Robinhood Review: Investing Like a Hero
You’ve likely heard the tale of Robinhood, the beloved outlaw who frequented Sherwood forest, stealing from the rich and giving to the poor. As it was, this hero outlaw’s namesake app also has a bit of a legendary reputation.
Robinhood was one of the first investment apps to offer commission-free investing, making it an early fan-favorite among investors. Learn how this app works, its pros and cons, and how it allows for fractional investing in our Robinhood review.
Table of Contents
What is Robinhood?
Robinhood is an investment app that allows users to trade ETFs, stocks, options, and cryptocurrency, all without paying commission or fees. It has a simple, easy-to-use design, and is mobile-first, meaning, it was intended to be used on your phone or tablet. It is available on iOS and Android.
There is no account minimum with Robinhood, and the absence of fees makes it a favorite amongst the millennial set. It was also one of the first online brokers offering free trades without fees and commission, though others have since started to offer this service. Copycats! But perhaps this investment tool’s best features are that it allows users to make fractional trades—in other words, making trades of less than one full equity or share. But more on that later.
How It Works: No Outlaw Experience Necessary
Get started with Robinhood by downloading the app. Open your account by inputting your personal information, from your email to your name, phone number, birthday, Social Security number, even a copy of a photo ID. The app will also ask you questions about your investing experience and your employer. You’ll also need to link your bank account in order to make trades via your Robinhood account, then fund your account. It’s super easy to add a nominal amount to your account. Think $5 or $10.
Once your application is approved (and this may take a few days – Rome wasn’t built in a day. Or maybe it was? We weren’t there.), you can start buying and selling stocks. When purchasing a stock, Robinhood complies a lot of information for you, from a stock’s price over time to recent news stories pertaining to the company, analyst ratings, and earnings. Then you have the option to purchase the stock instantly or place an order for a certain price. If your price is met, then you can set up the app to automatically purchase the stock on your behalf. You can also add certain stocks to your watchlist via the app.
Robinhood Pros &Cons
One of the best features of Robinhood is that it’s essentially free trading, i.e., no fees or commissions on trades. While Robinhood is no longer the only online brokerage to offer this, it’s still a solid contender in this aspect.
Pros: The Good Stuff
Robinhood allows for fractional trading. This is a good thing because it allows beginner investors or those without a lot of capital to get their foot in the door with stocks they may not otherwise be able to afford.
Robinhood also allows for cryptocurrency trading in small amounts, another key for novice investors.
Cons: The Not So Good Stuff
It’s not meant for seasoned or experienced investors, as its tools and resources may be too simple for the advanced set.
It also does not allow for trading of all securities, for example, mutual funds and bonds are not able to be traded via Robinhood.
Robinhood only supports taxable accounts and lacks phone customer support.
Fractional Cryptocurrency Trading
We’ve already talked about how Robinhood allows for fractional trading, a boon to new investors. But the app’s approach to both fractional and cryptocurrency trading is where it really shines.
Robinhood is one of the few online brokers that allow for cryptocurrency trading. Sure, allowing for fractional trading of those securities can help investors purchase securities they may not otherwise be able to afford, but it also helps spread the risk when investing in sectors like cryptocurrency, which is notoriously risky. We’d be remiss if we didn’t include this in our Robinhood review even though crypto may not be on your radar quite yet.
You don’t need to steal from the rich to feed the poor with Robinhood’s investment tools. Instead, you get an easy-to-use platform to grow your investment portfolio that even the mega-cheap Sheriff of Nottingham would approve of. Seriously, the guy’s a miser.
Frequently Asked Questions
Yes. Robinhood is a member of the Securities Investor Protection Corporation (SIPC), which means your funds are protected up to $500,000 and $250,000 in cash. Sensitive information, like your Social Security number, are also encrypted by the app before it’s stored.
Robinhood has no minimum balance, zero fees or commissions on stock, ETFs and options trades, and doesn’t charge to open an account. However, if you upgrade to a Robinhood Gold account, you’ll be required to maintain a $2,000 minimum balance and charges a $5/month fee.
Unfortunately, investing with Robinhood won’t earn you the title of beloved heroic outlaw by stealing from the filthy rich and disseminating much-needed resources to the poor, as its namesake was wont to do. But investing early and regularly with Robinhood or any brokerage firm will get your one step closer to becoming the hero of your own financial future.