Rating:   3-star brokerage firm rating

2018 Robinhood Investing firm review. Brokerage fees and commissions, advantages and disadvantages, minimum requirements and promotion offer for opening a new online account with the discount stock broker.


Robinhood Overview

Robinhood is an app for iPhone and Anroid devices that allows users to trade on several major stock exchanges and other securities markets right from their phones. Robinhood prides itself on being completely free, which it is - it charges no commissions or fees on most trades, nor does it come with a subscription fee.


Robinhood Commissions

InvestmentsCommissions
Stocks and ETFs $0
Stocks and ETFs broker assisted $10
Listed Foreign Securities $50
Euroclear $35
Canadian Stocks $35
Options $0
Crypto-currencies $0
Mutual funds not offered
Treasury Bills, Notes, Municipal and Agency Bonds, Zeros & Strips not offered


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How Does It Work?

Users can create a Robinhood account fairly quickly after installing the free app. Like many apps that synch with your bank account, the longest part of the process is bank verification. Users must also supply additional background information and make their tax disclosures in order to open an account, which is required with any investment platform.

Once your account is set up, you can begin trading immediately. Robinhood does not charge trading fees or commissions to trade U.S. stocks online.

Increased buying power (also called margin borrowing) is available through Robinhood's one premium product, Robinhood Gold. The broker charges a monthly fee for this unique margin service if margin loan is under $50,000. The fee isn’t a percentage of money borrowed, as with a traditional margin service; but rather it is a flat monthly charge. The exact amount is based on account size, which has a minimum of $2,000 to use margin, per federal policy. The minimum fee is $6, and it increases up to $200, depending on the amount you want to borrow. If you borrow more than $50,000, Robinhood charges 5.0% on balances above that level.

Robinhood's interface is very simple. Users are presented with basic performance metrics for their investments, as well as live trading prices and quick news items, upon opening the app.


Robin Hood Investing Review


Robinhood's user interface is intuitive and easy to use. Selecting an individual security opens up charts of that security's performance over the trading day, week, month, year, and the past five years, as well as the user's own returns and news relating to that security.


The Pros

As far as trading individual securities goes, Robinhood has a lot of advantages over its competition. Mainly, the ability to make trades without losing any profitability to trading fees or commissions means that users can make small stock purchases without running up losses to trading fees. This makes Robinhood as well as a higher rated commission-free broker, Firstrade, is ideal for someone who is new to investing, or someone who wants to open an account separate from their other accounts to manage a completely separate risk profile without mingling their Robinhood portfolio with a more balanced one.


The Cons

If you are investing on a scale where transaction fees are insignificant compared to your overall balance, Robinhood does not have much to offer you, especially because it lacks many features that would be considered industry-standard for any mainstream securities trading platform.

For advanced traders, the biggest turn-off will be that Robinhood has no advanced trading platform or tools. Any trading strategy more complex than buy low, sell high (or buy low, and hold until you retire) will simply not work on Robinhood. Serious traders who need more tools in order to make investing worth their time should take a look at TD Ameritrade.

Another big downside is that Robinhood is not a great tool for investing in foreign markets. Some international ETFs can be purchased on Robinhood, but most individual securities initially registered on foreign markets will not be accessible. The unavailability of these markets on Robinhood is not advertised to the user until after the user has already made a search for that security and decided to purchase or sell it. For more serious traders, or even for amateurs or people looking to build their portfolios on their own, this can be a significant limitation.

Robinhood also lacks useful investment research tools. For traders who have access to free research tools at other brokers, this is not a major issue because any security the user wishes to purchase can be researched elsewhere.


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Who Is Robinhood Brokerage Good For?

Robinhood is the perfect app for anyone who either wants to begin investing small amounts of money or who wants to diversify their portfolio using an app that will allow small trades without losing value to trading fees. Robinhood's lack of trading fees will make it especially attractive to users who aren't investing at such a volume that trading fees become insignificant.

The real danger in Robinhood for the new user, however, is that it makes trading too easy. People who are totally new to investing or day-trading will be attracted to the ability to make instant commission-free trades from their phones. But because Robinhood lacks any research tools and allows trades to be ordered (and paid for) with just a couple of clicks, users who are totally new to investing will not be exposed to education about the risks involved with buying and selling ordinary stocks quickly and easily. Such users may be tempted to act impulsively based on transient trends, sudden bad news about a security that is irrelevant to its actual values, or the dreaded "gut instinct" that can turn any trader's overconfidence into a gaping new risk profile.

As tempting as it may be to set up a Robinhood account for a child or grandchild or a friend who has expressed an interest in beginner investing based on the promise of quick, easy, and free, users who don't know what they're doing with their money will not have the tools they need to make informed decisions about new investments.

Robinhood is not a beginner tool (read Best broker for beginners), nor is it a teaching tool. Because of the limitations it suffers in terms of the markets it can access, the research it provides, and the total lack of advanced trading features, it is also not for expert traders (read Best brokerage firms for day-traders). Robinhood is perfect for someone who already has the tools and training they need in order to make informed, risk-sensitive decisions about the securities they purchase, but doesn't have the buying power needed to make trades at a scale that mitigates losses to trading and commission fees.

Robinhood pairs well with ThinkOrSwim (read review) or with any other mainstream securities research tools. Users with access to multiple trading platforms will have no trouble using separate research tools to make a decision that is then implemented, quickly and for free, by Robinhood.

For manually buying and selling individual securities, Robinhood is a great tool because it allows the user to make small or experimental investments for free. But for the trader who is either totally uninformed, or who is an expert, or who is trading at a volume that eliminates trading fees as a serious cost, a full-service investment solution that allows for advanced trades like options and swaps, provides research tools through the same platform, and that isn't limited to major American exchanges is a far better bet.


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Robinhood Investing reviewed by TopRatedFirms.com Rating: 3