Robinhood App Review
Ease of Use
Executions and Routes
The Robinhood Trading App gained a lot of attention by offering zero-commission trades. Many new traders see this as a great alternative to discount brokers who charge a per-share commission. This isn’t the first time the free trading concept has been applied but it is the first time it gained real traction. So, is it worth to switch to Robinhood and get free trading commissions? Read the review to find out?
About the Robinhood App
Robinhood is a mobile trading application for iPhone and Android that provides zero commission trades on U.S. stocks and ETFs. While their website is at Robinhood.com, the platform is purely designed for mobile trades, with minimal desktop access. Robinhood is an SEC registered broker-dealer and member of FINRA & SIPC. However, they are a mobile-only stock brokerage, with access to listed foreign securities as well (for a fee). The app is intuitively designed and flows very smoothly. Kudos to the designers for the sleek, simple and contemporary feel.
Robinhood was the brainchild of Stanford classmates Vlad Tenev and Baiju Bhatt. The duo designed trading platforms on Wall Street for some the largest financial institutions and derived a mobile platform that could take advantage of electronic trading and automation to cut costs down to zero for the end-user while maintaining efficiency and stability on the back end. As of 2020, Robinhood has grown to 13 million users, up from 2 million users in 2017.
Is this the right investing app for you? Continue reading our Robinhood app review to find out.
What is the Robinhood App?
The Robinhood app is a simple mobile application that allows investors to buy and sell stocks, ETFs, options, and cryptocurrencies.
Robinhood is focused on making investing simple and that’s exactly what the app does. The app is easy-to-use and designed specifically for beginner investors who want to get involved in the stock market.
Opening a Robinhood Account
To open a brokerage account, the trader must have a legal U.S. address and U.S. citizenship or valid U.S. visa, valid social security number, and be at least 18 years or age. The standard/basic account is a limited margin account that allows for instant settlement and instant deposits. This doesn’t allow for short selling or margin trading, however those features are available through Robinhood Gold fully leveraged margin accounts.
Cash accounts are available through downgrading in the app. There is no account minimum for the regular Robinhood account. All accounts for personal single person accounts, no corporate or joint account capabilities are available yet.
I was surprised by how easy it was to open a Robinhood account. Initially, I was concerned that the account opening process would be a hassle on a mobile phone but I was pleasantly surprised. This is one of the easiest account opening processes I have tested. You can open the account directly from your mobile phone and the sign-up form is clean and easy-to-use. It takes about five minutes to open a brokerage account with Robinhood.
Another nice perk is that new users can get a free stock valued between $2.50 and $200 when they open a new account. I’m sure many users open an account just get a free stock. You can get additional free stocks by inviting friends to join (up to $500 in free stocks per year).
Robinhood is built for simplicity. You won’t find all of the same bells and whistles as you would with traditional brokerages, but this is more of a feature than a flaw. Robinhood isn’t really designed for investors who have been navigating the markets for years. It is designed for new investors who want to take a simple approach to investing. These investors don’t need complex trading tools, in-depth financial reports, and advanced portfolio analysis tools; they just need a way to buy and sell stocks.
Comparing Robinhood to a full-service discount broker wouldn’t be an apples-to-apples comparison, so we will be focusing on Robinhood’s unique offerings in our Robinhood review.
Here are a few of the key features of the Robinhood app.
Investing and Trading
Robinhood users can invest in and trade the most popular financial assets. These include:
- Stocks & ETFs
- Options trading
Stocks and funds are the bread and butter of the service, but options trading and cryptocurrency trading have become increasingly popular over the last few years.
Stock trading and options trading is available for over 5,000 securities.
Cryptocurrency trading is available for 17 of the most popular coins, including Bitcoin, Ethereum, Ripple, Litecoin, and more.
Commissions & Fees
Robinhood doesn’t charge any commissions on trades. Most traders won’t incur any fees, however certain types of funding/withdrawal methods do incur charges.
- Outgoing ACAT (automatic customer account transfer service) transfers have $75 fees but incoming ACAT wires are free.
- International wire transfers are $50 and outgoing domestic wire transfers are $25.
- Broker-assisted phone trades cost $10.
- Domestic overnight check delivery is $35 and $30 penalties apply for returned and NSF checks.
These fees are typical with most brokers and can be avoided by using free funding methods and placing your trades within the app.
While Robinhood’s commission-free trading was a game-changer when it initially launched, traders now have more options for free trading. Companies like Webull, Dough, and Firstrade have recently announced free trading options as well.
Robinhood allows investors to buy fractional shares of their favorite companies. This is definitely a worthwhile feature for investors with smaller brokerage accounts.
If you have a small account, full shares of high-priced stocks may be inaccessible. For example, Amazon is priced at over $3,000/share at the time of writing this. If you have less than $3,000 in your account, you can’t buy a full share of Amazon.
Robinhood changes this by allowing you to buy fractional shares of companies. For example, you could purchase 1/10 of a share of Amazon for $300. This feature was initially popularized by services like M1 Finance and Stockpile, and is now available to investors who use Robinhood.
Platforms & Tools
As we will continue to reiterate throughout our Robinhood review, this app is designed for simplicity. Users will have access to basic investing tools, but that’s about it.
When Robinhood initially launched, it was a mobile-only brokerage. They have since rolled out a web-based trading platform, but it’s about as basic as the app. You can find basic line charts, watch lists, and price quotes – but not much more. In a way, this is just a cleaner version of a free tool like Yahoo Finance with the added functionality of order placement.
The main features of both the desktop and mobile trading platforms are:
- Watch lists
- Basic fundamental data
The charts in Robinhood are very clean and basic. By default, users will be shown line charts with customizable timeframes. You can choose to view a stock chart over the following timeframes:
- 1 Day
- 1 Week
- 1 Month
- 3 Months
- 1 Year
- 5 Years
Robinhood recently added candlestick charts to the platform (a much-needed addition). That said, the charts are super basic and don’t include any technical indicators. If you are a technical trader, you will definitely need to use another charting platform, such as TradingView.
Research and Fundamental Data
Robinhood offers the same set of fundamental information that you will find on sites like Yahoo Finance or FinViz. You can quickly get a snapshot of a stock’s yearly range, market cap, P/E ratio and more. You can also view the most recent news stories.
In no way will this replace your other fundamental research, but it’s a nice addition and a helpful way to get a quick understanding of a company’s current standing.
The app also provides an earnings chart which does a good job of comparing earnings estimates to actual earnings.
You can add watch lists simply by typing in the company name/symbol. This is a simple and convenient feature. The platform is all about simplicity, like a tiny house. You really have to know which stocks you want to monitor and trade. The watch lists are clean and easy to read. The line chart next to each ticker is a nice additional feature.
Like everything in the Robinhood app, placing an order is very simple. Traders can choose between market, limit, stop loss, and stop limit orders. There are no advanced order types (such as conditional orders) available, but most new traders will not utilize these anyway.
The order screen is clean and easy to use. Simply enter the amount of shares you want and the price you are willing to pay (with limit orders).
One of the cool features Robinhood recently added to the app is “Popular Lists.” These are lists of popular stocks in different sectors or themes.
This feature can be helpful for investors who want to use the investment app to discover new investment ideas. Example lists include:
- 100 most popular stocks
- Top movers
- Technology stocks
- Entertainment stocks
- And more
This is a free upgrade lets you use up to $1,000 of pending bank deposits immediately. Robinhood instant allows you to re-invest funds without waiting the three-day settlement process as in a cash account. The limited margin account lets you invest the funds from selling a stock position immediately. Margin regulation and limitations will apply, including the PDT rule (no more than three roundtrips during a rolling five business day period for accounts under the $25,000 threshold).
Traders can e-mail and message customer service with issues. Phone support is also available (but not for general inquiries). Keep in mind broker-assisted phone trades are charged $10 each.
While customer support is decent, it’s definitely not as accessible as full-service brokers like ETRADE.
As noted multiple times in this review, the Robinhood app is intended to simplify trading for the average investor/trader. Accordingly, the app is easy-to-use but limited in features. That said, the company hasn’t failed to keep up with modern technology. The app accepts Touch ID authentication and Face ID authentication (for iPhone X). This is a useful feature for traders who don’t want to enter their password every time they log in.
The app also includes a feature called “Pattern Day Trade Protection.” This feature will prevent users from placing trades that may be in violation of the PDT rule. Basically, if you’re about to place a 4th trade in a period of 5 days, the app will prevent you from doing so. This is definitely a helpful tool for new traders who are either unaware of the PDT rule or lose track of how many trades they’ve placed.
Robinhood Gold is a premium account upgrade that is available for $5 per month. This upgrade comes with a few main benefits:
- Bigger Instant Deposits – This allows users to instantly transfer $5,000 from their bank accounts if they want to start investing deposits sooner (i.e. no waiting for the deposit to clear).
- Professional Research – Users will have access to Morningstar research reports.
- Margin Investing – Double your buying power using leverage.
- Level 2 Data – Users can get access to Level II data supplied by NASDAQ Totalview.
While Robinhood Gold perks can justify the $5 per month subscription fee, they are really only suitable for a specific type of investor. If you are a sophisticated investor who requires access to professional research, margin trading, and level 2 data, you are probably better suited for a more advanced discount broker like ETRADE or TD Ameritrade. These brokers provide similar services for free.
The only way I could see someone paying for Robinhood gold is if they really love the Robinhood platform and don’t want to transition to another broker.
Robinhood Cash Management
Robinhood Cash Management is a banking solution that provides some compelling features you won’t find at traditional banks. Here are the main features:
- Higher interest rate
- FDIC insurance
- No account minimum
- Debit card with access to 75,000 fee-free ATMs
The standout feature is the interest rate. You can easily find banks with FDIC insurance, no account minimums, and zero-fee ATMs. That said, most banks pay an interest rate that may as well be 0%.
Robinhood Cash Management offers a high yield savings option that currently pays 0.30% APY. This rate changes relative to the fed funds rate, which is currently super low. That said, 0.30% APY is much higher than most traditional bank accounts like Chase and Wells Fargo and relatively competitive when compared to other high yield savings accounts.
The cash management account is a great place to park your uninvested cash while you wait for investment opportunities. You won’t get rich off of 0.30% interest, but you will make more money than you do at your other bank accounts.
Who is Robinhood is Best For?
The Robinhood application caters to new and casual investors who rely solely on their mobile devices. The simplicity of the app appeals to Millennials who are the most comfortable demographic with a mobile-only stock brokerage. We discuss this demographic further in our Acorns Review as we analyzed another service designed specifically for “app investors.” Newer traders like those in Ricky Gutierrez’s Learn Plan Profit group seem to really like the simplicity of the platform.
Swing traders and investors will appreciate the portability and streamlined convenience of the app. Intra-day traders will need a more thorough routing system as well as research and charting features found with a direct access broker.
It’s very hard to trade actively on this platform since there is no direct order routing, chart indicators, news feeds, scanners or much screen space. While the zero commissions are the main selling point, the portability and convenience is an additional benefit. Robinhood is like the tiny house of online brokerages. Users need to be self-directed, independent and resourceful enough to supplement this no-cost platform with research and analysis off another platform. The fills may also be tricky since Robinhood has order flow deals with multiple firms.
Robinhood is best for long-term investors and traders with very small accounts. It can almost be considered of a learning tool that allows new traders to test their skills without burning money in commissions. For traders with more experience, brokers like ETRADE, TD Ameritrade, and Schwab will likely be more suitable.
Zero-commission trades may sound enticing, but they come at a cost. You will not have access to level 2 trading (without Robinhood Gold), advanced charts, advanced order types, and more. Furthermore, trading commissions should never be the difference between a profitable and unprofitable trading strategy.
Common Questions About Robinhood
Robinhood is quickly becoming one of the most popular stock brokers for new traders so we figured we should address some of the most common questions about the broker.
How does Robinhood offer zero-commission trades?
Brokers don’t just make money from commissions. In fact, commissions aren’t even the biggest source of revenue for brokers who charge commissions (i.e. ETRADE, Interactive Brokers, etc.). Stock brokers can make money from commissions, but the bulk of their income comes from interest on client accounts and payment for order flow. The second revenue source is definitely worth exploring further.
When you place a buy or sell order, your order needs to be sent to the market. Most of us don’t think much about this process but there’s a huge industry surrounding it. Orders can take a few different routes before being executed and companies are actually competing to get access to your orders. These companies want your orders so badly that they’ll actually pay for them. In these cases, the broker is compensated for sending your order to a specific route, and this is what’s known as “payment for order flow.”
The truth is, most casual traders won’t even notice a difference between the different order routes. That said, Robinhood’s practice of internalizing order flow does come at a cost. For certain trades, this process can result in slower executions which can lead to worse fill prices and or missed trades.
Robinhood also makes money from its Robinhood Gold service.
Does Robinhood have a desktop platform?
Robinhood recently released a web trading platform that looks very similar to the company’s mobile app. While it’s convenient to manage your account online, the desktop platform really doesn’t add much value. It’s quite simplistic and most of the information it provides can be found for free elsewhere.
Robinhood’s zero-commission trades are not a “bait and switch” tactic, nor are they intended to distract clients from other account fees. Robinhood is actually pretty good at providing transparent, fair pricing. You can either choose the free plan, which is absolutely free, or you can opt for Robinhood Gold for $5 per month.
What can I trade at Robinhood?
Robinhood clients can trade stocks, options, and cryptocurrencies. That said, traders cannot trade the full range of these asset classes. For example, sub-penny OTC stocks are not available through the platform, nor are a lot of the cryptocurrencies you’d find with services like Coinbase.
Can you make money with Robinhood?
Of course. Robinhood is just a broker that facilitates stock trades, options trades, ETF trades, and cryptocurrency trades. Whether or not you make money is up to you. Robinhood does nothing to help you make money OR prevent you from making money. The performance of your investments will dictate whether or not you make money. For example, if you buy Apple’s stock and the stock price goes up, you will make money; if the stock price goes down, you will lose money.
How does Robinhood compare to other discount brokers?
Robinhood is a simplified version of discount brokers like ETRADE and TD Ameritrade. This simplicity comes at a cost, as the brokerage has eliminated many beneficial resources that you will find at other discount brokers. Absolute beginners are unlikely to notice the missing features, however most experienced traders will prefer another broker.
How does Robinhood compare to free brokers like Webull?
Robinhood is a pioneer in the mobile investing industry and, to date, it’s hard to beat the app’s simplicity and ease of use. That said, many competitors are catching up and filling in the gaps in Robinhood’s service. For example, Webull recently launched as a free app-based brokerage that offers advanced trading tools alongside free commissions. In my opinion, Webull is a clear winner over Robinhood.
- Zero commissions on U.S. stocks, ETFs, and options
- No account minimum
- Easy-to-use mobile trading app
- Great user experience for new investors
- Always connected to the U.S. equity markets
- Cryptocurrency trading and options trading are available
- Seamless design integrates features well
- No order routing options or short selling
- Weak chartings and research functions
- Lacking advanced tools that you would find in a robust trading platform
- Not the best fit for active stock trading (mostly designed for investing)