Robinhood Review 2024 (2024)

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About Robinhood

Robinhood is one of the best investment apps that gets you commission-free trading on several US-listed investment types, with high-yield cash management offerings, margin trading, and access to initial public offering (IPO) investments.

Robinhood Investing also offers cryptocurrencies, so it could be a solid choice for those who want to trade assets like bitcoin and ether without commissions. Plus, Robinhood recently launched a cash card that lets you earn cash back at places you shop, with the option to earn bonuses.

Robinhood accounts are available as both cash and margin. When deciding to open a cash account versus a margin account, it will depend on how you want to fund your account. Cash accounts are funded with existing money from your bank account, while margin accounts can be partially funded with borrowed money from a lender.

The platform also offers IRAs with a 1% match, but the overall brokerage isn't a good choice for those who want access to investment options like joint accounts and education savings accounts.

Is Robinhood Right For You?

As one of the best investment apps for beginners, Robinhood's user-friendly interface and simplified trading strategies make it a great pick for new investors. In general, it's an ideal platform for beginners looking to implement an active investing strategy, especially since it is fairly low-cost.

Robinhood is also best for crypto-focused investors who want to trade assets like bitcoin and ether. It's not a good option for hands-off traders.

Robinhood: Overall Rating

Robinhood Pros and Cons

How trustworthy is Robinhood?

Robinhood has a D rating with the Better Business Bureau. The bureau says the brokerage has a pattern of complaints that show multiple users were unable to withdraw funds from their investing accounts.

In 2021, Robinhood faced intense scrutiny after it halted trading on several stocks — namely GameStop (GME) and AMC Entertainment (AMC) — whose share prices skyrocketed due to the efforts of members of a Reddit forum called r/WallStreetBets. The investment app eventually reopened trading on many of the stocks it had temporarily restricted, but its restrictions led to user retaliation and major lawsuits.

BBB data also shows that in 2021, the Financial Industry Regulatory Authority (FINRA) claimed that — at certain times dating back to 2016 — Robinhood provided false and misleading information on important issues, approved customers for options trading when they didn't meet the company's eligibility criteria, and failed to properly supervise its technology. Robinhood neither admitted to nor denied the charges, and FINRA fined the platform $57 million and ordered $12.6 million in restitution.

Ways to Invest with Robinhood

Stocks and Funds

Robinhood is best for active traders interested in placing commission-free trades in stocks, options, ETFs, and cryptocurrencies. The brokerage has no minimum account size requirements for most of its investments, but you'll have to make minimum opening deposits for its fractional shares and margin trading offerings. You'll also need at least $25,000 for pattern-day trading.

Robinhood offers fractional shares, which means that you can purchase portions of stock in companies without paying the full share price. You'll only need $1 to get started. And its advanced charts give all users access to a more in-depth analysis of different investments.

Plus, Robinhood's web platform and mobile offerings are straightforward to navigate. And you'll get one share of free stock when you open an account. You'll also get a free stock whenever you make successful referrals, and 1.5% APY on uninvested cash (Robinhood Gold members receive 5% APY).

Options

Robinhood's commission-free option trading comes with a notable perk: no per-contract fees. Many brokers charge under $1 per options contract, and some platforms use tiered pricing structures that charge lower fees for more active traders and higher fees for less active traders.

But with Robinhood, you'll incur no such fees. It's worth pointing out, though, that options investing carries more risk than stock and ETFs. Robinhood offers options risk disclosures on its website. And while Robinhood formerly required its users to have a margin account for options trading, you can now trade options with its regular cash accounts.

Cryptocurrency

This platform's commission-free rule applies to cryptocurrencies as well. The Robinhood Crypto account option lets you trade an array of digital currencies such as bitcoin, dogecoin, and ether. In total, Robinhood offers 18 cryptocurrencies.

This is a limited selection compared to exchanges (e.g., Kraken and Coinbase) that offer 100+ assets, but the brokerage's selection could still be useful as long as it supports the asset you'd like to exchange.

You can use any funds you've deposited into your brokerage account to purchase cryptocurrencies through Robinhood Crypto. Robinhood also rolled out crypto wallets in early 2022.

Before its wallet launch, users couldn't transfer crypto from or to external wallet addresses. But now, you can send any crypto assets to the wallet of your choosing. In addition, Robinhood is building a web3, non-custodial crypto wallet and DeFi platform.

The app will let users exchange crypto without network fees, store NFTs and access NFT marketplaces, utilize DeFi protocols, and connect to DeFi apps.

Robinhood Gold

Robinhood Gold allows you to trade on margin and access Morningstar professional research reports and Nasdaq market data.

With margin trading, you're essentially borrowing money from a brokerage to invest in securities or other financial assets you can't afford, but you'll need at least $2,000 to get started. Your investments serve as collateral for the margin loan, and you'll have to pay back your borrowed funds. Gold members get a lower margin rate compared to non-Gold members (8% interest instead of a high 12% rate)

Gold members can also earn 5.00% interest on uninvested cash in their brokerage accounts. Non-Gold members can earn 1.50% as long as they're enrolled in a cash sweep.

IPOs

Robinhood has IPO access. Unlike other popular brokerages that require a minimum household asset sizefor investors who want to take advantage of the IPO offer price, Robinhood says it has no minimum balance or special status requirements.

This investment offering is best for traders who want to buy a company's IPO shares before they're listed on an exchange for the public. A big downside, though, is that you aren't guaranteed to receive IPO shares when you request them. This is because Robinhood gets a limited amount of shares of each IPO.

IRAs

Robinhood has also launched IRAs for those looking to build wealth through a retirement account. Though previously not available to all of its users (users could only sign up for the waitlist as Robinhood slowly rolled out access), it's now available to everyone.

Its accounts — traditional IRAs and Roth IRAs — allow for trading without commissions, recommended portfolios, and an extra 1% match on every dollar that goes toward your IRA. Robinhood IRAs trade stocks, ETFs, and options. You can currently only sell stocks and ETFs in the IRA, but Robinhood will also soon launch options trading for eligible users.

Robinhood Fees

Robinhood has no minimum to open an account and start investing, plus there's a 0% fee. However, fractional shares have a $1 minimum and a $2,000 minimum requirement to access margin trading. In order to upgrade to Robinhood Gold, you'll have to $5 per month.

Robinhood — Frequently Asked Questions (FAQs)

How Robinhood Compares

Robinhood vs. Fidelity

Fidelity is one of the top online brokers for automated investing, educational resources, investment options, and low-cost trading. Robinhood and Fidelity Investments both offer commission-free trading on multiple investment types. But you'll have a wider range of investment options at Fidelity than you will with Robinhood.

Both companies offer stocks, ETFs, and options, but, unlike Robinhood, Fidelity offers automated investing and advisor-managed portfolios for hands-off investors. The brokerage also has a more extensive account and investment selection.

However, Robinhood is the better choice for all-around commission-free trading and crypto trading.

Fidelity review

Robinhood vs. SoFi

SoFi is an investment app suitable for all kinds of investors but is generally best for beginners and passive investors. Robinhood and SoFi Invest have similar investment offerings. But Robinhood is the cheaper option when it comes to trading fees. Though SoFi also offers DIY trading, it's a better choice for those in search of IRAs and automated investing.

If you like the sound of active trading, though, and don't mind doing a bit of your own research on your investments, Robinhood's low fees and commission-free securities could be a good fit for you.

Robinhood vs. SoFi Invest

How Robinhood Makes Money

Instead of charging commissions, Robinhood makes money through a process called payment for order flow. When a user makes a trade, Robinhood sends that trade to a third party that places many large orders at once for a slight advantage. The larger company then compensates Robinhood. The brokerage also generates income from interest on securities and margin loans and with Robinhood Gold, a premium subscription service that charges a flat monthly fee.

Finally, Robinhood also charges several fees for certain services and transactions, and it may pass on third-party costs to its customers. To avoid surprises when using the app, it's good practice to learn when you might pay extra.

If you use Robinhood, you won't pay annual fees, commission fees, inactivity fees, or 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. The brokerage will also pass on third-party costs, such as regulatory fees and out-of-network ATM fees, to you. It's possible to avoid some of these costs, but you'll need to understand when they may apply.

How to Minimize Robinhood Fees

When you open a Robinhood account, you're already avoiding fees that some other brokerages charge. But if you want to minimize some of the other costs of using Robinhood, you can try the following.

• Avoid the upgrade: Consider using the free account instead of upgrading to Gold service.
• Research fees before buying: Before placing a trade or requesting any services, visit Robinhood's support page and look for information about fees and when they apply.
• Search for in-network ATMs: You can withdraw cash from your Robinhood account for free using a debit card at participating stores and at in-network ATMs. Tap the "Find ATMs" button in your Robinhood app to find the nearest withdrawal locations.
• Check out the foreign stock: Before buying shares from a foreign company, find information about potential fees from the bank that issues the American Depositary receipt.
• Go paperless: Instead of paying for paper monthly statements and confirmations, choose the electronic versions.
• Transfer to your own bank account:Robinhood charges you a fee when transferring money to a competing brokerage, but not to your own bank account. If you need to pull money out of your Robinhood account, consider moving it to your bank first and then investing elsewhere.

How to Close a Robinhood Account

Prior to deleting your account, you'll first need to choose what to do with your holdings:

• Sell all your shares and close all positions — alternatively, you can just transfer them to another brokerage account through the Automated Customer Account Transfer Service (ACATS) form
• Close your debit card if you signed up for one
• Transfer all money out of your account to bring your balance to $0

If you have questions about closing your account, reach out to Robinhood customer support directly. They can help guide you through the process.

Why You Should Trust Us: How We Reviewed Robinhood

We examined Robinhood Investingusing Personal Finance Insider's rating methodology for investing platforms to compare and examine account types, pricing, investment options, and overall customer experience when reviewing investing platforms. Platforms are given a rating between 0 and 5.

Cryptocurrency exchanges generally offer multiple assets, trading tools, fees, and other resources. Some investing platforms are better for more advanced investors or active investors, while others may better suit beginner investors and passive investors. Robinhood was evaluated with a focus on how it performed in each category.