If you’re looking for a hands-on platform that lets you invest as little or as much as you want, and be in control of your investments, look no further than Robinhood. This user-friendly platform helps you set up a portfolio based on your risk-tolerance and timeline while giving you the reins to handle investments yourself.
It’s not your typical robo-advisor that sets up a portfolio and manages it for you. Robinhood provides the platform and the guidance, but you do the investing.
Robinhood gives investors the best of both worlds. Should you consider it? Here’s our review.
What is Robinhood?
Robinhood is a mobile trading app that helps investors create portfolios of stocks, options, ETFs, and cryptocurrency. Robinhood doesn’t charge any commissions or monthly fees and offers investors a hybrid hands-on/hands-off approach to investing.
While it’s not the only mobile trading app or the only online broker offering $0 commission trades today, it still has plenty of stand-out features great for different types of investors.
How Does it Work?
It’s easy to sign up for Robinhood after you download the mobile app. You’ll provide your personal information including your Social Security number. Next, you’ll answer questions regarding your investment experience and risk tolerance and transfer funds to your Robinhood account.
Robinhood doesn’t require a minimum balance, so you can transfer as little or as much as you want. It’s reassuring to know that each Robinhood investor’s money is protected up to $500,000. This insurance doesn’t protect you against losses because of poor market performance, but it protects your money should Robinhood go out of business.
Experienced investors who want to invest on margin (borrow) can open a Robinhood Gold account. While it costs $5 a month, Robinhood Gold investors have access to Level III market data, higher instant transfer limits, and the ability to invest on margin if approved.
Who Should Use Robinhood?
Robinhood is for the hands-on investor or the investor who wants to learn to be hands-on investors. It guides you without making the investments for you. In other words, it’s like working with a human stockbroker without the hefty fees.
Is Robinhood Legit?
It sounds too good to be true to have a stockbroker that doesn’t charge anything, but it’s true. Robinhood is legitimate and safe and is SIPC insured which protects your investments should Robinhood go out of business.
Who Shouldn’t Use Robinhood?
If you’re looking for a hands-off approach to investing where the platform does the work for you, it’s not Robinhood. You must have an interest in learning how to navigate the market, diversify your portfolio, and make trades.
What are the Advantages?
- No account minimum – Many online brokers require hefty account minimums that most beginning investors can’t meet. Robinhood makes it easy for anyone to get started with as little money as you want.
- No commissions – Trading without commissions is an incredible way to start trading. You don’t have to worry about hefty commissions eating at your profits. While you’ll still pay the standard regulatory fees (every broker charges this), you won’t pay a fee to Robinhood for every trade.
- Buy fractional shares – Robinhood allows you to invest in fractional shares or less than a share. If you don’t have enough to invest in a stock, but have an interest in investing in the company, you can buy a part of the share and earn a prorated return based on your investment.
- Interest on savings – If you carry a cash balance, you can keep it in your Robinhood account and earn 0.3% APY.
- Robinhood debit card – Robinhood provides investors with a debit Mastercard that you can use anywhere Mastercard is accepted. Robinhood has 75,000+ free ATMs and there are no fees for monthly fees, overdraft fees, or account minimums.
- User-friendly interface – Robinhood’s interface is easy to use, which is great for beginners and experienced investors alike. You can easily figure out how to place orders and manage your account without feeling overwhelmed.
- Get a free stock just for signing up – Every new investor that signs up for Robinhood receives a free ‘surprise’ stock in their Robinhood account.
What are the Disadvantages?
- Limited investment options – Robinhood doesn’t offer investments in mutual funds or bonds. If you’re an experienced investor and prefer to include those assets in your portfolio, you won’t find them at Robinhood.
- No retirement accounts – Investors may only open a taxable account. This is great for some borrowers, but if you’re thinking ahead for retirement, you won’t find tax-advantaged accounts here.
What Should you Consider?
Before choosing Robinhood, decide what you want out of your investment platform. If investing in stocks, ETFs, options, and cryptocurrency is what you want, Robinhood is a great and affordable platform.
You’ll get the guidance you need without any commissions or hefty fees. Even if you’re’ a beginning investor, there are plenty of opportunities to make the most of your chance to grow your money in a taxable account.
Should you Use Robinhood?
Robinhood makes it easy to try the platform out with no minimum balance requirements and free stock when you sign up, it’s hard to say ‘no.’ It’s a great way to dive into investing, managing your own portfolio with the oversight you desire to make the most of your money.
Try Robinhood today and see how you like handling your own investments. With an attractive cash account, no fees, and the ability to invest in options, something most robo-advisors don’t offer, there’s a lot to consider when trying Robinhood.