Robinhood Review 2024

Robinhood is a popular trading app due to features like a streamlined interface, with no account minimums or trading fees. More than that, Robinhood makes trading approachable.

While Robinhood has broken down investing barriers for some customers, it’s not without issues. It lacks free research tools, and it doesn’t have the breadth of investment options you get from some competitors. If you’re a prospective Robinhood user, you may want to remember these things before you start trading.

About Robinhood

Robinhood was founded in 2013 by Vladimir Tenev and Baiju Bhatt to democratize finance. The two founders noticed Wall Street was paying next to nothing for trades while charging customers for every trade. At the same time, many brokers have account minimums, and the two wanted to give everyone access to the financial markets.

They launched the Robinhood app, which has no commissions and minimal fees on most securities trades. In addition, there is no dollar minimum required to open or maintain a brokerage account with Robinhood.

The company went public on July 29, 2021, listing its stock on the Nasdaq under the ticker HOOD. At the time of the initial public offering, its shares were priced at $38 each. As of Feb. 15, Robinhood stock was $13 per share.

How does Robinhood work

Robinhood provides commission-free trades of stocks, options, exchange-traded funds and cryptocurrency. The brokerage uses a mobile-first approach, offering apps for iOS and Android. However, you can also use Robinhood on a desktop computer; most web browsers support it.

Aside from its streamlined interface and commission-free trades, Robinhood stands out with its 24-hour trading. Using the platform, investors can trade 24 hours a day, five days a week. The company offers 24/7 support, including 24/7 phone support.

Robinhood offers investment choices like crypto and options you may only find at some brokers. It also offers margin trading, with a lower rate for Robinhood Gold subscribers. However, the platform’s overall investment selection is limited. For instance, it doesn’t offer bonds or mutual funds. While it does offer ETFs, some investors may find it difficult to diversify their portfolios properly.

One concern with Robinhood is its business model. The company uses payment for order flow, or PFOF, representing a significant portion of its revenue. This means Robinhood sends customer orders to market makers, who then fill the orders. Critics say this can create a conflict of interest because brokers like Robinhood may send orders to their preferred market makers to maximize revenue at customers’ expense.

Pros and cons of Robinhood

Pros

• No account minimums, monthly fees or trade commissions.
• Streamlined, easy-to-use interface.
• Offers a high rate on uninvested cash for Robinhood Gold members.

Cons

• Does not offer investments in bonds or mutual funds.
• Other investment platforms offer better educational and research tools.
• The company has faced significant regulatory scrutiny.

Key perks

Robinhood offers a few key perks that make it stand out among brokerages. Here are some of the highlights:

• No commissions or fees. In most cases, you won’t have to pay any commissions or fees on trades.
• Pays interest on uninvested cash. Robinhood pays 1.5% interest on uninvested cash for all members and 5% for Gold subscribers.
• 24/5 trading. Robinhood lets you trade 24 hours a day, Monday through Friday.
• Fractional shares. Like many brokers, Robinhood has added fractional shares, which allows you to invest in stocks and ETFs with as little as $1.
• Stock lending. An option to lend securities you already own to earn extra income.
• Individual retirement accounts. Robinhood offers an IRA to invest for retirement. Currently, only stocks and ETFs are available for Robinhood IRAs. However, Robinhood offers a 1% to 3% match on contributions or IRA transfers.
• Cryptocurrency. Robinhood Crypto lets you buy, sell and hold popular cryptocurrencies, including bitcoin (BTC), ethereum (ETH) and dogecoin (DOGE), among others. You can get started for as little as $1.
• IPO access. Robinhood’s IPO Access feature lets you buy shares at the IPO price as soon as the stock becomes available. This is typically reserved for institutional investors. 
• Robinhood Gold. For a $75 annual subscription fee, members get perks, such as a 5% APY on uninvested cash as well as an 8% margin rate for any margin borrowing over $1,000.

User experience

One of the biggest draws to Robinhood is its simple, clean interface. The platform features beautiful charts and minimal clutter. It also makes trading easy; features like swipe to trade let you buy and sell securities with just a few taps.

However, while Robinhood’s app is enjoyable to use, the company has faced outages and other technical issues in the past. These issues have left some users unable to participate in market rallies.

In addition, critics of Robinhood say it gamifies the trading process, using fancy animations that can attract new, inexperienced investors and lead them to engage in risky active trading.

Robinhood’s relatively small library of educational resources may also contribute to this situation. Robinhood has partnered with Morningstar to offer access to in-depth stock reports to Robinhood Gold members. Meanwhile, firms like Fidelity and Vanguard offer educational resources and other research tools without a fee.

Commissions and fees

Robinhood users pay no commissions or fees on securities trades, including options. This feature has helped attract many users to the platform.

However, Robinhood does charge fees in some instances. For example, it charges a 12% margin rate or 8% for Robinhood Gold members for any margin above $1,000. The Gold members pay a $75 annual fee.

Another fee is a $100 outgoing Automated Customer Account Transfer Service (ACATS). This applies if you want to transfer your account from Robinhood to another broker.

How Robinhood compares

Broker	Commission-free stocks and ETFs	Contract options fee	Fractional trading available
E-Trade	Yes	$0.65	No
Interactive Brokers	Yes	$0.65	Yes
Fidelity	Yes	$0.65	Yes
Charles Schwab	Yes	$0.65	Yes
Merrill Edge	Yes	$0.65	No
Ally Invest	Yes	$0.50	No
Robinhood	Yes	$0.00279	Yes

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Is Robinhood right for you?

Robinhood is not for everyone, but it can be a good choice for some. For instance, you might appreciate it if you are a newer investor who doesn’t want to be overwhelmed by a barrage of technical terminology and advanced charts.

It can also be a good fit if you want to avoid fees and commissions, though many brokers offer commission-free trades today. Active traders might like Robinhood due to its reasonable margin rates and fractional shares. However, margin trading can be very risky.

On the other hand, Robinhood can be problematic for inexperienced traders drawn in by Robinhood’s engaging interface. Generally, beginner investors should avoid active trading, especially if trading with money you can’t afford to lose.

Similarly, long-term or passive traders may not be the best fit for Robinhood. This is because the platform lacks investments such as mutual funds and bonds and doesn’t have features like automated investing or rebalancing.

Final verdict

Robinhood provides commission-free trades of stocks, ETFs, options and cryptocurrency. It’s simple, intuitive interface appeals to new customers looking to dip their toes into the world of trading. While this can make trading more accessible, it also makes it easier for new and inexperienced traders to lose more than they can afford. Before signing up for Robinhood, new traders should be wary of risky active trading strategies.

Frequently asked questions (FAQs)