Summary
Robinhood got off to a flying start in 2013 as a disruptor in the investing business. It’s a fee-free platform that has made trading in the stock market easy for everyone. Their biggest competitive advantage is commission-free trading in stocks, options, and cryptocurrency. Thanks to the clean design and smooth user experience, the platform has developed a strong brand image. But, there is a lot more about this brokerage than just free trading. This Robinhood review will help us take a closer look at the cost, key features, and pros and cons that an investor should know before signing up for this platform.
So, let’s dive in to learn whether Robinhood is a right fit for your portfolio:
History
Robinhood is a stock and cryptocurrency broker that operates out of Menlo, California. It was founded in April 2013 by Vladimir Tenev and Baiju Bhatt, who had originally met while in college at Stanford University. During an interview with Forbes prior to the launch of the service, Bhatt stated “Our goal is to make the public markets more available to more people”.
Target Audience
Robinhood is a great option for anyone interested in investing in stocks or cryptocurrency, but aren’t sure where to start. It’s also a great fit for investors who would like to trade in stocks, options, or ETFs, and don’t want to deal with the hassle of a confusing interface or trading fees. They have positioned themselves as the best platform for young investors with the spirit to get into the game.
Trading in small quantities via fractional shares helps build a solid investing foundation, without needing a lot of capital. Moreover, clean design and easy navigation is the secret behind its exponentially growing user base. But if you want to buy mutual funds or need an IRA account, you’ll need to consider other options.
Still not sure if this brokerage is the perfect fit for all your investing needs? Keep reading this review of Robinhood to learn more about their specific offerings.
Pros and Cons
Pros
- Simple and easy to navigate design
- Low trading costs with $0 account minimum
- Can trade both stocks and cryptocurrency
- Trustworthy cash management and recurring investment features
- Advanced features like fractional shares, margin investing, and IPO investing are available
Cons
- Less efficient research and trading tools.
- Only Robinhood Gold members can benefit from professional research
- No retirement accounts, education savings accounts, joint accounts, or mutual funds
- You can’t transfer crypto in or out of your account(yet!)
Ways to Invest With Robinhood
The range of offerings in Robinhood is limited to only a few categories.
- Cryptocurrency
- Stocks
- ETFs
- Options
These offerings work well for a beginner but fail to impress experienced investors. The platform doesn’t support fixed-income products, mutual funds, forex, or futures.
However, you can trade in over 5000 stocks together with most equities and ETFs registered with the U.S. exchanges. The brokerage also offers exciting Options trading for more than 650 global stocks through American Depositary Receipts (ADRs).
Which Cryptocurrencies Are Available On Robinhood?
Robinhood supports purchasing, trading, and real-time market data for the following:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Bitcoin SV (BSV)
- Ethereum (ETH)
- Ethereum Classic (ETC)
- Litecoin (LTC)
- Dogecoin (DOGE)
Review of Robinhood Costs and Fees
No good review would be complete without talking about the fee schedule. Unlike most of its competitors, Robinhood doesn’t charge trading fees. So, what’s the catch?
- First off, spot trades are absolutely commission-free.
- To trade on margin (borrow money from Robinhood for trading), you must have a Robinhood Gold subscription. The subscription is $5 per month and enjoys a margin of $1000 at no interest. If you use margin above $1000, it is at 2.5% interest
- Transferring cash or stocks from your Robinhood account to another brokerage has a $75 fee
- There are no domestic or international wire charges
- There are no account opening, maintenance, or account inactivity fees
- Sending a domestic overnight check has fees as low as $20
- Hiring a broker may cost you a $25 Live broker fee
Portfolio Analysis
Being able to analyze your portfolio is a critical factor when it comes to a thorough review of Robinhood. The tools available are very basic and lack features that are standard with some of their rivals. In the Portfolio view, you can only see your real-time balance, buying power, and margin details. This view lets you see your portfolio value for the previous Day, Week, Month, 3 Months, Year, or all time.
A more detailed breakdown of your portfolio can be seen in the “Account” tab under the “Account” menu on their website. Yes, you have to click Account twice to get to the view. It gives a great breakdown, such as a circle chart of your investments, equity per asset, current and average cost, and total returns. Unfortunately, this view is not available in their mobile app.
In addition, there is no easy way to export your transactions. There is a History view that shows your orders and dividend payouts in chronological order, but the data can’t be sorted or exported. It does have a filter option, but at the time of this writing it will only let you limit the view to Dividends, Orders, Transfers, Robinhood Gold, and Rewards.
Display Settings
Robinhood doesn’t offer a lot of options to customize the display. You can change between Light and Dark themes for both the website and mobile, but that is as far as the customizations go, with one notable exception.
There is one great feature that more sites and applications need to implement: Accessible Colors. There is a toggle in the settings to change the colors to be more friendly to users with deuteranopia (red-green colorblindness). This is especially welcome in a market dominated by red and green candlesticks as the primary indicator for price movements.
Knowledge Library and Education
Not every user is aware of market strategies or even the basics of investing. That’s exactly why a good online brokerage system should educate its potential users.
Their educational offerings may not be as robust as sites such as Investopedia, but it seems they are dedicated to continuously adding to their library.
Currently, they offer quite a few different options to learn.
- Under The Hood – A weekly podcast and blog
- Robinhood Snacks – Their daily newsletter and weekly video series
- Robinhood Learn – A more traditional knowledge base that gives new users a great starting point
Thanks to the exciting visuals in Robinhood Snacks, boring financial videos are fun and engaging. Being able to hear from other users is not just educating, but also inspiring.
Support and Customer Service
Robinhood provides support to its users via both e-mail and telephone. E-mail support requests are typically answered within 1 trading day.
The phone help center operates 24/7. You can request a call from the Help Center in the mobile app or website. The representative is open to all discussions, such as queries regarding the next IPO, debit card transactions, cryptocurrency trades, and more.
Review of Robinhood Security
One of the most important questions that we ask in our review is: “Is Robinhood secure for investors?”. There are several ways by which they protect your data. These are:
- You can limit the login access on your mobile app via fingerprint or face recognition and custom pin
- Accounts can be secured with Two-factor authentication (2FA) using either SMS or a 3rd party authenticator app
- Passwords are secured from the hackers with the BCrypt hashing algorithm, which is a standard in the Industry.
- They are a member of SIPC which protects its member’s securities up to $500,000. This does not include cryptocurrency investments
- For added security, Robinhood uses third-party integration to access your account and credit information
Security Breaches
Unfortunately, it’s not uncommon for organizations to have their security breached. There are many organizations around the world dedicated to breaking through even the toughest security for financial or political gain. It is practically inevitable that a breach is going to occur. It’s a question of when, not if. Having transparency and the right tools to mitigate loss are very important.
Robinhood is no exception to these security incidents. Their responses to these breaches, and their transparency, say a lot about their character.
November 3rd, 2021
Directly from the Robinhood website:
“Late in the evening of November 3, we experienced a data security incident. An unauthorized third party obtained access to a limited amount of personal information for a portion of our customers. Based on our investigation, the attack has been contained and we believe that no Social Security numbers, bank account numbers, or debit card numbers were exposed and that there has been no financial loss to any customers as a result of the incident.”
As a user of Robinhood myself, I was concerned at first when I saw the news breaking, but I have been really impressed with their response so far. They wrote an Under The Hood post where they gave more detail on exactly how many people were effected, and what data was compromised.
October 5th, 2020
In October 2020, Robinhood experienced a breach that effected around 2,000 users. According to a Robinhood spokesperson, “A limited number of customers appear to have had their Robinhood account targeted by cybercriminals because of their personal email account (that which is associated with their Robinhood account) being compromised outside of Robinhood. We’re actively working with those impacted to secure their accounts. This was not stemming from a breach of Robinhood’s systems.”
There was a bit of controversy stemming from this incident regarding areas that many feel Robinhood should have improved their internal processes to prevent this from occurring. Because of this incident, they have since implemented many changes, such as bank account verification and 24-hour telephone support.
The final verdict of our Robinhood review
The key takeaway of this Robinhood review is that if you are new in the investing Industry, this brokerage is a great start. The ease of use and simple design provides an easy on-ramp to trading. The commission-free stocks, options, ETFs, cryptocurrencies, and simple app control are hard to resist. When you are a beginning investor, choosing the right brokerage is important. It can be your best advisor, instructor, and investment analyst.
If you are an active, experienced investor, other options exist that may better fit your needs. That is not to say that Robinhood doesn’t have something to offer you as well. It is a great platform to diversify your portfolio that makes it easy to execute no-hassle trades right from your mobile phone.
What do you think about Robinhood? Do you use them already?
Let us know in the comments below!
