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Robinhood Review | Pros, Cons & Alternatives (2021)

RobinHood

8.8

Fees & Costs

10.0/10

Minimum Investment

10.0/10

Ease of use

8.0/10

Account Opening

8.0/10

Beginners

8.0/10

Pros

  • Free
  • Crypto-friendly
  • Simple and straight forward

Cons

  • Web based version needs improvement
  • No retirement accounts
Disclosure: Please note that this article may contain affiliate links

Free and investing don’t go together. Usually, there are high commissions or at least management fees, not to mention hidden fees that take away from your profits.

Robinhood set out to be different.

They were the first advisor to offer free trades (no commissions) and they also don’t charge a management fee.

Robinhood is primarily a mobile app, but they offer web trading too making it great for new investors to try their hand at investing.

Check out my review to see if it’s a good robo-advisor for you.

Crypto friendly
Account Minimum
$0
Management Fee
0.00%
Portfolio
ETFs,‎ Stocks, Options and Crypto
Supported Accounts
Individual, Joint, Trusts, custodial accounts and IRA
Rebalancing
Tax Loss Harvesting
Fractional Shares
Automatic Deposits
SRI
Human Advice
Best for
Beginner investors who are interested in a free service which let's you invest in options and trade crypto currencies.
Summary
RobinHood is a free mobile app that lets you invest in stocks, ETFs, options and cryptocurrencies. It is designed for young investors who looking to get their feet wet.
Review
-
Current Promotion
-
Crypto friendly
Account Minimum
$0
Management Fee
0.00%
Portfolio
ETFs,‎ Stocks, Options and Crypto
Supported Accounts
Individual, Joint, Trusts, custodial accounts and IRA
Rebalancing
Tax Loss Harvesting
Fractional Shares
Automatic Deposits
SRI
Human Advice
Best for
Beginner investors who are interested in a free service which let's you invest in options and trade crypto currencies.
Summary
RobinHood is a free mobile app that lets you invest in stocks, ETFs, options and cryptocurrencies. It is designed for young investors who looking to get their feet wet.
Review
-
Current Promotion
-

What is Robinhood?

Robinhood is the robo-advisor for young people who love technology and all things free. It’s a robo-advisor that offers unique trading opportunities with little cost. It doesn’t have all the bells and whistles you’ll find at other robo-advisors, but sometimes simplicity is best, especially when you’re just starting out.

If you want a simple interface, down-to-earth jargon used, and straightforward choices, you’ll love what Robinhood offers. If you’re an experienced investor looking for robust research, charting, or rating options you may want to look elsewhere. This one focuses on the beginner – making it easy for anyone to trade and keep the profits in their pockets.

How does it work?

Account opening

Opening an account is as simple as downloading the Robinhood app completing the application. As I stated above, there’s no minimum balance required, so you can open an account with as little or as much as you want. It may take a few days to get approved – it just depends on what Robinhood needs from you.

Deposit and withdrawal

You can set up recurring deposits or make manual deposits on your own time – you choose. If you choose automatic deposits, you can set them up monthly, bi-weekly, weekly, or quarterly. Once you link your checking account, you can also shoot money over whenever you have extra money to invest.

If you deposit $1,000 or less, you get immediate access to it. If you deposit more than $1,000, it may take up to 5 business days to be available.

You can withdraw funds at any time, but if Robinhood must settle assets to withdraw the funds, there is a two-day settlement period before they can initiate the withdrawal. From there, it may take a few days for the funds to transfer. You can withdraw up to $50,000 per business day.

Interface

As I stated above, Robinhood is simple, and its interface shows it. This is great for beginners that don’t want to be overwhelmed with too many choices or features. Robinhood is a mobile-first broker, so they offer most features on the app, but you can get plenty of features on the website too if you prefer. While you can’t customize your home screen, it’s clean and simple to read. You can also set up custom alerts so you get the information you need instantly.

Trading options

Robinhood only offers taxable accounts, which is a downside for some that are looking to start their retirement account.

What can you trade?

Here’s where Robinhood shines – they don’t offer just your typical assets. You can trade stocks and ETFs, which are normal for robo-advisors. But you may also trade options and cryptocurrency which is what sets them apart.

Here’s a little more detail. You can’t trade penny stocks or sell stocks short (only long positions). You can trade multi-leg options, but simple strategies. You can trade fractional shares, which is great for beginning investors who don’t have enough to buy a full share but want to invest.

Costs

All trades are commission-free and there’s no account management fee. But like any robo-advisor, there are other fees you should be aware of:

  • $75 outgoing wire fee
  • $25 domestic wire fee
  • $5 paper statement fee
  • $22.10 per $1,000 sold regulatory trading fee

Plus, if you using up for Robinhood Gold, you pay $5 per month.

Additional features

Cash Account

This is one of Robinhood’s unique features – a cash management account. Not only do you earn interest, but they provide a debit card that you can use to pay your bills, or withdraw cash from one of the 75,000 free ATMs.

Customer service

Robinhood customer service is by email only. You can send in your questions or concerns any time of day or night. They do, however, have a robust help page with answers to many of the most frequently asked questions.

Research

If you don’t pay for Robinhood Gold, your research options are there, but limited. They offer analyst ratings and earnings information including access to earnings calls. If you pay for the Gold program, you get access to more robust third-party research, but that’s best reserved for experienced investors making active trades.

Education

For an app geared toward beginners, the education portion is lacking. However, there are articles and a few three-minute podcasts to educate investors.

Robinhood Gold

This is Robinhood’s premium account that’s better for experienced investors. As I said above, the basic account is basic but great for beginners. The Gold program provides Morningstar research, access to a margin account, and access to extra trading hours outside of normal hours.

Tutorial

RobinHood Pros and Cons

PROs
Free, no commissions on trades, easy to understand user-interface
CONs
While the app is sleek and clean, the web platform is outdated and lacking
Simple and straightforward design makes finding companies and prices super easy
Slower customer support than M1 Finance
Ability to trade cryptocurrencies
If you’d like to perform any research or technical analysis, you’ll most likely have to use other platforms outside of Robinhood
Free stock when you send a referral link or sign up using someone else’s
They don’t offer retirement accounts
PROs
Free, no commissions on trades, easy to understand user-interface
Simple and straightforward design makes finding companies and prices super easy
Ability to trade cryptocurrencies
Free stock when you send a referral link or sign up using someone else’s
CONs
While the app is sleek and clean, the web platform is outdated and lacking
Slower customer support than M1 Finance
If you’d like to perform any research or technical analysis, you’ll most likely have to use other platforms outside of Robinhood
They don’t offer retirement accounts

FAQ

Is Robinhood good for beginners?

Robinhood is good for beginners that don’t mind making their own trading decisions. Robinhood isn’t like other robo-advisors that put together a portfolio and give you little choice in your investment options. Instead, you choose the exact investments and execute the trades. You can monitor your portfolio on the app, like a traditional robo-advisor, but if you want to make changes, you make them, not the robo-advisor.

Who is Robinhood best for?

Everyone wants to know, which is the right robo-advisor for them. Robinhood is best suited for the beginning investor looking for a taxable account. Robinhood doesn’t offer retirement accounts, but retirement accounts are best as a passive investment and Robinhood focuses more on active management. It’s great for beginners looking to get their feet wet in the market.

How much do you need to use the Robinhood margin account?

As with all robo-advisors or brokers for that matter,  you must have at least $2,000 invested to buy on margin. This is a Financial Industry Regulatory Authority rule, not a Robinhood rule.

How much does the Robinhood cash management account pay?

If you have cash in the cash management account, it earns 0.30% APY. It’s FDIC insured and comes with a free debit card that you may use anywhere Visa is accepted. You may also use the card to access your cash at one of the 75,000 free ATMs available.

Does Robinhood assess your portfolio?

No, the assessment is on your shoulders, but Robinhood does a nice job of walking you through it. Because the interface is so simple, it’s easy for beginners to catch on and figure out how to manage their portfolio. Your home screen shows a one-day snapshot of your portfolio, but if you click on each investment, you’ll see the individual performance and can adjust accordingly.

What are Robinhood Snacks?

Robinhood ‘snacks’ are bite-sized newsletters you can consume in 3 minutes or less and get the information you need. It’s a great way to stay up on your research and learn new things without taking up too much time. They also offer short podcasts if you prefer that method.

Can you get your money out without paying fees?

Yes, there is a way around the $75 fee. Sell all your investments within Robinhood first. Wait for everything to settle (2 days past trading). Then transfer your funds to your linked checking account and close your account. If you switch brokers and transfer assets, that’s when you incur the $75 fee.

How does Robinhood make money?

Robinhood is good for beginners that don’t mind making their own trading decisions. Robinhood isn’t like other robo-advisors that put together a portfolio and give you little choice in your investment options. Instead, you choose the exact investments and execute the trades. You can monitor your portfolio on the app, like a traditional robo-advisor, but if you want to make changes, you make them, not the robo-advisor.

Alternatives

Robinhood vs M1 Finance

M1 finance is another commission-free broker, but they work differently than Robinhood. M1 creates pies rather than portfolios. They have prebuilt pies or you can customize your own. You choose your assets and you can buy fractional shares. M1 doesn’t have management fees or commissions, like Robinhood but is best for experienced investors that want robust research and investing options.

Robinhood vs Etoro

Etoro is for the social investor – the one that wants advice from others or to see what others are doing before making investment decisions.

Investors can copy trades from other investors or even completely follow other investors, doing what they do. Investors can trade cryptocurrencies, stocks, and forex. While it’s not a free platform like Robinhood, Etoro is very transparent with their costs.

Robinhood vs Webull

Webull is a contender in the commission-free space as well. It’s best for investors interested in technological investments. The app itself is very techy-focused, but anyone can use it. Webull offers both retirement and taxable accounts for individuals – no joint accounts are allowed. Webull, like Robinhood doesn’t have a minimum investment requirement, but Robinhood is better for beginners.

Robinhood vs E*TRADE

Everyone has heard of E*TRADE and now they too have jumped on the zero commission bandwagon. E*TRADE is best for beginning investors that plan to actively trade. E*TRADE offers robust research options, two apps, 24/7 customer support, and a lot of trading options including stocks, ETFs, futures, bonds, mutual funds, and options.

Current Promotions

There are currently no promotions.

Worth It or a Scam?

Robinhood is as legit as they come. They make the stock market as simple as possible – something that’s not an easy task! They are SIPC insured, which covers you up to $500,000 in securities and $250,000 in cash and they are also a part of FINRA to make investors feel even better.

With no commissions or management fees, it’s easy to give Robinhood a try, just be careful if you want to close out your account – making sure you sell your assets before closing the account to avoid unnecessary fees.

Summary

Robinhood looks basic, but it packs quite a punch. I love it for its versatility and of course, no fees. If you’re tired of letting a robo-advisor tell you where you’re going to invest and you want to give investing a whirl on your own in a taxable account, Robinhood is a great place to try it.

Robo Chooser

Use the following Quiz and find out which robo advisor is best for you.

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