Robinhood is one of the newest players in the investment industry. Age hasn’t stopped this newcomer from winning the hearts and wallets of millions of customers. From humble beginnings, Robinhood emerged in 2013. Seven years and over 10 million customers later, the online broker has raised over $500 million in venture capital.
How did this newcomer manage to pull all these clients in such a competitive space?
The big draw to Robinhood is their free trading stocks, options, and ETFs. Free trading sure beats the discounts that you find in brokers like DEGIRO. Robinhood also comes with easy-to-use trading platforms in web and mobile devices. It is factors like these that appeal to the millennials that make a significant portion of the Robinhood customer base.
Instead of singing the praises of this online brokerage, let’s dive in and review Robinhood. Below is everything you need to know about Robinhood.
Assets to Trade
Robinhood offers stocks, ETF, options, and cryptocurrency. Our investors who prefer to trade in futures, mutual funds, and bonds will be disappointed as the broker doesn’t offer these assets. For the best offerings in mutual funds, you should try eToro who have an wide selection of actively-managed funds.
With the Cash Management feature, you can earn some money. Any cash sitting on your account earns interest. The total yield you get from Cash Management is comparable to what you would find at a high yield savings account.
Cash Management makes it convenient for you to keep money in your account and still earn interest. Otherwise, you would have to move your money to get a higher yield.
Trading Platforms and Tools
Robinhood offers trading services over the web and mobile platforms. While investors can use the web-based trading interface, it’s on the mobile platform where the broker excels. Robinhood’s most recognizable trading platforms are its mobile applications. The developers stripped down the app to its bare essentials. The result was a mobile application that is simple to understand and navigate. It is easy to swipe around, investing in stocks and placing orders.
On top of your screen is a convenient search bar. From the search bar, you can stock and view the charts at any time frame. There are no delays, and everything runs smoothly. From your mobile app, you can access vital statistics. Place your order in a few taps.
Robinhood’s focus on simplicity is its biggest strength. However, the strength exposes a few drawbacks. These include:
- The Watch list functionality is too simple. It features a few optional columns beyond percentage change and the last price.
- You cannot modify the stock charts beyond six default date ranges
- The mobile app does not support landscape mode
Robinhood lacks in the research department. The broker offers a “People Also Bought” section for analyst ratings. They also offer an “About” section for company bios. It may sound like much, but it’s a cut and dry experience that focuses on simplicity. The information is over summarized.
The simplicity may appeal to some investors; to others, there’s more to desire. For more research reports, you can subscribe to Robinhood Gold. For the price of $5 a month ($60 a year), you gain access to Morningstar research reports.
Where Robinhood Excels
- Free Trading
You can trade stocks, ETFs, options, and cryptocurrency for free. This is good news for investors, especially options traders. You can find free ETF and stock trades from other sources, but free options are unique to Robinhood.
- Account Minimum and Free Funding
Robinhood has no restrictions on account minimums. The broker’s account funding process is quite efficient. Robinhood uses instant verification with major banks to ensure your funding process is fast and smooth. The application can move up to USD 1,000 of your deposit immediately. The rest of the deposit may take a few more days before they reflect in your account. Not ideal, but you have enough funds to place an order.
- Robinhood Gold
Robinhood Gold is the premium offering. You get access to research reports, and you can trade with borrowed funds and margins. For $5 a month ($60 a year), you can access research on 1,700 companies from Morningstar.
Areas Robinhood Could Improve
- Limited Free Research and Education
The research available on the regular Robinhood program is oversimplified. It leaves much to desire. Unless you subscribe to Robinhood Gold, you will get insufficient data on research.
- Customer Support
Robinhood’s customer experience involves its chatbots. This may be fine if you have simple questions whose answers lie in the prepackaged set of responses. Move further afield with your questions, and you may have to email their customer care agents. Emails may take a while before you get your answer. You can always call for immediate responses.
Robinhood isn’t perfect. An investor who knows what he or she is looking for will overlook the flaws to enjoy the benefits. With Robinhood, there are quite a bit of those (benefits):
- Free trading
- Intuitive trading platforms
- Fast account funding
New investors who need a lot of support may not find Robinhood appealing. If you are a prolific investor, Robinhood may be the brokerage for you.