You know how retailers make it super-easy to spend. There are all these shopping apps you can now use on your phone: from Amazon to Walmart. And with a click of a button yo, can buy anything. Well, guess what? That concept is here for investors; enter key player, Robinhood.
Before I go any further, I’d like to point out that I am not an invested financially in Robinhood, am not getting paid for this review, and apart from having a Robinhood account for trading am in no other way affiliated with Robinhood. With that said, here we go!
Robinhood is a financial services company initially established in 2013. It’s known for its stock trading platform which is primarily designed to be used on smartphones. Since its inception, Robinhood has received over $176 million in funding from almost 30 major investors.
Robinhood has reported that it has over three million users who have traded over $100 billion thus far.
How Does Robinhood Work?
The app has all of the information you need to view your account and execute trades. You can set-up your login via your thumbprint. It will take you right to the main screen that shows your portfolio value along with a simple chart of performance, and all of your holding below that. The menu options are simple and have a clean and look (see below):
The Free Stocks button allows you to promote Robinhood to friends and family. If they sign-up for a Robinhood account, you both receive a free share of a stock.
The Account button breaks down your portfolio between stocks and cash and also provides Account Statements.
The Banking button allows you to move funds to and from Robinhood to the banks you have linked and also allows you to transfer stock from other brokerages.
The History button provides transactional data such as trade orders, deposits, withdrawals, interest payments, dividends received. It can be filtered by these categories as well.
The Settings button allows you to increase security when accessing your account, increase or decrease notifications for transactions, and add or upgrade additional account features.
The Robinhood Gold Account offers additional features like extended trading hours (up to 6:00 PM EST), additional buying power, and instant settlement of funds for quick trading. I don’t have the Robinhood Gold version so I cannot comment on the user experience of this account.
If I have one small piece of criticism it’s that the dividends you earn are deposited into your cash account and serve as your “Buying Power” should you decide to reinvest in the same securities or purchase different ones. There isn’t a way to set up automatic dividend reinvestments as there may be with other brokers. However, you can allow your cash balance to increase by earning dividends and periodically reinvest, for free!
How Does Robinhood Make Money?
I’ve read that Robinhood makes money through special transactions, interest earned from user accounts and their Robinhood old account. But I also decided to go the source directly. So here is what the folks at Robinhood had to say when I asked via email, which by the way they replied to in just a day:
Thanks for reaching out!
How does Robinhood make money?
With Robinhood Gold, you get up to 2x your buying power and access to after-hours trading for as little as $6 per month. This is the only product Robinhood charges you for and is completely optional. Trading is still commission free.
Additionally, Robinhood earns revenue by collecting interest on the cash and securities in Robinhood accounts, much like a bank collects interest on cash deposits.
They also have a full fee schedule here. As you can see, they charge for foreign trades, special types of money transfers and account maintenance fees except for electronic statements which are free like most brokerages. I have not needed to acquire any of these services that come with fees since I’ve had a Robinhood account.
I don’t need to execute any foreign trades since I’m able to buy an international ETF (i.e., IDV) through Robinhood anyway. This gets you into the global market and diversification all in one easy step. When transferring funds, I use my local bank which connects to Robinhood’s platform and is free. I can view statements anytime, online and for free using my phone. #winning 🙂
What Else is Great About Robinhood?
Robinhood continues to offer new services at a rapid pace:
Automatic Customer Account Transfers – you can now move your entire portfolio from a broker which you may have opened an account with several years ago to Robinhood. Robinhood states that it will cover any fees charged by your previous brokerage.
Robinhood for Web – In early 2018, users can continue to trade for free on the web (new platform is simply called ‘Robinhood for Web’) and continue to on their mobile devices. I’ve already signed-up.
Options Trading – In early 2018, Robinhood will offer users the ability to trade options with no commissions or contract fees.
It’s recommended by several bloggers as outlined by Rockstar Finance and is especially good for people just starting out in investing. Investopedia has ranked number 1 in the Top 4 Apps for Traders. And this is due to the easy to user interface, as evidenced by receipt of the Apple Design Award, and of course commission free trading.
So with all that being said, I highly recommend you try out Robinhood and reap the benefits such as its free trading – including a free share of stock, easy to use interface and flexibility to trade anywhere you want using your smartphone.
How do you feel about Robinhood’s online brokerage platform? Are you currently paying for trades? Would you consider switching to Robinhood?
I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!