock with as little as $1, Robinhood is a good choice for investors who are just getting started.
- Savings and brokerage account in one: Robinhood essentially treats clients’ uninvested cash as a high-yield savings account, with an APY that rivals even the best online savings banks.
- Don’t want to invest in mutual funds or bonds: Robinhood is excellent for stocks, ETFs, options, and even cryptocurrencies, but if you want to hold mutual funds or individual bonds in your brokerage account, you’re out of luck.
- Just want a standard brokerage account: In addition to not offering mutual fund investing, Robinhood doesn’t offer retirement accounts such as IRAs. You also cannot open a trust, partnership, Coverdell, 529, custodial, or any other type of brokerage account through Robinhood. Source: fool.com
Robinhood App – Bottom line br
Robinhood isn’t perfect. However, investors who know what they want will likely be able to overlook the faults in exchange for the huge advantage to make free trades.
- Free trading can be great for beginners. It allows newbies to roll up their investing returns faster.
- Lacking in Support – Newer investors may want more support, research and education.
- Robinhood may still be a great choice to simply get your trades executed. There are many resources available online for research and trading information.
Robinhood is a great way to get your feet wet with investing with no fees. The platform is regularly adding new features, including the web-based platform, options trading, and crypto. While it is not powerful enough to be your only investment platform, it does work well for your individual stock trading account. It’s far from perfect, but it is a great value. Face it, free is hard to beat.
