Investing is not easy for everyone, particularly if you are only a beginner in the field. Most people use trading apps, allowing them to invest their money much easier than before. Still, many of the pro apps are quite expensive, especially when it comes to their monthly fees. While veteran investors may not have a problem, beginners do not even stand a chance.
This is why Robinhood was created: to level out the playing field. Made for the young millennial, this app holds quite a lot of surprises for traders. But what are the advantages and drawbacks of this app? Who should use it – and who should steer clear of it? This Robinhood review will provide you with a bit of insight on the matter.
Who Is Robinhood For?
Robinhood is for the young millennial who wishes to start investing and trading. It is best suited for beginners that only want to trade cryptocurrencies and fractional shares in smaller quantities. In terms of research and use, it needs only a little from the trader, making it the perfect option for those who have never traded before.
Robinhood is mostly for those who require simplicity in an application rather than multiple features. The trading costs are very low, making it the ideal choice for the investor on a budget.
Robinhood is best for mobile users that work with individual taxable accounts, cryptocurrency, and margin accounts. It may not be the best choice for those who want even more fancy features from an app – but for a beginner, this can actually be very convenient.
Things We Like
What we like most about Robinhood is that it offers free stock, ETF, options, and cryptocurrency trading. We also like that is gives us the option for margin investing and fractional shares, along with cash management accounts.
Due to the simplicity of the layout, both the website and the mobile app are very easy to navigate. This makes Robinhood the perfect choice for beginners that have only taken an interest in trading but do not really know how to make their way around.
Things We Don’t Like
Due to the idea of keeping things as simple as possible, you can say that many features were simplified to the point that they are lacking. As a result, we do not see many trading tools and investing research options.
The customer service can also only be contacted at limited times – which means that even if you need an answer right away, you may occasionally have to wait for it. Also, it is very inconvenient that you can’t name beneficiaries so that the money transfers automatically upon your death.
Pros / Cons
- No account minimum
- Streamlined interface
- Cryptocurrency trading
- No retirement accounts
- No mutual funds or bonds
- Limited customer support
Safety and Regulation
The Robinhood app was launched in 2015, followed closely by the website, which was launched in 2017. In time, the application became more and more popular, especially among beginner investors.
Who Is Robinhood?
Robinhood is an online trading platform that allows you to manage your money, but also invest it. You may use it as a way to store your money, withdrawing it upon need from your debit card, but you may also use it to track stocks and cryptocurrencies.
Is Robinhood Regulated?
Like most brokers dealing with securities, Robinhood also received regulation from SEC (Securities and Exchange Commission). Robinhood is also a member of FINRA (Financial Industry and Regulatory Authority).
Countries It Accepts Clients From
Robinhood is accepted and can be used by most countries around the world. The only exceptions to this are Iran, Cuba, Syria, North Korea, and the Crimean area of Ukraine. You will not be allowed to enter your account from these countries, and if you even attempt to log in while traveling, you risk having your account restricted.
Robinhood is still relatively new compared to other apps on the market. However, it did receive an award from Google, namely the “2016 Google Play Award for Best Use of Material Design.”
Range of Offerings and Products
Robinhood offers several products you can invest in. Here are the main ways for you to give your fortune a kickstart.
Funds and Stocks
As we previously pointed out, Robinhood offers you the opportunity to get commission-free stocks, options, and ETF trades. These trades can be made in whichever option you want, whether it is your phone or computer. Fractional shares may be accessed here as well.
If you are a fan of investing in cryptocurrency, the Robinhood Crypto feature can also prove to be a very convenient offering. You get Ethereum, Bitcoin, and Dogecoin. The app allows you to invest in small Bitcoin amounts, meaning that it is a perfect choice if you are running low on funds.
Robinhood also allows you to trade options within the app. Bear in mind that you may only trade with stock and the options tied to the stock index. You may also only get these options for a bigger stock.
With Robinhood, there are two trading platforms that you may go for. The first is the web platform, which you can access directly from a browser. This platform is very simple to use but meets all the basic needs that an investor might require.
The mobile platform has slightly more functions, mainly because it was created before the website. With the mobile app, you can enjoy the news feed, customizable alerts, the possibility of gaining access to live earning calls, and candlestick charts.
When you open a Robinhood account, you are automatically given a Robinhood Instant account. However, if you want, you may upgrade your account to Robinhood Gold or convert it into a cash account.
If you decide to upgrade and get the Robinhood Gold account, you will have to pay a monthly fee of $5. You also have a limit of three-day trades every week. Unless you have a balance of more than $25,000, you will be blocked for 90 days from using your account.
Usually, Robinhood works through direct deposit (i.e., a bank transfer). That being said, there are three other methods by which you can wire the money. For example, you may choose to do it either through your Robinhood account or set it to automatically withdraw from your payroll.
There is no deposit fee that you have to concern yourself with. However, if the transfer goes over the “Instant” limit, then you might have to wait a couple of days until the money reaches your account.
If you stick with the standard Robinhood Instant account, then there will be no minimum for the deposits. Still, if you go for the Robinhood Gold account, then you will have to put in a minimum of $2,000.
Since Robinhood comes with its own debit card, you can withdraw money for free from pretty much any ATM. However, wire withdrawals are quite expensive. A domestic wire transfer costs $25, whereas an international transfer costs $50. If you make multiple accounts, it can get rather pricey.
Robinhood does not have a demo account. You start straight at Robinhood Instant account, which does not require minimum or extra fees. After that, you may decide whether you want to upgrade to Gold or not. Some may even see the Instant account as a version of the Demo.
The platform has a variety of promotions that you may use. For one, you may use the Robinhood promotion code to get a free stock when you open an account. This should help you get started as you are advancing on your investor journey. The stocks are randomly picked and added to your portfolio.
You also get a referral bonus that allows you to win up to $500. Robinhood also regularly releases coupon codes, which every trader is free to access. For this reason, you may want to pay close attention to their newsfeed.
Client Support and Education
Client support can be done through email and social media. According to previous users, it is one of the very few areas where Robinhood is lacking, as most of them expect phone support as well. Responses also tend to be slow, suggesting that there isn’t always a representative there to help you.
Also, considering the app was made for new investors, there is a clear absence of educational materials. While the “Learn” page does have a couple of articles on basic topics, there are no webinars or videos available. The only useful educational feature is the daily podcast, Robinhood Snacks, which can provide some information on the market, but it’s not enough.
Verdict – Overall Rating
In the end, Robinhood is the perfect investing tool for beginner investors that never really invested before but still did their research. It is great for those who are low on investing funds and want something simple, with no unnecessary bells and whistles. Yes, it may be lacking in certain areas such as the educational resources, but it still holds promise for low-budget investors.
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There is a very high degree of risk involved in trading securities.
With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection, and market volatility that may substantially affect the price or liquidity of a currency or related instrument. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses. Learn more at Wikipedia.
All investments involve risks and are not suitable for every investor. The value of securities may fluctuate and as a result, clients may lose more than their original investment. The past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk it does not assure a profit, or protect against the loss, in a down market.
There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. More details here.
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