How Does Robinhood Work For Beginners In 2024?

Robinhood launched in April of 2013.

Their impact on the investment industry has not been small, they even have a term for it called the “Robinhood Effect."

Robinhood revolutionized the brokerage industry by offering commission-free trading. Almost all other brokerages have followed suit as a result. Robinhood truly transformed the brokerage industry forever. 

Their focus on an easy-to-use beginner-friendly platform has drawn in many beginner investors. 

Robinhood is the first step in many beginner investors' journeys. With their widespread popularity and simple interface, this is for good reason.

So how does Robinhood work?

Check out my video below to learn more, or keep on reading!

Learn More: Robinhood Retirement 3% Match

Robinhood is a popular "all-in-one" investing app.

While they are most well-known for their commission free stock trading, they've recently shaken up the Retirement Investing World too.

Introducing Robinhood Retirement; home of the biggest IRA match on the market.

Here's what you need to know:

• Robinhood offers 2 types of retirement accounts - the Roth IRA and Traditional IRA
• All Robinhood investors will get a 1% Match on what they Contribute or Transfer
• Robinhood Gold members will get a 3% Match - the biggest on the market

And don't worry, this comes with a Portfolio Builder Tool. You don't have to construct your investment portfolio from scratch if you don't want to.

Lastly, you'll even get a free stock worth up to $200 when you open a new Robinhood account using our link.

Best Free Stock Promotions

Brokerage	Promotion	Link
	1 Free Fractional Share Worth Up To $200	Learn More
	Earn Up To 75 Free Fractional Shares	Learn More
	7 Free Stocks When You Deposit $100+	Learn More
	$20 Bonus When You Invest $5+	Learn More

How To Sign Up For Robinhood

First things first, in order to use Robinhood and see how it works, you will need to sign up for an account.

Since this is a full-blown brokerage account, Robinhood is required to ask you for certain information such as your employment, social security number and level of investment experience.

Robinhood is required by law to collect this information, and they make it clear that they do not share this information.

Insider Trading Questionnaire

During the sign up process, Robinhood will ask you a few questions related to your possible relationships with individuals at publicly traded companies.

All brokerage platforms are required to ask these questions:

1. How much investment experience do you have?
2. Are you employed?
3. Are you or a family member a senior executive or a 10% shareholder at a publicly traded company?
4. Do you or any of your family members work for a stock exchange or brokerage?

Tax Certification

Next, Robinhood is going to ask you to answer some required questions about your tax situation.

They will ask you whether or not you are subject to backup withholdings from the IRS.

If you don't owe money to the IRS, this is most likely going to be a "no."

Robinhood is required by law to report your investment activities to the IRS, as you will need to pay taxes on your capital gains, earned interest, dividends and more.

You can read our full article about Robinhood taxes here.

Linking Your Bank Account

The next step in the sign up process will be linking your bank account in order to deposit funds.

Here's step-by-step instructions on how to do this:

1. Click on the person icon at the bottom right of the app
2. Click on the three lines at the top left of the app
3. Select 'Transfers' from the menu of options
4. Scroll down and look for the section 'Linked accounts'
5. Click on the '+ add account' option to begin adding a bank account

Robinhood gives you a few different options when it comes to funding your new account. You can link up to 3 bank accounts as well as 1 debit card.

The debit card comes with a $1,000 daily deposit limit, however you have the advantage of instant transfers here.

Direct bank account transfers, on the other hand, are expected to take 4 to 5 business days.

At this point, you'll decide whether you want to add a bank account or a debit card. Then, you'll have the option to initiate a transfer once the account is successfully linked.

Receiving Your Free Stock

Time for the fun part! As soon as you fund your account, you'll receive a notification about getting your free reward stock. 

Robinhood offers a unique incentive where you are actually able to pick your free stock yourself.

Once your account is funded with any dollar amount, you'll receive a random dollar amount as a reward.

With this reward, you have the exciting opportunity to pick a gift stock from a list of 20 of America's leading companies. These companies are carefully selected based on their market capitalization within their respective sectors.

• The cash value you receive will vary, ranging from $5 to $200
• Approximately 98% of participants receive rewards valued between $5 and $10

You can use this reward to claim a fractional share of a stock.

Check out our full article on the Robinhood free stock here to learn more.

What Is A Fractional Share?

In the past, investors would have to purchase a whole share of a stock or ETF in order to gain exposure to the asset.

This became problematic when investing in companies with a high share price, such as Berkshire Hathaway Class A shares. These shares have never been split, and as a result, the share price is over $500,000!

If you wanted to buy shares of this stock, or others with a high share price, Robinhood allows you to invest in $1 increments using fractional shares.

Instead of owning an entire share, you could own as little as 1/1,000,000th of a share.

How To Research A Stock

One of the very next things you might want to do is search for a stock or ETF using the Robinhood app.

Here's my full video tutorial below, or keep on reading!

Here's instructions on how to search for an investment using Robinhood:

1. Open the Robinhood app and click on the search icon in the top right (next to the bell icon)
2. Type in the name of the company or the symbol for the stock/ETF (example 'AAPL' or Apple)
3. Click on the correct result under 'Stocks & ETFs'
4. Research the stock using the available data and chart

After looking for Apple stock, here is what you will see.

Here's some of the key information on this screen:

• The stock symbol is AAPL
• Current share price is $169.90
• Average volume is 60 Million shares traded daily
• Overnight volume is 122,500 shares on this particular day (Robinhood supports 24 hour trading of certain stocks, including AAPL)
• The Market cap (total value of the company) is $2.61 Trillion
• Price to earnings ratio (PE Ratio) comes in at 26.47
• The dividend yield for Apple is 0.56%

With time, you'll become more familiar with these various statistics. For now, it's just important to be aware of where you access this information.

How To Buy A Stock

If you want to actually purchase a stock, such as Apple, you will click on the green Buy button.

By default, it will be set to dollar value investing - leveraging those fractional shares. However, you can click the drop down menu in the top right if you want to change this to whole shares.

At this point, you will enter the dollar value you want to invest, or the total number of shares you are looking to purchase. If you want to take advantage of fractional shares, you will need to invest using the dollar value.

Once you are ready to move forward, click on the green Review button.

Finally, you will confirm the order if you want to actually place the order.