Robinhood had a busy week. Here's what the platform's users need to know.
Brokerage accounts like Robinhood have grown increasingly popular in recent years. In fact, Robinhood is a big draw for new investors because it lets them buy stocks and not pay commissions on a per-trade basis. Those commissions can eat into investors' profits, so avoiding them is a good thing.
But Robinhood had a rocky start to the month of August, and much of that has to do with the platform's initial public offering (IPO). If you use Robinhood, here's what you need to know.
What happened to Robinhood stock?
An IPO takes place when a private company decides to go public and offer up its stock to investors. Robinhood had its IPO on July 29.
At first, the results of that IPO were disappointing, with Robinhood shares falling below the initial IPO price. But then investors scooped up Robinhood shares at a rapid clip, driving up the price. The rally was so intense that the trading of Robinhood stock was temporarily halted on Aug. 4. By Aug. 5, Robinhood shares had plunged, but they crept back up again the day after.
Should Robinhood users be worried?
Robinhood's stock has been on an extremely volatile ride. And at this point, it's hard to predict when its share price will stabilize and what investors think the company is really worth.
All of this means that it's a precarious time to invest in Robinhood stock. But if you're simply someone who uses the Robinhood platform, that's a different story.
It's true that Robinhood has faced its share of lawsuits related to halting trading during a series of meme stock rallies earlier this year. But the company remains a popular platform for trading -- and users and investors are likely to stay loyal. So if you use Robinhood as your brokerage, there's no reason to rush and pull your money out.
Robinhood doesn't charge a per-trade fee, and it also doesn't require an account minimum. That gives you a lot of flexibility as an investor.
Plus, Robinhood allows users to purchase fractional shares of stock so that if you don't want to buy a full share of a company's stock or can't afford one, you can buy a portion of a share instead. While a growing number of brokerages are starting to offer fractional investing, not every brokerage does.
We don't know what the future holds for Robinhood's stock price or what regulatory changes may be coming in light of the company's ongoing legal battles. Chances are, though, if new trading regulations are enacted as a result of Robinhood's actions, they won't apply to Robinhood solely, but to all brokerages.
If you've been happy using Robinhood so far, there's no reason to find another brokerage just yet. But you may want to hold off on buying shares of its stock until trading cools off.
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FAQs
FINRA is a self-regulatory body that many brokerages participate in. As you may recall, your money in Robinhood is protected by the Securities Investor Protection Corporation (SIPC). The SIPC protects up to $250,000 for cash claims and $500,000 for securities–so 99% of investors have NOTHING TO WORRY ABOUT.
Should I worry about my money in Robinhood? ›
Is my money safe with Robinhood? Investment accounts with Robinhood are covered by more than just the Securities Investor Protection Corp. (SIPC), which protects up to $500,000 for securities and cash or $250,000 for cash only per account.
Is there any downside to using Robinhood? ›
Robinhood's range of offerings is extremely limited in that it only offers stocks, ETFs, options, and cryptocurrency trading. Robinhood doesn't support mutual funds or fixed-income products, and you can't trade commodities, forex, or futures. If you choose Robinhood as your broker, you can invest in: Stocks, long only.
Is it safe to use Robinhood right now? ›
They are regulated by the Securities and Exchange Commission (SEC), similar to other popular brokers. In addition to their individual account security measures, Robinhood is also a member of the SIPC, so securities are protected up to $500,000 (up to $250,000 for cash).
Should I stay on Robinhood? ›
Robinhood isn't the most robust trading platform and doesn't offer all of the advanced charts and trade types that expert, experienced traders may want. But the basics are covered, making it a good choice for beginner investors and casual investors.
Why do people say not to use Robinhood? ›
What are the disadvantages of using Robinhood? The main downside of Robinhood is that the investment selection is limited for hands-off, passive investors: The broker offers no mutual funds or index funds, which financial advisors typically suggest using as the basis of a diversified portfolio.
Do I actually own stock on Robinhood? ›
Do you actually own the stock on Robinhood? Investors do own the shares of stocks and ETFs purchased on the Robinhood platform. This is the same type of stock ownership you get when you purchase stocks through most other brokerage companies.
How much does Robinhood charge to cash out? ›
Bank account: No fee for withdrawals. External debit card account: Withdrawals have a 1.5% fee based on the amount being transferred out. You'll see the calculated fee when you initiate the withdrawal, so you'll know the amount up front.
How do I get out of Robinhood? ›
Select Account (person) → Settings. Select Account Information → Deactivate Account. Follow the steps to close all your brokerage positions and withdraw your outstanding balance.
Can you make money with Robinhood? ›
At a Glance: Robinhood is a user-friendly financial technology company that disrupted the industry by offering commission-free trading, fractional shares, and easy mobile access. Users can make money through asset appreciation by buying low and selling high, or by collecting dividends from companies.
Enable Two-Factor Authentication
2FA helps protect your Robinhood account by requiring two sources of verification to sign in to your Robinhood account: something you know (your password) and something you have (a one-time code or device approval request).
Is it safe to link bank account to Robinhood? ›
insured banks each day. This means that cash balances at Robinhood are insured up to $250,000 per user. In addition, all stocks and ETFs in the platform are insured up to $500,000 through the Security Investors Protection Corporation (SIPC). Robinhood's crypto is not covered by these policies.
Is Fidelity better than Robinhood? ›
Fidelity's platforms also support trading from charts or placing basket trades, which are features not available with Robinhood. Both Fidelity and Robinhood have suitable trading experiences for new investors, but Fidelity is superior to Robinhood for intermediate and advanced investors.
Does Robinhood charge fees? ›
If you use Robinhood, you won't pay annual fees, commission fees, inactivity fees, and fees for moving money to your bank account. But you'll pay a $5 monthly fee to upgrade to a Gold account and various service fees for things like requesting a paper statement.
What is the average Robinhood account balance? ›
Robinhood Yearly Average Account Size
| Robinhood Average Account Size 2017 | $2,371 |
|---|
| Robinhood Average Account Size 2019 | $2,771 |
| Robinhood Average Account Size 2020 | $5,038 |
| Robinhood Average Account Size 2021 | $4,317 |
| Robinhood Average Account Size 2022 | $2,695 |
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Robinhood: Security. Both Coinbase and Robinhood are safe places to buy and sell cryptocurrency. They use many of the same industry-leading security methods, so they're about equal for protecting your crypto. They also have FDIC insurance, which covers cash deposits up to $250,000 per account.
Is my money safe if Robinhood shuts down? ›
Since Robinhood is a member of SIPC, you are covered for up to $500,000 worth of securities, including $250,000 which can cover cash. So, if Robinhood somehow went out of business and lost customer assets, the SIPC would step in. Your assets would be safe regardless of what happens to the brokerage.
Is investing in Robinhood worth it? ›
Robinhood is a good platform for active trading and provides commission-free trades on all investments. But it's lacking in some areas, such as the number of accounts it offers and the fact it doesn't let you invest in certain popular asset classes such as bonds and mutual funds.
Can you make a lot of money on Robinhood? ›
In general, trading on Robinhood is not more risky than trading on any other platform. However, Robinhood's margin trading feature is risky for the average investor. Trading with money that is not yours is very risky. If you borrow money and the share goes up, and you sell in time, you can make a big profit.
Why did Robinhood take my money? ›
Reversals may happen for a few reasons: Insufficient Funds. Wrong Type of Account (doesn't support ACH transactions) Duplicate Transaction.
