The Bottom Line: Robinhood is a free-trading app that's ideal for investors who want to trade stocks, options, exchange-traded funds and cryptocurrency without paying commissions or fees. The service is innovative, cutting out nearly all costs that are typically associated with investing.
Did you know more than 50% of millennials aren’t investing in the stock market? Some don’t invest because they think they need a lot of money. Others don’t invest because they think it’s too risky.
But what if I told you both of these aren’t true? What if I told you there’s a simple way to dip your toes in the investing waters for free without having to risk a ton of cash?
You may have thought there was no such thing as commission-free investing, but think again. Today we’ll talk about Robinhood—a 100% fee-free investing platform.
We’ll dive deep into how it works and the pros and cons, so you can decide if it’s the right investing platform for you.
If you’ve held off on investing because you thought it was too risky or too expensive, stick around—Robinhood may change your mind.
Minimum Investment: $0
Stock Trades: Free
What Is Robinhood?
Robinhood is an online brokerage. But unlike most brokerages that charge $6 to $10 for every trade, Robinhood is 100% commission-free. It doesn’t charge users anything to use its services. That’s right. Zero, zilch, nada.
Vladimir Tenev and Baiju Bhatt—two roommates at Stanford University—founded Robinhood in 2013 out of a desire to make investing accessible to everyone.
The stock market can be intimidating, it's true. But history has proven that, when done responsibly, it's a great way to create wealth. Over the past century, the stock market's had an average return of 10%.
Robinhood’s mission is to “empower the new generation to take greater ownership in their financial future, which... shrinks the gap between the "haves" and the "have nots" and leads to a healthier, more robust global economy.”
A publicly-traded company, today Robinhood is worth $5.6 billion and has over 6 million customers. According to Robinhood, it has saved customers over $1 billion in commission fees since its launch.
Types Of Investments Offered Through Robinhood
Robinhood offers a wide range of investments including:
- Exchange-traded funds (ETFs)
- Cryptocurrencies (including Bitcoin, Ethereum, Dogecoin, Litecoin, and more)
Robinhood offers four different order types to use when trading (the last three automate the buying/selling process):
- Market (you buy the stock at market price).
- Limit (you lock in a particular buy or sell price. When the stock hits that price, it’ll automatically buy or sell).
- Stop Loss (you limit your loss by automatically selling a stock once it dips below a certain price. In this case, the stop loss turns into a market order and it could sell at or around the price you indicate depending on when your order is processed).
Stop Limit (this is similar to a stop loss, but this order turns into a limit once it has reached your desired price. This locks in your trade at a certain rate).
How Does Robinhood Make Money?
Robinhood never takes a commission from investors. Instead, Robinhood makes money three ways:
Interest on cash. When you have cash sitting idle in your investing account, Robinhood keeps the interest earned on that cash.
Robinhood Gold subscriptions. This is Robinhood’s premium account service. Subscribers pay $5 per month and get access to additional trading features (more on this below). Robinhood also earns 5% interest when you trade on margin as a Gold subscriber.
Rebates from market makers. For every $100 you buy in stock, Robinhood earns 2.6 cents from the market maker.
What Do Customers Say About Robinhood?
Robinhood has a mix of good and bad reviews depending on where you look online.
If you look on Google Play, the Robinhood App has a 4.4 out of 5-star rating with over 93,000 votes. It has five reviews on Trustpilot with an average 3 out of 5-star rating.
Most reviews praise the mobile app claiming, “If I would’ve known it was this easy to build a portfolio and make investments... I would’ve started years ago.” Other reviews praise the app’s sleek interface and easy usability.
Most complaints are about Robinhood’s long customer service wait times and problems encountered during the sign-up process. Robinhood does a good job of responding to these negative comments in an effort to help customers have a smooth experience with the platform.
What Makes Robinhood Unique?
While investing platforms are a dime a dozen, here are three ways Robinhood stands out from the pack:
Commission-free trades. Robinhood is leading the industry when it comes to low-cost trades. (I mean, it doesn’t get any better than free.) While they do charge $5 per month for their premium service, many investors use the free version with no problems whatsoever.
$0 account minimums. With no upfront costs and no minimum deposit, you can start investing with Robinhood today—even if you only have $20 to spare.
Access to pre-market and after-hours trading. The stock market is open from 9:30 am to 4:00 pm Eastern. With Robinhood, you get access to the market from 9:00 am to 6:00 pm Eastern. This means you can make trades 30 minutes before the market opens and two hours after it closes.
Crypto investing. First, many brokerages don’t offer cryptocurrency investing at all. And those that do, charge trading fees. With Robinhood, you can trade cryptocurrency commission-free. (If you use a site like Coinbase to trade crypto, you’ll pay anywhere from $0.99 to $2.99 per trade.) This market also never closes, so you can trade crypto 24/7.
What Are The Benefits Of Investing With Robinhood?
So, now that you know what makes Robinhood unique, let’s talk about some benefits you get when you invest with Robinhood.
Thanks to Robinhood Instant, you don’t have to wait three business days for your money to transfer from your bank to your Robinhood account.
All transfers up to $1,000 are available instantly. (This means you can act on a stock market move whenever you see fit.)
The same goes for trades. Typically after you sell a stock you have to wait three days for the transaction to clear. With Robinhood Instant, you can go ahead and purchase new stock without having to wait.
Note: Robinhood Instant doesn’t apply when withdrawing money from Robinhood. Legally, you have to wait three business days for funds to transfer from Robinhood to your bank.
Robinhood Gold is a premium service that “supercharges” your Robinhood account. It costs $5 per month and is best for experienced investors.(This higher instant deposit limit is based on your account balance. See the chart below for details.)
In addition to all the great benefits you get with a regular account (like fee-free trades and crypto investing), you also get:
The ability to invest on margin. (You can borrow up to $1,000 on margin interest-free. After that, Robinhood takes 5% interest. Not sure what margin means? Read our FAQ section below.)
Professional research from Morningstar. (Morningstar publishes reports on 1,700 stocks. These reports cover a comprehensive analysis of each company and are designed to help investors make informed decisions.)
Level II Market Data from Nasdaq. (See multiple bids and asks for any given stock using Level II Market Data.)
The mobile app is sleek and easy to use. Robinhood started as an iPhone app. It launched an Android version of its app in 2015 and a desktop version in 2017.
Regardless of which platform you use, Robinhood has a clean interface that’s simple to navigate.
Stay up-to-date on all the latest financial news with this 3-minute daily newsletter—delivered straight to your inbox. Robinhood deems this service “digestible financial news.”
Don’t want more emails junking up your inbox? Robinhood Snacks also has a daily podcast where financial experts breakdown three top business stories in 15 minutes.
Robinhood Trading Information
Customers once voiced concerns over Robinhood’s lack of trading information.
In the past, customers had to use other websites to get a clear analysis of a company’s past and present performance. Robinhood addressed these concerns by fleshing out its educational tools.
In addition to Robinhood Snacks (mentioned above), every stock comes with:
5-year stock price history (shown in a line graph or candlestick chart)
You’ll also find recent news articles for every stock in Robinhood.
Robinhood Cash Management is essentially a savings account that will be built into your Robinhood account (there won’t be a separate product you need to sign up for).
Rumor has it this account will earn 3% interest—better than most interest rates on the market today.
What To Watch Out For
So, what should you watch out for with Robinhood? There aren’t many drawbacks, but here are a few things that might trip up new Robinhood customers:
It’s not for day trading. Robinhood is for active traders, yes, but you can’t day trade unless you have a minimum equity balance of $25,000. A lot of people join the platform thinking they can make multiple trades per day, but this against federal regulation.
Robinhood Crypto isn’t available in all 50 states. Robinhood is slowly rolling this program out across the country. It’s currently available in 39 states. Also, not all cryptocurrencies are available through Robinhood—just the popular ones.
Pros & Cons
Robinhood is a free-trading app that's ideal for investors who want to trade stocks, options, exchange-traded funds and cryptocurrency without paying commissions or fees. The service is innovative, cutting out nearly all costs that are typically associated with investing.
How Do I Get Started With Robinhood?
Setting up your Robinhood account is an easy 5-step process that takes less than 10 minutes.
Click Get Your Free Stock. (This is a current promotion and may not be around forever.)
Create your username and password.
Fill out your account information including your name, address, date of birth, Social Security number, citizenship, marital status, and employment status.
Link your bank account, deposit funds into Robinhood, and get started!
Below are answers to some popular questions about Robinhood.
Is Robinhood safe?
How do I contact Robinhood by phone?
What does it mean to invest on margin?
Is Robinhood good for beginners?
Does Robinhood affect my credit score?
Should You Use Robinhood?
Robinhood makes it easy to jump in the investing game with little experience. They take the intimidation out of investing through commission-free trades, $0 minimum account balance, and a streamlined user interface.
Plus, you’re not limited to just stocks. Robinhood offers options, ETFs, and cryptocurrencies—all commission-free.
You can set up an account today, deposit funds instantly, and start making smaller trades without worrying about fees eating up your investments.
If you follow the media and have certain “hunches” about the stock market, for example, you can easily try them out in Robinhood with a small number of stocks.
Because of this, Robinhood is ideal for active investors. If you’re looking for long-term investing where your portfolio is automatically diversified for you, you may want to look into another service like Robinhood or Acorns.
Have questions about Robinhood we didn’t answer? Drop them in the comments below.