Robinhood Review 2019
Born as an idea of two Stanford roommates 5 years ago, today Robinhood is a $5.6 billion company aimed at revolutionizing the financial system. The platform became so successful all because of the concept to democratize the investment process by cutting the trading fees and provide commission-free investing. In this Robinhood review, we will dive deeper into the reasons why the investment app is preferred by more than 4 million users, making it one of the fastest-growing players in the industry.
Commissions and Fees
Simply put, Robinhood provides the cheapest possible trading services that you can find. The investment app became so widely popular due to its disruptive model to provide free investing to the masses.
The commission fee structure allows clients to trade U.S. listed securities commission-free. In addition to all that, all automatic clearing house (ACH) bank transfers are completely free of charge.
The majority of the investment app’s users are millennials and this is no coincidence. The Robinhood minimum deposit is set at $0 which makes it open to all types of investors, no matter of the funds they have at their disposal.
In a world where some of the largest brokers set minimums of $500 for the brokerage accounts and above, Robinhood easily shines. Yet, for margin trading (Robinhood Gold), the minimum account balance is set at $2 000 which is the regulatory standard.
When it comes to cryptocurrency trading based on blockchain technologies, depending on the digital asset, Robinhood sets the minimum order sizes as follows:
Robinhood is renowned also for its fair cryptocurrency prices that are very close to the market one. Unlike exchanges and other apps, Robinhood Crypto offers fair prices, without any hidden fees.
The range of traded instruments is not one of Robinhood app’s strengths. As of now, the asset classes that users can choose from are limited to:
There are no mutual funds, FX and fixed-income instruments. Another downside is the fact that the investment app does not offer an automatic dividend reinvestment program.
This means that when dividends are issued, they are credited to accounts as cash and cannot be invested back in the particular security.
Another thing that may bother potential users is the way cryptocurrency investing is handled. When buying digital assets, the investor cannot transfer them to their own online or offline wallets.
The cryptocurrencies remain within the Robinhood app and cannot be used for third-party transactions.
Many investors wonder whether they will be able to get involved in day trading on Robinhood.
The truth is that investors are limited to 3 trades per day for the period of 5 trading days unless they have finished yesterday’s trading session with an account balance of more than $25 000.
Trading Platforms and Tools
The basic idea of the Robinhood trading platform is to provide everything needed for one to invest from his mobile device.
Android and iOS users can navigate the platform easily and customize all their preferred features such as relevant alerts, personal news feed, etc.
The sign-up and the initial setup, including the account funding, are quick and smooth. According to the company, the application approval happens within an hour.
The app does not offer the traditional interface of typical stockbroker platforms. Instead, it is minimalistic and intuitive, allowing quick trades execution with a limit, stop and market orders, which is more than enough for basic investing.
The data is real-time, although the terms of the platform mention that sometimes it may lag with up to 20 minutes.
Although Robinhood started as an investment app only, it has recently released a desktop version of their platform. Yet, the service is far from the ultimate investment experience.
Overall, the Robinhood trading platform lacks much of the needed tools when compared to established brokers. Although it offers analyst ratings and commentary from Morningstar, there are no backtesting software, nor any in-depth charting, stock screener and visualization features.
The charts can only show historical data and tick information that cannot be customized. With that said, if you are a day trader or a data geek, look elsewhere.
We should also mention and the “Robinhood Gold” investment feature. The premium service allows investors to trade on margin (2x). It has its perks like extended trading hours and instant access to your funds without having to wait a couple of days for a settlement.
If you are one of those riskier investors and decide to trade on margin, bear in mind that you won’t have to pay any interest. Instead, you will be charged with a monthly fee, depending on the account size.
For all those who want a professional advice, Robinhood offers the chance to take advantage of a broker-assisted trading for which you will have to pay additionally.
Education and Research
Unfortunately, all the educational part is limited to tutorials on how to navigate the app and where to find newly-introduced features.
The idea of the Robinhood app is to simplify the investment process as much as possible, which is why the design is so clean and simple. The controversial part here is that, although the investment app targets newbies, it lacks the much-needed know-how and educational resources to make their lives easier.
The only form of basic research tools that the mobile app offers is limited to tick charts and valuation stats. Yet, if you want to test different scenarios, use screeners or dive deeper in indicators and numbers, Robinhood will likely disappoint.
When it comes to the web-based platform, the case is pretty much the same. There are no research or educational tools, apart from articles on the platforms’ UX.
You can find some additional information on their blog though, but it is yet again limited to corporate news, new features and platform developments.
There are no how-to guides, videos, articles, etc. that may help you understand more about the investment process or how to achieve your personal goals.
With that said, if you want to take advantage of Robinhood’s free-of-charge investment platform, the best thing to do is conduct your research elsewhere and use the app only for trades execution.
The customer service is standard – there are multiple ways to get in touch with a Robinhood representative such as phone, email, social media, etc. Yet, the service is not 24/7, so if you try to contact them outside the standard business hours, you will have to wait until the next day.
Here we can focus also on the recent allegations against Robinhood about exploiting their clients’ order flow.
The investment app is said to be earning 40% of its revenue from selling its clients orders to high-frequency traders, with two of the most prominent industry leaders - Citadel and Two Sigma Securities on the receiving end of the deal. Although the company CEO published a letter to decline the allegations, Citadel and Two Sigma Securities refuse to comment.
The customer service is further enhanced by the investment app’s referral program. If you invite a friend of yours to sign up and he gets approved, then both of you will get a free stock. That way, anyone can get a share of Apple, Ford, Google, etc., simply by spreading the word about Robinhood.
Alternatives To Robinhood
Robinhood Review Summary
Commissions & Fees
Trading Platforms & Tools
Education & Research
There are plenty of investment apps that offer “free” investing. Yet, most of them can surprise you with some hidden fees popping-up for this or that, which significantly increases the overall trading costs.
Investing via Robinhood, on the contrary, is entirely free. If you want to find the cheapest way to invest, then Robinhood is your best shot.
The free-trading app is ideal for investors who are willing to trade stocks, ETFs, options or some cryptocurrencies without having to pay for that.
If your primary goal is to cut your costs and do basic buying and selling of stocks, options and cryptocurrencies, then Robinhood is what you should choose.
All those who are seeking advanced trading tools, research & analysis features and want to have more broad investment choices at their disposal, consider using Trade Ideas.
Entirely free investing
Lack of educational resources
Slick design and intuitive user interface
Everything needed for basic investing
No access to mutual funds
Lack of 24/7 support