Robinhood Review

Advantages and disadvantages of Robinhood. What are the good and bad things/features of the brokerage company? What are Robinhood benefits?

Overview of Robinhood’s Investing Cons and Pros

Robinhood used to be one of the fastest growing app-based brokers in terms of popularity, especially among the millennial crowd. Young professionals, who often have less money to sock away, were attracted to Robinhood’s free trading platform and ease of use. If you want to learn more about trading with Robinhood, this article will go over the broker’s pros and cons.

Robinhood Pros:

Free Trades

Without a doubt, the biggest pro drawing people to Robinhood is their ultra-low-cost model. The app supports trading in U.S. stocks (except those listed on the OTC), ETFs, options, and some cryptocurrencies, all completely commission-free.

Robinhood also doesn’t charge any account activity or maintenance fees, which makes their basic platform entirely free to use. This is great from the perspective of day traders, who would otherwise rack up multiple commissions a day, as well as long-term investors.

Robin Hood Free Stock

Robinhood Gold

Day traders and those looking to use margin should consider paying a small $5 monthly fee to upgrade their account to “Gold” status. A Robinhood Gold account is basically a margin account with some additional perks, such as instant access to deposits, more stock research, and extended hours trading. With your $5 subscription, you also automatically have access to $1,000 of additional investing power free of interest charges. Any amount that you borrow above the initial $1,000 incurs a flat 5% interest charge, regardless of the margin amount.

Robinhood Gold is an attractive value proposition for those traders that need and frequently use borrowed capital. The $60 annual subscription comes out to the equivalent of a 6% interest charge on the $1,000 of capital it gives you access to, and this doesn’t even consider the other Gold perks. Additionally, the 5% interest charge of borrowings above the initial $1,000 is relatively low for the industry. Looking at the competing low-cost broker, Firstrade, for example, we see margin rates that start at 9.75% and only decrease to 5.5% once you borrow a hefty amount.

Ease of Use and Customization

Besides free trading and low margin rates, another pro of Robinhood is its simple design and user-friendly interface, which make the app a breeze to navigate and trade with. The main screen shows you your account’s return history in chart form with your active positions and watch list immediately below.

Clicking into any of these tickers will bring you to the stock’s quote page with all the generic details you would expect (stock chart and prices, volume, market cap, recent trading range, and company profile). This is also where you can place trades for that security using the below easy to read screen. Any account settings and related details, such as banking connections, tax documents, and trade history, can be easily accessed by a pull-out menu to the left of the screen.

Robinhood Cons:

Company Financials, Research Reports, and Charting Tools

Although a pro in many ways, Robinhood’s simple design leaves a lot to be desired in terms of functionality and the more advanced features commonly found with full-service brokers. To be fair, we can’t expect too much from a free service, but nonetheless, Robinhood’s lack of technical charting tools, research data, and stock screeners leaves a lot to be desired on their trading platform. As long as you are resourceful and fine with grabbing this information from any of the free sources you can find online, this con shouldn’t be a deal breaker though.

Robin Hood Margin Rates

Investment Offerings

Robinhood offers a decent amount of investment options, but the absence of mutual funds will pose a problem for many investors. Mutual funds form the backbone of many balanced, long-term portfolios, and so not being able to buy them will force Robinhood investors to substitute with ETFs or to take their brokerage accounts elsewhere. They also don’t offer any bonds on their platform, which is a big con for asset allocation blends, although this can be partially rectified by using fixed income ETFs.

Account Types

Besides limited security offerings, Robinhood also has a sparse selection of account types to choose from. They currently offer only individual taxable accounts, so those looking to save for retirement via an IRA will need to look elsewhere. This makes Robinhood unsuitable for a large number of investors since many people only have investments in a retirement account.

Robinhood Top Competitors

Customer Service

Robinhood has plenty of self-help articles to answer common questions, and for issues that can’t be resolved there you can send them a message in app. They generally respond to inquiries within a day or two, but in many cases we noticed the responses seemed as if they were “pre-canned” and didn’t really address the nuances of our question.

Pros And Cons of Robinhood Summary

In conclusion, Robinhood may be a good fit for you if you are a cost-sensitive day trader that focuses on stocks, ETFs, and options. Their easy to use app, low-cost model, and attractive margin rates make the app ideal for these types of traders.

The ideal Robinhood investor is also comfortable navigating different sources on the internet to conduct in depth market research in order to bridge the gap created by Robinhood’s lack of advanced account features and tools.

If you are investing for retirement, place a lot of value on customer service and having a full-service brokerage account with all the “bells and whistles”, Robinhood may not be a good fit for you.

Robinhood Investing reviewed by Rating: 3