Robinhood Evaluation: Execs, Cons, and If It's The Proper Platform for You

Robinhood is seemingly good for these seeking to delve into inventory trades, exchange-traded funds (ETFs), and crypto buying and selling, all on one platform. It has an easy-to-use cell app and fee-free service, and is ceaselessly ranked as probably the greatest on-line brokers.

On this evaluate, we’ll be weighing the details that can assist you decide if Robinhood is an efficient match for you.

TIME’s Take

Robinhood has grown steadily in recognition in recent times, however it’s not the best platform for everybody. Although it markets itself primarily towards new traders, the options provided—together with the restrictions of the app—make Robinhood extra appropriate for seasoned, lively merchants who’re extra assured of their investing expertise and fewer depending on customer support and investor assets.

What’s Robinhood?

Robinhood is an funding platform providing commission-free buying and selling of shares, ETFs, cryptocurrency, and choices—all by way of a cell app or web site. The corporate is thought for its easy-to-use, streamlined platform and attraction to traders new to the funding sport. Its Robinhood Retirement provides IRAs, each conventional and Roth.

Robinhood execs & cons

Execs

• Doesn’t require a month-to-month price or account minimal to open or keep a brokerage account (apart from Gold account).
• Straightforward to make use of.
• No international transaction, inactive account, switch or card alternative charges.
• Provides commission-free crypto buying and selling with no markups and markdowns.
• One of many few brokers providing entry to Preliminary Public Choices (IPOs).
• Excessive-interest money possibility.
• Permits fractional share buying and selling.
• The Gold tier subscription provides a really aggressive 5.0% APY in your uninvested brokerage money (it’s 1.50% with out Gold).
• Robinhood Retirement provides a 1% match every time you deposit funds.

Cons

• Doesn’t supply joint brokerage or custodial accounts.
• A Gold tier subscription, which gives analysis and information that’s typically free at most brokerage companies, prices $5 per 30 days.
• Doesn’t supply bonds or mutual funds.
• The app encourages lively buying and selling and margin buying and selling, that are high-risk actions for its goal market of latest traders.
• Permits cost for order stream, decreasing among the advantages of commission-free buying and selling.
• Buyer help is proscribed: Robinhood doesn’t supply direct cellphone help or dwell chat except requested by way of the app or its web site.
• Restricted instruments for buying and selling, analysis, and schooling.

Who ought to select Robinhood?

Robinhood is finest suited to intermediate or superior traders. This may embody skilled traders who’re much less reliant on buyer help, dealer investor instruments and academic assets.

The platform is designed primarily for lively buying and selling, together with day buying and selling. It’s one of many high brokers for choices buying and selling since there is no such thing as a per-contract price, as is widespread with most brokers.The app additionally seems to encourage margin buying and selling. This isn’t a apply really useful for brand spanking new and small traders, because it magnifies the potential for funding losses.

Robinhood shouldn’t be an optimum platform for the form of long-term, buy-and-hold index investing technique really useful by the vast majority of monetary advisors and adopted by most traders.

How did we evaluate Robinhood?

When evaluating Robinhood we thought of the next components:

• Out there accounts and investments.
• Commissions and charges.
• Ease of platform use.
• Options and instruments provided.
• Customer support availability.
• The forms of traders finest served by this platform.
• Firm fame.
• Particular or uncommon options.

Robinhood in-depth

Commissions and charges

Robinhood provides commission-free trades of shares, choices, ETFs, and cryptocurrencies. While you buy international shares on U.S. inventory markets, often known as American Depositary Receipts (ADRs), there could also be a price of $0.01 to $0.03 per share.

Like all brokers, Robinhood is topic to regulatory charges, that are handed on to traders. These embody a regulatory transaction price of $8 per $1 million of principal on promote orders, a buying and selling exercise price of $0.000145 per share on fairness sells, and $0.00244 per contract on choices sells—the latter two are topic to a most of $7.27 per commerce.

Robinhood, like many brokers, additionally makes use of a cost for order stream system. That will lead to traders getting a less-than-optimal value on each the acquisition and sale of securities inside their accounts. It’s a price construction through which the value of the safety is marked up on buy or discounted on sale, with the “unfold” going to the dealer.

Margin charges

Robinhood’s present margin rate of interest is 11.75% every year on normal accounts. Nonetheless, if you’re a Robinhood Gold member, the margin charge drops to 7.75%.

As is the case with all brokers, margin charges are variable and topic to vary primarily based on prevailing rates of interest whereas the mortgage is in drive.

Platform and expertise

Robinhood ranks excessive on ease of use because of its simplicity. However a part of that simplicity is because of its lack of investing instruments in contrast with many opponents. Among the many widespread instruments that the platform lacks: buying and selling simulators, safety screeners, and alerts.

Robinhood does supply superior charting, serving to you to determine tendencies utilizing technical indicators resembling quantity, shifting averages, and the relative power index (RSI). It additionally provides candlestick, line, and quantity charting.

Extra superior instruments can be found in case you take part in Robinhood Gold. That plan provides skilled analysis from Morningstar, in addition to Stage II market information from NASDAQ in actual time.

Robinhood is kind of well-regarded by customers of the app. It has a score of 4.2 out of 5 stars amongst 4.1 million iOS customers on The App Retailer, and 4.1 out of 5 stars amongst 472,000 Android customers on Google Play.

Vary of choices

Robinhood provides a restricted variety of account sorts and investments. It specializes within the following:

Choices buying and selling: Like most funding brokers, Robinhood costs no fee for choices trades. Nevertheless it additionally doesn’t levy a per-contract price, which is often $0.65 per contract. By waiving that price, Robinhood makes choices buying and selling a bit of bit extra worthwhile than the competitors.

Cryptocurrency buying and selling: Robinhood provides buying and selling in quite a few currencies, together with Bitcoin and Ethereum. You’ll be able to start buying and selling with as little as $1, and trades are commission-free.You may also benefit from the Robinhood Pockets to carry your crypto belongings freed from community charges. You’ll maintain and keep the non-public key to the pockets, which is a part of the Polygon and Ethereum networks.

Preliminary Public Choices (IPOs): Robinhood is without doubt one of the few funding brokers to supply participation in IPOs. IPOs give you a chance to be among the many first to purchase shares in a personal agency earlier than they grow to be obtainable on the open market.

Get your first inventory free: While you open a brand new Robinhood account, you’ll earn a specified greenback quantity, supplying you with the flexibility to choose a present inventory from an inventory of 20 main U.S. corporations. The money worth can be utilized to buy fractional shares in any of the businesses provided.The reward is value between $5 and $200, however Robinhood clarifies that roughly 98% of individuals will obtain between $5 and $10.

Analysis and schooling

Whereas Robinhood is working to enhance on this space, it’s nonetheless trailing the competitors.

The location does present a “Be taught” part, which helps traders higher perceive how one can use the platform and grow to be more practical traders. Furthermore, Robinhood Snacks gives a e-newsletter and podcasts to prospects with updates on the monetary markets which might be “simply digestible.”

Robinhood Gold members have entry to extra superior analysis, however it’s a premium program that comes at a price (see description beneath).

Customer support and safety

Whereas Robinhood doesn’t present a direct cellphone quantity to contact, help is on the market by way of e-mail at [email protected]. You may also use the app or web site to talk or request a cellphone name. Robinhood gives a really detailed FAQ web page that may typically reply most questions.

Account safety is supplied by two-factor authentication (2FA). That requires two sources of verification to signal into your account, making entry by unauthorized events a lot much less possible.

The corporate additionally makes use of a number of industry-standard measures to guard your account and your info. That features hashing your account passwords utilizing the {industry} normal BCrypt hashing algorithm and encrypting delicate info earlier than it’s saved. In the meantime, each cell and internet purposes present safe communication utilizing the Transport Layer Safety (TLS) protocol.

Lastly, Robinhood is a member of the SIPC (Securities Investor Safety Company). This implies you’re protected in opposition to dealer failure for as much as $500,000 in money and securities, together with $250,000 of money. Nonetheless, the protection doesn’t lengthen to funding market losses or cryptocurrency positions.

Cellular app

The Robinhood cell app is on the market for iOS customers on the App Retailer and for Android customers on Google Play. It comes with all of the options of the online model and receives excessive scores from customers.

Further options

IRA accounts: Robinhood provides conventional and Roth IRA accounts. You’ll get a 1% match on each greenback you contribute, together with transfers from different IRAs or 401(ok) accounts.

Robinhood IRA accounts can help you make investments commission-free and benefit from a custom-recommended portfolio. All investments, besides cryptocurrencies, can be found by way of an IRA account.

Excessive-Yield Financial savings Account (HYSA): Robinhood provides an account paying curiosity in your uninvested money. You’ll be able to earn 1.5% APY (4.65% on Gold plan accounts) on balances as much as $1.5 million by way of companion banks. All funds as much as that restrict are insured by the Federal Deposit Insurance coverage Company (FDIC). See extra of the very best HYSA charges.

Robinhood Money Card: Robinhood provides a debit card that gives money again once you buy taking part manufacturers. It additionally offers you the flexibility to mechanically make investments a few of your paychecks in a preselected selection of shares or cryptocurrencies. You’ll be able to then earn a bonus of between 10% and 100% in your weekly roundups.

The Money Card additionally comes with 24/7 cellphone help, entry to 90,000 fee-free ATMs, the flexibility to ship checks, and no overdraft or month-to-month charges.

Robinhood Gold: Robinhood provides this as a premium plan, for $5 per 30 days. The plan comes with the next upgrades:

• Skilled analysis from Morningstar.
• Stage II real-time market information from NASDAQ.
• 4.65% APY on uninvested money (vs. 1.5% on normal accounts).
• Decrease margin rates of interest: 7.75% vs. 11.75% for normal accounts.
• Bigger on the spot deposits (as much as $50,000), primarily based in your account standing.

Robinhood Gold is an elective plan, which you might be free to downgrade out of at any time.

Alternate options to Robinhood

If you’re contemplating Robinhood—or some other funding dealer—you owe it to your self to take a look at different platforms.

Robinhood is an efficient platform for lively buying and selling and gives commission-free trades on all investments. Nevertheless it’s missing in some areas, such because the variety of accounts it provides and the very fact it doesn’t allow you to spend money on sure well-liked asset lessons resembling bonds and mutual funds.

Thankfully, there are many different competitively-priced choices on the market to satisfy traders’ wants. Two examples are TradeStation and J.P. Morgan Self-Directed Investing*. Each of those platforms give customers entry to a higher number of funding and account sorts, together with retirement accounts.

Every dealer excels particularly areas. For instance, Robinhood is best for choices and fractional share buying and selling, whereas J.P. Morgan Self-Directed Investing* is nice for investing in mutual funds and prospects who search cellphone help however doesn’t, for instance, enable cryptocurrency investing. TradeStation, then again, provides wider funding and account choices, together with the flexibility to spend money on futures.

All three are good platforms however may not be proper for all traders. The desk beneath summarizes the key options of every of them:

Robinhood fame

It’s common for brokers to expertise customer support points and regulatory challenges. Nonetheless, Robinhood appears to have encountered greater than the standard quantity, particularly given the platform’s relative youth.

For starters, the Higher Enterprise Bureau offers Robinhood its lowest “F” score. The nonprofit group cites authorities regulatory motion in opposition to the corporate, in addition to a sample of complaints from prospects a couple of lack of response from buyer help and an lack of ability to entry accounts.

Examples of regulatory actions embody the next:

• SEC, December 17, 2020: The Securities and Alternate Fee (SEC) fined Robinhood $65 million for making deceptive statements and omissions in buyer communications and FAQ pages about the way it earns its income. The superb was associated to the cost for order stream referenced earlier on this evaluate.
• FINRA, June 30, 2021: Robinhood was fined $57 million and ordered to pay $12.6 million in restitution, plus curiosity, to hundreds of harmed prospects for offering false or deceptive info relating to its systematic outages in March 2020. It was the biggest monetary penalty ever ordered by the Monetary Trade Regulatory Authority (FINRA).
• New York Division of Monetary Providers (DFS), August 2, 2022: NY DFS imposed a $30 million penalty on Robinhood Crypto for vital anti-money-laundering, cyber-security, and consumer-protection violations.

These fines symbolize actions in opposition to Robinhood by three regulatory our bodies, every for a special infraction.

Regularly requested questions (FAQs)

Is Robinhood for inexperienced persons?

Robinhood generally is a good match for starting traders. The corporate is arguably probably the greatest on the subject of making the market extra accessible and is commission-free with most trades. Nevertheless it does lack the client help and investor assets of extra conventional brokerages {that a} newbie might have.

What are good alternate options to Robinhood?

In the event you’re not sure Robinhood is the best funding app for you, there are many alternate options.

For instance, in case you’re a brand new investor additionally seeking to accumulate funds to speculate, Acorns is a superb selection. It means that you can hook up with a spending account that may spherical up your purchases and switch the turn into your funding account.

In the event you’re searching for a better stage of buyer help, platforms like Constancy and TD Ameritrade are higher decisions. Alternatively, in case your major plan is to commerce cryptocurrencies, crypto exchanges like Coinbase or Gemini could also be a better option.

Is Robinhood protected?

Robinhood is a member of SIPC (Securities Investor Safety Company). Because of this, if it goes underneath, as much as $500,000 of your funds held by the dealer might be protected.

Be aware that this safety is for dealer failure, not for losses because of investing actions.

Are you able to lose cash with Robinhood?

Sure, you’ll be able to lose cash with any funding dealer, particularly in case you interact in sure forms of buying and selling. The issue is magnified once you make investments utilizing borrowed cash (margin buying and selling).

How lengthy till you commerce after you open an account?

Customary ACH transfers take as much as 5 days to course of. Nonetheless, with Robinhood Immediate Deposits you’re given fast entry to as much as $1,000 whereas your ACH switch is processing.

Not everybody will qualify for Immediate Deposits, particularly upon opening a brand new account. In the event you don’t qualify, you’ll want to attend till your ACH switch completes to start making trades.

*INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE