Robinhood Review - The Ins and Outs of Commission-Free Trading

Robinhood Review

Have you ever wanted to do all your stock trading from your smartphone for free? Well, that’s a possibility by using a mobile-only app as you will find out in this Robinhood review.

While you won’t have a full-service trading platform if you trade on Robinhood, it can be a good way to begin investing or save money on your future investments assuming you only want to trade stocks. Although, you can’t trade mutual funds, bonds, or forex.

As Robinhood is only available as a mobile app at the moment, you will need to have an iPhone, iPad, Apple Watch, or Android device to trade. A desktop interface is also planned, but, hasn’t been introduced yet.


Brief Overview of Robinhood

The key feature of Robinhood is commission-free trading, giving you the ability to buy and sell stocks & ETFs for free.

This is a very appealing offer to anybody whether you only buy once a month or once a day.

While price wars continue to drive trading commissions lower, no major brokerage has offered free trades for “just anybody.”

And, they also do not charge any account minimums meaning you only need to deposit enough money to afford the buying price of a single share of stock.

This makes it even easier for beginner investors with a limited income or number of assets to start investing.

Robinhood Gold

Of course, there never is a truly free lunch and Robinhood has to pay for commission-free trading somehow.

Robinhood employs the “freemium” business model that offers a basic service for free to attract customers (free stock trading) and offers a premium service for a small fee along with collecting interest from uninvested customer deposits.

The goal is to get enough paid subscribers to support the number of customers that only use the free service.

Robinhood’s current premium feature is its Gold subscription plan that allows you to do margin lending and engage in extended hours trading starting at $10 per month.

If enough people do not sign-up for the Gold plan, Robinhood will have to introduce more premium features or reduce the quality of their free perks to remain in business.

Robinhood is Mobile-Only

If you are glued to your smartphone and are an “I have an app for that” type of person, the fact that Robinhood is mobile-only might not be a bad deal.

But, there are times when a regular trading platform is helpful to eliminate the limitations of trying to cram a laptop screen’s amount of information onto a cellphone screen.


Who Should Consider Robinhood

Robinhood’s target customers are Millennials that use their phones for just about everything from texting to paying the bills.

Now they can start doing basic investing on their phone as well for free.

There are some fees for those that want to dive into margin lending, but, for those that simply want to buy and sell stocks or ETFs with a few taps of the finger will have a hard time finding a more affordable platform.

Passive investors that only do a few trades per month, maybe even buying the same stocks each time, might also like this app because while the app is easy to use, active traders will probably want a regular trading platform that also has research options.

And, it can become rather tiresome and difficult to manage the day-to-day trading functions from an app for serious investors as well.

Beginners with little free capital will like Robinhood because there are no account minimums and the commission-free trading.

However, depending on your level of investing knowledge you might want to use another discount broker that provides educational support and has research tools.

If you already know what stocks you want to buy, this could be a non-issue, but, many beginners will probably want to use these tools more than they expect.


Likes & Dislikes

Likes

Dislikes

  • No account minimums 
  • No commissions - and by no commissions we really mean NO commissions
  • Easy sign-up and very easy navigation in the app
  • Margin trading available
  • Limited investment offerings (only stocks and ETFs) and limited account choice (Single Taxable Brokerage only)
  • No short selling or leverage
  • No trading platform or tools - it's too basic for experienced investors
  • No research tools nor educational support
  • Doesn’t support incoming customer account transfers (ACATs)
  • No automatic dividend reinvestment program
  • Currently only available in the U.S. (although, they are expanding to Australia soon)

Investment Offerings

Robinhood allows you to buy over 5,000 stocks and ETFs listed on the U.S. stock exchanges commission-free.

What you cannot trade are options, OTC securities, warrants, mutual funds, or forex.

When you sign-up for Robin’s Gold plan you can trade margins for a flat monthly fee.

Being able to trade stocks and ETFs is a huge plus as you might expect a free investing service to only allow you to trade a handful of investments for free like your company 401k.

The good and the bad

The limited amount of advanced offerings will keep many advanced traders from using the platform.

You might expect that Robinhood would also offer options trading with their Gold service as you can do margin lending. Perhaps that is a future plan in their “freemium” pipeline.

But, for the average investor that simply wants to invest and not keep all their money in the bank, stocks & ETFS can be two of the most cost-effective ways to invest.

Widespread ETF investing is still catching on as many advisors still might recommend mutual funds, but, many brokerages have launched an ETF version of their mutual funds to attract investors looking for low-cost funds.

If you are comfortable investing in stocks & ETFS and only plan to do simple buy and sell trades, the lack of additional investment offerings shouldn’t stop you from choosing Robinhood.

Plus, if you have an existing brokerage account already, you can always use that to hold mutual funds as you cannot transfer external accounts to Robinhood.


Fees

Robinhood takes pride in being fee-free for its average user who won’t pay any fees and they do not have any minimum balance requirements or annual maintenance fees for any user.

Trading Fees

  • U.S.-listed stocks and ETFs (mobile trades): $0
  • Listed Foreign Securities: $50 per trade
  • Euroclear: $35 per trade
  • Canadian: $35 per trade
  • Broker Assisted Phone Trades: $10 per trade

Account Fees

  • ACH Bank Transfers (Incoming or Outgoing)- $0
  • Annual Maintenance Fee- $0
  • Complete Transfer of Assets (Transfer Out)-$75

Robinhood Gold Prices (Margin Trading)

Due to federal regulations, a margin trading account must have at least $2,000 in assets, but, this is the only account minimum required by Robinhood.

It has a tiered pricing model listed below with different levels of buying power per account size grouping:

Account size

Price per month

$2,000-$3,000
$3,000-$6,000
$6,000-$12,000
$12,000-$24,000
$24,000-$30,000
$30,000-$50,000
$50,000+

$6-$10
$10-$15
$10-$25
$10-$50
$10-$100
$10-$125
$10-$200

Robinhood’s average investor will be very happy with the fees because there simply aren’t any.

The fees charged for foreign stocks and margin are very competitive for those that decide to venture into different trading arenas, but, the average user probably won’t because they are most likely attracted to Robinhood because it’s commission-free.


Platform

Robinhood’s trading platform is a mobile platform ONLY for iOS and Android devices.

You can create an account on their website, but, you must download their app to actually use your account, similarly to Acorns app.

In addition to trading on their app, Robinhood has also included two “classic” features that most other brokerages offer: watchlist and smart notifications.

The Watchlist allows you to track the performance of stocks and ETFs that you are considering trading.

And, the Smart Notifications feature will tell when a company is about to announce dividends, earnings, and splits.

When you are ready to buy, you can set market, limit, stop loss, and stop limit orders as you would with any other online brokerage.

Usability

In general, the Robinhood app is easy to use. When you login, you will see the following on the home page:

  • Account Value
  • Historical Charts or Volatility Information
  • Green colored performance numbers if you’re up
  • Red colored performance numbers if you're down
  • Any relevant stories will display in a slider bar at the bottom of the screen.

What you will see when first choosing a stock:

Notice the news slider at the bottom of the app screen (pictured below):

Since Robinhood is mobile-based, it’s designers know that space is a premium.

They have done a good job of highlighting the information you need to know your current account value, how much a stock is trading for & its history, and how you can buy or sell.

Design

If you are hesitant to use an app-based trading platform, Robinhood is pretty good for what it offers.

The app has a sleek and minimalist appearance that allows you to navigate with ease and do what you want the first time.

Like your GPS might change to a dark background when driving at night, Robinhood has a similar design element. Their app has a light background when the market is open for trading and turns dark when the market closes.

Both designs, have the same Robinhood branding teal green buttons to maintain a level of consistency.

An app that is unique yet not too busy is important. The different color designs are a nice and clever touch that help make Robinhood feel refreshing.

Plus, they don’t clash with their signature green color meaning an easy-to-use app also means it needs to be easy-to-look-at as well!

Robinhood Gold

You can sign-up for the Robinhood Gold plan within the app’s drop-down menu.

After subscribing, you now have access to “Gold Buying Power” and the ability to do margin trading.

Additional benefits of Robinhood Gold include pre-market and after hours trading. While you have instant access to all trading deposits, you can access larger amounts as part of the Gold plan.


Trading Process

Robinhood is a no-frills trading platform with very limited functionality which also makes the trading process easy and understandable for beginners.

To execute a trade, you simply:

  • Choose the stock or ETF you want to buy or sell;
  • Enter the number of shares to trade;
  • Select the type of trade to finalize the order.

It’s that simple!

When looking at a particular stock, like DryShips Inc. for example, it shows you the current or historical performance, but cannot customize the charts or compare to other stocks simultaneously.

The real-time date will show instantly, although, there can be price quotes can sometimes lag.

Research

Research tools are one missing feature of Robinhood.

Beyond the basic performance charts and notifications feature, you will have to do your research elsewhere.

Maybe in the future, Robinhood will have some research tools, but, nothing has been announced yet.

If you know what you want to trade, Robinhood makes it easy to buy or sell.

But, if you are starting from scratch, you will need to get your information from the internet or your current brokerage’s research tools.

For those that have a brokerage account elsewhere but want to save a few dollars in trade commissions, Robinhood can be a decent alternative.


Educational Materials

Unlike other brokerages that will at least have a small knowledge base of basic investing articles to at least describe how margin trading works or the difference between stocks & ETFs, Robinhood’s help center is primarily dedicated to helping you navigate the app to avoid contacting customer service.

Much of this information can be found on the internet already, but, a beginner investor with no trading knowledge will probably be better served using a discount brokerage with vast educational support to avoid getting so they can research & get trading advice from the same place they keep their investments.


Support

Robinhood has phone support available during market hours from 9 a.m. to 6 p.m. Eastern, Monday through Friday. They will assist with phone trades in addition to technical support with the app.

In addition to phone support, you can also send them an e-mail anytime and they will respond back as soon as possible.

Some customers have said they don’t have the best customer support service, but, it is comparable to some other low-cost brokerages and considering Robinhood is a free option, having phone support is a nice touch when so many brokerages are pushing live chat as a way to reduce business costs.


Robinhood Review Final Verdict

If you solely want a free, barebones mobile app to casually invest with, Robinhood is a good option that allows you to “carry your investments in your pocket.”

But, if you want to trade more than stocks & ETFs or have research tools and educational support at your disposal, Robinhood’s commission-free trading will leave you disappointed.

For many, trading with Robinhood isn’t worth the hassle until they launch a web-based platform, add more research tools, or begin offering retirement accounts to make investing in stocks and ETFs even cheaper.

Have you ever wanted to do all your stock trading from your smartphone for free? Well, that’s a possibility by using a mobile-only app as you will find out in this Robinhood review. While you won’t have a full-service trading platform if you trade on Robinhood, it can be a good way to begin investing or save money on your future investments assuming you only want to trade stocks.

Andrew
 

My name is Andrew and I run Slick Bucks to help folks learn to manage money cleverly, and how that clever management can make you wealthier.

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