Robinhood has democratized investing, making it accessible and affordable for people of any age and income. It offers commission-free trading and has pushed many discount brokers to offer free trading as well.
With with , Robinhood is a marketing phenomenon. It has introduced millions of young people to the stock market.At the same time, a litany of controversies surrounds the Robinhood brand.
Robinhood has contributed to a culture that has “gamified” securities trading into something similar to a casino. Robinhood makes investing so easy that some people end up trading beyond their knowledge and financial means.In this post, I’ll explain who should and shouldn’t use Robinhood. I’ll also explain what types of trades and investing work well with Robinhood and what’s better left to other platforms.
Table of Contents
- 耀竣金融配资_在线配资炒股:Quick Look
- 耀竣金融配资_在线配资炒股:Who Should Use Robinhood?
- Where Robinhood Shines
- 耀竣金融配资_在线配资炒股:Where Robinhood Falls Short
- Recent Changes: IRAs, Phone Support, Stock Screeners
- Robinhood’s History of Controversies
- FAQs About Robinhood
Robinhood Review: Quick Look
| Company Name | Robinhood |
|---|---|
| Company Type | Self-directed investment platform |
| Key Features | Frictionless investing (free trades, fractional shares, near-instant access) |
| Downsides | Poor trading platform, limited customer service, ease of trading can be problematic |
| Best For | New investors who want to “learn by doing” at low stakes, buy-and-hold investors who like monitoring their portfolios |
Who Should Use Robinhood?
Robinhood is a self-directed investment platform that opened in 2012. You’re eligible to use Robinhood if you:
- Are at least 18 years old
- Have a valid Social Security number
- Have a legal U.S. residential address
- Are a U.S. citizen, permanent resident or have a valid U.S. Visa
However, as I’ll explain in this Robinhood review, many people shouldn’t use the platform.
It’s great for introducing people to the concept of investing in the stock market and, hopefully, to get them thinking about long-term financial goals. Robinhood lets you buy fractional shares and small quantities without jumping through many hoops. A low barrier to entry and an extremely streamlined user experience help inexperienced investors educate themselves.Advertisement
Robinhood Review: Where It Shines
Robinhood has served an important role in making the stock market accessible to everyone and encouraging a younger generation to consider investing. If you read a Robinhood review that doesn’t mention that fact, it’s probably incomplete.“I’m so glad Robinhood exists, because they changed stock trading in the United States by offering zero-dollar trades,” money expert Clark Howard says. “They made trading affordable for people of any age and any income. Robinhood eventually forced discount brokers to go from discount to free.”
Robinhood’s Advantages
- Zero-commission trades. This used to be a big differentiator. Many other brokerages offer free trades now. But Robinhood deserves credit for pushing the industry into a new era in that regard.
- Accessible for everyone. In addition to zero-commission trades, Robinhood requires no minimum deposit and offers fractional shares, making it easy to invest even in the most expensive stocks without much capital. Also, there are no minimums for investing in cryptocurrency, unlike most other platforms.
- The “easy button” for investing. Opening an account takes minutes. It’s possible to go from downloading the app to trading on the Robinhood platform in less than one hour. Deposits of less than $1,000 are instantly available to use. The charts and information are simple to understand, and it’s easy to make trades. It even syncs with TurboTax to help you do your taxes.
- Intuitive app. Robinhood’s app is the easiest way to “watch” the stock market that I’ve ever seen. It’s intuitive and streamlined, creating a great user experience if you want to monitor stock prices and the performance of your portfolio. It’s also easy to execute simple trades.
- High-yield savings. Robinhood’s spending account currently pays 1.5% variable APY and automatically sweeps uninvested cash into savings. That number rises to 4.4% APY for customers. Robinhood insures your money up to $1.5 million () and offers access to more than 75,000 ATMs.
- Free stock for everyone. Robinhood and says there’s a 1% chance that the stock it credits you will be valued between $50 and $200. You can also get free stock by .
Robinhood Review: Where It Falls Short
The simplicity of the entire Robinhood experience is a double-edged sword. I’ve never experienced such an easy-to-use investment platform. Robinhood has made a clear judgment to prioritize ease of use over almost everything else. If the goal is to attract otherwise-uninterested people to learn more about investing and long-term financial planning, that’s helpful. But several problems arise from its “simple over everything” ethos.“You’ve got inexperienced people without a lot of capital that are engaging in trading activity that can be dangerous to their financial well-being,” Clark said. “You have people who are trading like it’s gambling. To them, it’s like they’re in a giant electronic casino rather than investing in stocks as a long-term financial security.”
Robinhood’s Disadvantages
- Poor trading platform. The stock quotes on Robinhood’s app and website seem to be delayed. The spreads between buy and sell orders for cryptocurrency often are larger than on other platforms. Robinhood’s payment for order flow practices can prevent you from getting the best prices on trades. You can’t place certain types of trades such as . Its options trading function is clunky.
- Lacks basic investment features. Robinhood does not offer access to mutual funds, 401(k) accounts, shorting stocks, futures trading or joint accounts.
- Meager research capabilities. Fidelity Investments, Charles Schwab and TD Ameritrade all offer superior research and educational tools. For example, Robinhood’s watch lists and candlestick charts, which are basic monitoring and research tools for investors, are less customizable and offer less information than other online investment platforms. As most Robinhood reviews point out, it lacks research filters and trading analysis tools.
- Attracts uninformed investors. Robinhood offers the lowest barrier to entry. There are no account minimums and $0 trades. It makes smaller deposits available for immediate trading, and again, its app is extremely easy to use. All these features can serve as a beacon for those who want to eschew research and education and jump quickly into the deep end of the investing pool.
- Encourages more frequent trading. Its app is one of the most intuitive I’ve ever used. The clean, shareable charts of your portfolio performance make it tempting to check the app multiple times per day. It even displays confetti animation when you complete a trade. This can tempt some people into trading more frequently — just for the sake of action.
Recent Changes: IRAs, Phone Support, Stock Screeners
Don’t look now, but Robinhood is starting to grow up. The investment platform has added a steady drip of new features that has it closing the gap with the more established, full-service discount brokers. That gap remains considerable in certain areas. But Robinhood continues to move at a fast pace.IRAs Now Available Through Robinhood
Robinhood recently announced that they now offer IRAs. In conjunction with the launch of IRAs, the company offered a now-expired promotion for a 1% match for contributions from a linked bank account, provided you keep the money in your account for at least five years. This was a nice temporary perk to encourage users to open IRAs.Robinhood detractors can argue that it’s a poor platform to hold a retirement account, as its gamified design seems to inspire active trading, and the best retirement strategy is to create a long-term plan and stick to it. However, considering the average user age in the early 30s, it’s possible this feature will encourage people to open and contribute to an IRA who have never done so before.
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Increased Customer Support
I’ve been critical of Robinhood in the past for offering email-only customer support. Those days are over. Robinhood now offers . The procedure for starting a phone call is a little wonky. You have to navigate through the app or the website, fill out information about your question and then request a call. You’ll then get a notification when you’re next in line as well as the number from which Robinhood will call you. But at least you avoid waiting on hold forever, listening to music you’d rather not.Stock Screeners
Robinhood has never been the best investment company for buy-and-hold investors that meticulously research a company’s fundamentals in the vein of Warren Buffet.
Nor has it been great for short-term or swing traders focused on volume, implied volatility and other numbers.Fidelity, Schwab and others still have a huge lead in terms of stock research. But Robinhood is closing the gap significantly with competitor Webull.
It now offers among other additional data.No More Cash Management Account
Robinhood closed its cash management accounts in May 2023. It is still offering interest on uninvested cash held in your brokerage account. Previously, you could stash all your cash in your cash management account, earn interest, invest and spend money through your debit card. Now the Robinhood equivalent of a checking account is separate from your brokerage account.Advertisement
Robinhood’s History of Controversies
1. Access to Options Trading and the Alexander Kearns Suicide
Alexander Kearns, a 20-year-old college student from Naperville, Illinois, on June 12, 2020, after his Robinhood account showed a negative cash balance of $730,165. Kearns had been on Robinhood. His suicide note reportedly expressed disbelief that the platform had allowed him “to get assigned almost a million dollars’ worth of leverage.” News reports after Kearns’ death indicated . But it drew attention to how easy the Robinhood platform made it for new investors to make risky, complicated trades. Robinhood users can access options trades by doing just three things:- Signing up for a gold membership ($5 per month after a free 30-day trial)
- Depositing at least $2,000 in their brokerage account
- Answering a few questions on the Robinhood app about their trading experience
2. Controversial Order Flow Practices
When you buy stock, there must be a seller to complete the trade. Unless you specify your bid price for a stock, a matchmaker of sorts — known as a market maker —will help execute your trade. For popular stocks, the difference — or spread — between buyers’ bid prices and sellers’ asking prices tends to be small. But for more volatile stocks with less trading volume, the spread can be larger.Advertisement
3. Outages During High-Volume Days
Technical and performance issues have plagued Robinhood’s trading platform, especially on volatile, high-volume days. According to , Robinhood experienced outages every month in 2020. That included . An outage on March 2 lasted for nearly 17 hours. The S&P 500 rocketed up nearly 116 points that day — or 3.9%. As stocks surged higher in the wake of the coronavirus crash, Robinhood traders did not have access to their platform.4. The “Robinhood Rally” and the Gamification of Investing
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5. Robinhood’s Involvement in the 2021 GameStop Saga
In January 2021, Reddit users from the Wall Street Bets group loosely organized and created chaos in the stock market when they started buying up shares of the moribund video game retailer GameStop. The price of GameStop’s stock jumped quickly, catching off guard the traders who expected the stock to fall. That forced them to buy more stock to prevent massive losses, causing what’s called . Institutional investors with hundreds of millions of dollars were betting on GameStop to go out of business, essentially. Yet the stock price soared nearly 3,000% in January! This historic event eventually led Robinhood to suspend trading on GameStop, causing a national uproar. Questions arose about whether the fintech investment platform was colluding with hedge funds. Because Robinhood accepts PFOF, it gets a bulk of its revenue from the hedge fund world. Some felt that Robinhood was doing this to protect the rich hedge fund companies at the expense of the retail investors — the opposite of the company’s marketing theme (including the very name of the company). When are involved (Robinhood’s default account type), such high volatility even for enormous investment firms. and required companies like Robinhood to set aside hundreds of millions of dollars with the .Advertisement
Frequently Asked Questions About Robinhood
Who Are Robinhood’s Competitors?
Few well-known companies are apples-to-apples competitors to Robinhood. is probably the largest name that offers a similar product. However, you can access many of the same services through most of the traditional discount brokers, some of which are now free (see next question). They tend to offer superior research, customer service, access to more products and better trading platforms.Do Any of Robinhood’s Competitors Offer $0 Trades?
Yes. Charles Schwab and Fidelity Investments offer $0 stock trades. TD Ameritrade, TradeStation and E*TRADE also are among the brokers that now offer free trades.Is Robinhood Completely Free?
Yes, at a certain level of access. Robinhood does not charge a penny for stock, options and cryptocurrency trades. However, Robinhood Gold costs $5 per month after a 30-day trial, and you have to have Robinhood Gold to get access to common investing research tools such as Level II market data and Morningstar reports. And without Robinhood Gold, you can’t trade on margin. Robinhood also accepts payment for order flow (PFOF), so it does make money off of your trades. There are also fees for some services, such as a $75 charge if you want to transfer your portfolio from Robinhood to another brokerage.How Do I Contact Robinhood Customer Support?
Robinhood now offers phone support and live chat every day, 24 hours a day. That’s a huge upgrade considering the average age (and, in theory, experience level) of the traders on its platform. Robinhood’s customer support requires you to be signed into your account in the app or on the website. The company offers some level of support through its social media accounts and via email.Can I Trade Immediately After I Open My Robinhood Account?
Robinhood says it notifies you in less than one hour if your application is approved, at which time you can initiate a bank transfer. Because Robinhood uses instant verification with several major banks, transfers of up to $1,000 are instantly available for investing. The same goes for proceeds of up to $1,000 from selling stocks. Deposits of more than $1,000 take about four or five days to process.Can I Day Trade Stocks on Robinhood?
Yes, but it’s not a good idea. Clark recommends against day trading. Knowledgeable stock market veterans can lose large sums of money in minutes. Even if you do well, short-term capital gains taxes eat away at your profits. Plus you’re required to have at least $25,000 in your account if you make more than three day trades in a rolling five-day period.Advertisement
Final Thoughts
| Pros | Cons |
|---|---|
| • $0 trades | • Poor trading platform |
| • Frictionless and accessible investing | • Limited research capabilities |
| • High-yield savings | • Too easy for inexperienced people to place risky trades |
