Robinhood Evaluation: Professionals, 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 the most effective 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 reputation lately, however it’s not the fitting platform for everybody. Although it markets itself primarily towards new traders, the options supplied—together with the constraints of the app—make Robinhood extra appropriate for seasoned, lively merchants who’re extra assured of their investing abilities and fewer depending on customer support and investor sources.

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 understood for its easy-to-use, streamlined platform and attraction to traders new to the funding recreation. Its Robinhood Retirement affords IRAs, each conventional and Roth.

Robinhood execs & cons

Professionals

• Doesn’t require a month-to-month charge or account minimal to open or preserve a brokerage account (apart from Gold account).
• Straightforward to make use of.
• No overseas transaction, inactive account, switch or card alternative charges.
• Gives 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 choice.
• Permits fractional share buying and selling.
• The Gold tier subscription affords a really aggressive 5.0% APY in your uninvested brokerage money (it’s 1.50% with out Gold).

Cons

• Doesn’t supply joint brokerage or custodial accounts.
• A Gold tier subscription, which offers analysis and information that’s usually free at most brokerage companies, prices $5 monthly.
• 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 recent traders.
• Permits cost for order stream, lowering a number of the advantages of commission-free buying and selling.
• Buyer assist is restricted: Robinhood doesn’t supply direct telephone assist or reside chat until requested by way of the app or its web site.
• Restricted instruments for buying and selling, analysis, and training.

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 assist, dealer investor instruments and academic sources.

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 isn’t a per-contract charge, as is widespread with most brokers.The app additionally seems to encourage margin buying and selling. This isn’t a follow advisable for brand new and small traders, because it magnifies the potential for funding losses.

Robinhood shouldn’t be an optimum platform for the sort of long-term, buy-and-hold index investing technique advisable by nearly all of monetary advisors and adopted by most traders.

How did we evaluate Robinhood?

When evaluating Robinhood we thought of the next components:

• Obtainable accounts and investments.
• Commissions and costs.
• Ease of platform use.
• Options and instruments supplied.
• Customer support availability.
• The forms of traders finest served by this platform.
• Firm popularity.
• Particular or uncommon options.

Robinhood in-depth

Commissions and costs

Robinhood affords commission-free trades of shares, choices, ETFs, and cryptocurrencies. If you buy overseas shares on U.S. inventory markets, also called American Depositary Receipts (ADRs), there could also be a charge 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 charge of $8 per $1 million of principal on promote orders, a buying and selling exercise charge 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 charge 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. Nevertheless, 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 based mostly on prevailing rates of interest whereas the mortgage is in pressure.

Platform and know-how

Robinhood ranks excessive on ease of use as a result of its simplicity. However a part of that simplicity is because of its lack of investing instruments in contrast with many rivals. 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 developments utilizing technical indicators comparable to quantity, transferring averages, and the relative power index (RSI). It additionally affords candlestick, line, and quantity charting.

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

Robinhood is sort of well-regarded by customers of the app. It has a ranking 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 affords 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. However it additionally doesn’t levy a per-contract charge, which is often $0.65 per contract. By waiving that charge, Robinhood makes choices buying and selling somewhat bit extra worthwhile than the competitors.

Cryptocurrency buying and selling: Robinhood affords buying and selling in quite a few currencies, together with Bitcoin and Ethereum. You may start buying and selling with as little as $1, and trades are commission-free.You can even reap the benefits of the Robinhood Pockets to carry your crypto belongings freed from community charges. You’ll maintain and preserve the personal key to the pockets, which is a part of the Polygon and Ethereum networks.

Preliminary Public Choices (IPOs): Robinhood is likely 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 non-public agency earlier than they develop into obtainable on the open market.

Get your first inventory free: If 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 supplied.The reward is value between $5 and $200, however Robinhood clarifies that roughly 98% of contributors will obtain between $5 and $10.

Analysis and training

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

The positioning does present a “Study” part, which helps traders higher perceive methods to use the platform and develop into simpler traders. Furthermore, Robinhood Snacks offers a publication and podcasts to clients with updates on the monetary markets which are “simply digestible.”

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

Customer support and safety

Whereas Robinhood doesn’t present a direct telephone quantity to contact, assist is obtainable by way of electronic mail at [email protected]. You can even use the app or web site to speak or request a telephone name. Robinhood offers a really detailed FAQ web page that may usually reply most questions.

Account safety is offered 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 probably.

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 net functions 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 towards dealer failure for as much as $500,000 in money and securities, together with $250,000 of money. Nevertheless, the protection doesn’t prolong to funding market losses or cryptocurrency positions.

Cellular app

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

Further options

IRA accounts: Robinhood affords 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 let you make investments commission-free and reap the benefits of a custom-recommended portfolio. All investments, besides cryptocurrencies, can be found by way of an IRA account.

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

Robinhood Money Card: Robinhood affords a debit card that gives money again while you buy collaborating manufacturers. It additionally offers you the flexibility to routinely make investments a few of your paychecks in a preselected alternative of shares or cryptocurrencies. You may then earn a bonus of between 10% and 100% in your weekly roundups.

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

Robinhood Gold: Robinhood affords this as a premium plan, for $5 monthly. The plan comes with the next upgrades:

• Skilled analysis from Morningstar.
• Degree 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), based mostly in your account standing.

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

Options to Robinhood

If you’re contemplating Robinhood—or another 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 offers commission-free trades on all investments. However it’s missing in some areas, such because the variety of accounts it affords and the very fact it doesn’t allow you to put money into sure widespread asset lessons comparable to bonds and mutual funds.

Fortuitously, 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 better 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 clients who search telephone assist however doesn’t, for instance, permit cryptocurrency investing. TradeStation, alternatively, affords wider funding and account choices, together with the flexibility to put money into futures.

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

Robinhood popularity

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

For starters, the Higher Enterprise Bureau offers Robinhood its lowest “F” ranking. The nonprofit group cites authorities regulatory motion towards the corporate, in addition to a sample of complaints from clients a few lack of response from buyer assist 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 nice 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 1000’s of harmed clients for offering false or deceptive info concerning its systematic outages in March 2020. It was the biggest monetary penalty ever ordered by the Monetary Business 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 signify actions towards Robinhood by three regulatory our bodies, every for a special infraction.

Steadily requested questions (FAQs)

Is Robinhood for newbies?

Robinhood generally is a good match for starting traders. The corporate is arguably the most effective with regards to making the market extra accessible and is commission-free with most trades. However it does lack the client assist and investor sources of extra conventional brokerages {that a} newbie may have.

What are good options to Robinhood?

In case you’re not sure Robinhood is the fitting funding app for you, there are many options.

For instance, should you’re a brand new investor additionally seeking to accumulate funds to speculate, Acorns is a wonderful alternative. It lets you hook up with a spending account that can spherical up your purchases and switch the turn into your funding account.

In case you’re on the lookout for a better stage of buyer assist, 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 secure?

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

Word that this safety is for dealer failure, not for losses as a result of investing actions.

Are you able to lose cash with Robinhood?

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

How lengthy till you commerce after you open an account?

Normal ACH transfers take as much as 5 days to course of. Nevertheless, with Robinhood Instantaneous Deposits you’re given quick entry to as much as $1,000 whereas your ACH switch is processing.

Not everybody will qualify for Instantaneous Deposits, particularly upon opening a brand new account. In case 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