Robinhood Review: My Experience As A Beginning Investor
Robinhood seeks to level the playing field when it comes to investing. You’ll save money on commissions – money you can put toward building and growing your portfolio.
- Beginning investors
- Margin trading
- Investing in cryptocurrencies
All of us know Robin Hood as a heroic outlaw who stole from the rich and passed those stolen treasures on to the poor. Robinhood – the investing app – is built on a similar philosophy: that everyone should have access to investing tools.
By offering commission-free trading, they make investing available for those of us who don’t have overflowing treasure chests in our homes.
Here’s my full review of Robinhood, so you can decide if it’s right for you!
What is Robinhood?
Robinhood targets the Millennial investor, connecting with younger consumers who want to get started in investing. The founders had experience in building investment platforms, and they started Robinhood with the goal of making investing available to more than just the wealthiest Americans.
How does Robinhood work?
The first thing I noticed at signup was that Robinhood is offering free stock to every new member. I didn’t even have to deposit any money!
Robinhood promises a one in 150 chance of getting a high-value stock like Facebook, Microsoft, or Johnson & Johnson for free.
The signup was easy. I just provided my name and email address and set a password. I was then directed to a page requesting my mailing address. This information is required by the federal government when signing up consumers to new financial accounts.
Next, you’ll have to provide your Social Security number. As with your address, this information is required by federal law.
Robinhood also asks for your level of investment experience. I chose “None” because I consider myself a beginner, but you can also choose from:
- Not much.
- I know what I’m doing.
- I’m an expert.
To continue, you’ll need to deposit some money. There’s no charge to move money in and out of Robinhood, and you don’t have to invest any of that money. There is no minimum requirement to fund your account, but insurance only covers up to $500,000.
Next, you’ll need to choose your bank account from the list and log into it to make the connection. My bank account wasn’t on the list, so I had to submit a request for approval before I could proceed.
If Robinhood can’t process your information based on the data you’ve provided through this process, you’ll have to upload a photo of your most recent government-issued I.D. to set up an account.
Pricing for Robinhood
Robinhood provides its services commission-free, but there are some hard-to-avoid fees associated with trading. There are also no fees to maintain your account or transfer funds back and forth.
There are a few third-party fees Robinhood passes on to you:
- SEC fees: $22.10 per $1,000,000 of principal for sells only.
- FINRA trading activity fee: $0.000119 per share (equity sells) and $0.002 per share (options sells). Maximum fee: $5.95.
If you upgrade to Robinhood Gold, you’ll pay $5 every 30 days in addition to interest on your margin trades.
If you use more than $1,000 of margin, you’ll pay 5% yearly interest on the amount you use above $1,000.
Robinhood is one of many great apps out there that make trading easy. Here are some features that set Robinhood apart.
One of the biggest selling points of Robinhood is its mobile app. You can see, at a glance, how each of your investments is performing. With just a few taps on your screen, you can purchase or sell an asset.
No commissions on trades
Robinhood makes its money in a variety of ways:
- Selling trades to different firms
- Robinhood Gold, a suite of powerful investing tools, which starts at $5 a month
- Rebates from market makers and trading venues
- Income generated from cash
- Stock loan income from counterparties
- Interchange fees from purchases made with the Cash Management debit card, and fees from program banks
This is a common practice among online brokers and means that you, the investor, can trade without commissions and fees.
Cryptocurrency trading available
If you’re interested in dipping your toe in the pond of cryptocurrency investing, Robinhood can help. Using their platform, you can trade Bitcoin, Ethereum, Dogecoin, and more.
Before making a decision about whether to invest in a stock, it can help to monitor it for a while. Robinhood makes it easy by letting you add assets to a watchlist. Simply search for a stock by name and tap the Add symbol. Then you can keep an eye on it while you decide whether to make a move.
News and market monitoring
As soon as I started investing, I became intensely interested in what the markets were doing. Robinhood provides a newsfeed to help me keep up with the news directly in the app.
There’s also a newsletter and podcast, called Daily Snacks, that provides news in an accessible, easy-to-understand format.
Alerts and notifications
Set up notifications so that you’ll know as soon as there’s significant activity on your account. You customize these notifications in the app’s settings. Set your preferences for Dividends, Bank Transfers, Orders, and Price Movements.
My experience using Robinhood
After signup, I was given a Robinhood Instant Account, which is a margin account. New members start here and can upgrade to higher tiers as they get comfortable with the platform. The Instant option is free to use, with no commissions charged on the amount you trade. You also aren’t required to keep a minimum amount in the account.
I was struck right away with the app’s easy-to-use, visually-appealing interface. You can see, at a glance, where your investments stand. Create a watchlist to keep an eye on stocks you’re considering buying. This has been a big help in deciding where I want to put my investment dollars. There have been a couple of instances where I held off on investing in a particular asset after seeing it drop in value on my Robinhood dashboard.
As I get more comfortable with Robinhood, I’m starting to see the value of Robinhood Gold. But it’s a commitment. Gold members pay $5 a month for a subscription but have access to bigger trades. With Robinhood Gold, you’re buying on margin, which means I’d be investing my money along with a loan amount from Robinhood. Robinhood lets you set limits to keep your risk at a minimum, but there’s always a bit of risk with this type of investing.
Right now, I’m enjoying what I’m getting from Robinhood Instant, but I’ll keep an eye on the other available options and continue considering an upgrade.
Who is Robinhood best for?
If you’re interested in margin trading, you can upgrade to Robinhood Gold. You’ll have access to $5,000-$50,000, depending on your account balance at the time you make a deposit into your Robinhood account.
If you use more than $1,000 of margin, you’ll pay 5% yearly interest on the amount you use above $1,000.
As a newbie investor, I found the interface very easy to use. I loved that I didn’t have to make a minimum commitment to start investing. I didn’t have to invest at all. It freed me up to try the platform out before I made my first small investment.
With Robinhood, you can learn as you invest. The tools make it easy to research the stock market and various investments. I especially love the podcast, which lets me catch up on the latest financial news while I’m doing other things.
Who shouldn’t use Robinhood?
If your goal is to set up an investment account to set aside money for retirement savings, Robinhood won’t be the best platform for you. Robinhood doesn’t offer any retirement savings options.
Those interested in dividend reinvestment
You won’t be able to reinvest any dividends you make through Robinhood. Those funds are credited as cash, so you’ll have to direct the platform where to spend them.
Bond and mutual fund investors
Although it’s great that you can invest in cryptocurrencies, I was surprised you can’t use Robinhood to invest in mutual funds or bonds. If you’re looking for a platform for those investments, you’ll need to keep searching.
Pros & cons
- Commission-free trading — Save money on fees and commissions with Robinhood.
- Visual dashboard — The interface is easy to use and keeps me updated on my portfolio.
- No-obligation signup — You can invest as much or as little as you want, with no minimum account balances required.
- Investment option limitations — You can’t invest in mutual funds or bonds with Robinhood.
- Funds aren’t automatically reinvested — I liked the fact that my dividends were credited to my account, but some would prefer to have the option to reinvest them.
Robinhood vs. Competitors
Company Cost Minimum requirement Investment types
Robinhood Free None Stocks, ETFs, options, cryptocurrencies
E*TRADE Free $0 Stocks, options, futures, ETFs, mutual funds, bonds, CDs
Public Free None Stock and ETFs
Robinhood isn’t the only trading app on the market. Here are a couple of others to think about.
E*TRADE was doing online trading long before its competitors, with a history dating all the way back to 1983. Although Robinhood’s interface is easier to use, E*TRADE offers more trading options and greater customizability. If you want to invest in cryptocurrencies, though, E*TRADE won’t work for you.
There’s no minimum investment to get started, and you’ll enjoy commission-free trades. If you don’t mind paying a little extra, Core Portfolios offers expertly-curated stocks for a fee of 0.30% and a minimum investment of $500.
Public works differently than most investing platforms. They do offer stock investments and ETFs – with any amount of money – but what makes them truly unique is that they add a social media aspect to the whole process. Making investing social helps beginner investors connect with others and learn why they should (or shouldn’t) invest in certain companies.
Public wants to allow young investors to invest in companies they truly believe in, so they offer fractional shares and have no minimum investment requirement.
It’s hard to go wrong when you’re investing with no fees and no minimum obligation. But if you’re serious about getting started on building a portfolio, it can help to choose the right platform from the start.
I find Robinhood a great choice because it’s not only easy to buy and sell, but to keep an eye on my portfolio and the market overall.Advertiser Disclosure – This advertisement contains information and materials provided by Robinhood Financial LLC and its affiliates (“Robinhood”) and MoneyUnder30, a third party not affiliated with Robinhood. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Securities offered through Robinhood Financial LLC and Robinhood Securities LLC, which are members of FINRA and SIPC. MoneyUnder30 is not a member of FINRA or SIPC.”