Robinhood has develop into a dominant pressure in the investing business – offering fee free trades to its customers, the power to trade choices and even crypto foreign money, and now it even has checking and financial savings accounts with a excessive yield!

It bills itself as the future of cash (each investing and now banking) – with $zero trades, a flowery smartphone app, and a bunch of fancy investment-backers that may make it the envy of any Wall Road agency.

However as a buyer and investor, is it’s commission-free buying and selling platform value it? Do you have to give it a attempt as an investor?

Listed here are my trustworthy thoughts on Robinhood. If you want to skip the Robinhood evaluation, the bottom line is that there are higher free options for long run buyers.

We advocate Fidelity and TD Ameritrade because they each supply $zero commission-free trades, $0 minimal IRAs and are full service. They are a better answer as a result of they offer many more instruments and assets for the long run. They usually both have great apps.

This is The Evaluate On Robinhood

Update: On November 1, Robinhood introduced that they will be launching a web-based platform of their app, as well as some new tools to make the expertise higher. In the event you’ve been a beta tester, please share your insights. We’ll update this evaluate as we check out their new products.

Update: On December 13, Robinhood announced that they will be launching options buying and selling on their platform at no cost. In the event you’re interested, you should be a part of the waitlist and we’ll share extra once we can. Nevertheless, we do know which you can’t use Gold Shopping for Power for options spreads, and it’s essential to use your margin limits or cash available to cover the maximum loss.

Replace: On January 25, 2018, Robinhood introduced free crypto trading can be rolling out in February. Solely Bitcoin and Ethereum (ETH) might be out there for trading when that rolls out to waves of customers beginning in California, Massachusetts, Missouri, Montana, and New Hampshire.

Replace: On October 1, 2019, Robinhood introduced it’ll begin providing a money administration account – with a strong high yield on your cash! This cash administration account is a superb choice and is corresponding to different excessive yield savings accounts.

Setting Up The Robinhood App

Robinhood does every little thing via it is smartphone app. Even in the event you enroll on their web site at Robinhood.com, you continue to should download their app.

Once I signed up on the website, I acquired an e mail with a link to download the Robinhood app. I followed the link and received started.

 Once I downloaded the Robinhood App for my iPhone, I opened it up. After you login together with your info, it asks you to create a Watchlist.

I didn’t really perceive what was even occurring at this level – I significantly simply entered my login info and it started populating a Watchlist. I wish it did not do this (and you do not have a option to skip it that I saw).

The subsequent display asks if you need Sensible Notifications for the app. I opted out of this because I hate notifications on my iPhone. I am positive others will discover this function helpful though:

The subsequent display asks you to fund your account. Out of each app I have ever used, this has been probably the most intuitive a part of the method. I discover linking financial institution accounts is usually a problem, even on a desktop pc, but Robinhood made this straightforward.

Once your account is funded, you will obtain a affirmation e-mail and an alert on the iPhone app. I respect the e-mail reminders because I disabled the notifications on my telephone. This is what your account display appears like:

Nevertheless, earlier than I might do anything, Robinhood as soon as once more requested me to setup a bunch of investment goals. I didn’t actually perceive the aim of those, as they do not appear to have any software program or assist to customise a portfolio or commerce.

It actually didn’t take long, but simply more added steps that I felt that weren’t needed. It was all pretty commonplace stuff, however appeared like a robo-advisor:

How To Use The Robinhood App

Now that you’ve your account funded, you can start utilizing the Robinhood App to lookup and trade stocks.

They have some very elegant ways to lookup stock info. This is what I started with, wanting up Abbott Labs (ABT). Once you lookup the stock symbol, it provides you a quote, primary chart, and different primary information about the stock.

That is all trading info – they have no elementary information about the corporate:

Earlier than you can also make a trade, Robinhood does have this cool function that allows you to take a look at “Well-liked Stocks” based mostly on what others are doing on their app.

While I do not wish to base my investment determination on what others are doing, somewhat voyeurism is all the time fun:

Once I went to make my first trade, I assumed I might maintain it easy and just spend money on SPY. So, I typed in the symbol for SPY and received a quote.

I then clicked the large Purchase button on the display and it brought me to the order display. It’s extremely intuitive and straightforward to use to put an order. You merely sort within the shares you need to purchase and the worth. If you don’t need a market order, you possibly can tap the “Market” and change it to a limit order.

After that, you assessment your order. Then, you simply swipe as much as submit. Personally, I hate having to swipe to entry features on a telephone. Just let me push a button.

Robinhood Gold

Robinhood Gold provides you:

• Margin Buying and selling: They name this function “Gold Shopping for Energy”, however truthfully it’s just 2x margin in your account. Nevertheless, in contrast to different margin accounts, you don’t pay curiosity. Your margin energy is predicated on the flat month-to-month charge you will pay
• Pre & After Hours Trading: You will get access to pre market and after hours trading
• Greater Prompt Deposits: You will get immediate access to your money, including whenever you promote a security, you don’t have to attend the few days for the settlement(they name this “On the spot Reinvestment”)

This is the place it gets tough. The pricing for all of that is pretty high for my part. In fact, that is all the time subject to vary (and please let us know within the comments if it does change):

Should you’re lucky sufficient to get an early invite, you’ll be able to improve by going to your Account display and tapping “Robinhood Gold”.

Robinhood Money

After stumbling to launch their money account, Robinhood now presents a cash administration account with a strong APY that is aggressive to the top high yield savings accounts on the market.

The account presently pays you 2.05% APY. Like all variable charges, this might go up or down over time.

The account has no minimum requirements, no monthly charge, no overdraft payment, and comes with a Mastercard debit card to simply access your cash at their big network of fee-free ATMs.

The only drawbacks with this account are that they do not reimburse different ATM fees, and you do have to make use of their app. Nevertheless, in the event you’re good with these circumstances, take pleasure in an ideal cash administration product.

How They Make Money

I am all the time leery once I see a company providing something for nothing. This company is not a non-profit. It is enterprise backed and might be trying to go public and make individuals rich. However, so as to take action, they need to earn money, so how do they do it? They break it down right here.

They have two models. First, they promote your info to 3rd celebration corporations. This can be a huge revenue generator for them, however it does have the potential to value particular person buyers cash on trades. You possibly can learn more about it in this article.

Second, they have their Robinhood Gold account, which you do pay a subscription for to have entry to things like margin trading. 

For the long term investor, these don’t really matter. Paying $zero.01 extra (probably) per share shouldn’t influence a long-term purchase and hold investor. Nevertheless, should you’re a dealer (which Robinhood’s platform isn’t geared in the direction of), this could possibly be pricey. 

Would I Transfer My Portfolio Over To Robinhood?

That is fairly simple: no.

I don’t see Robinhood as the alternative for something. I see them as a novelty. I found the app okay to use, not great. I could not think about holding a portfolio inside this app/firm and making an attempt to handle it.

When you trade incessantly, the app may be useful, however the analysis features are too primary to be of any use. Moreover, I can not picture buying and selling from a telephone.

Execs:

• Fee Free Trades
• Fairly App for iPhone & Android
• Safety: the app uses Apple Touch to login, which makes it really feel safe

Cons:

• Limited Funding Decisions 
• Not straightforward for managing your holdings (couldn’t see holding 5-10 positions with the app)
• Too primary charts and knowledge
• Printing statements and tax documents is a problem. It’s a must to login to the app, e mail it to yourself, after which print it.

Last Ideas

My last thought is that Robinhood is going to be a novelty that we do not hear about in 1-2 years. They attracted numerous buzz on social media last yr with their free trades, but after utilizing their service, I was pretty disenchanted.

I also do not see where the bigger market is going to return for this product, if financial product fanatics can’t get behind it.

Lastly, I fear concerning the cash circulate. Too most of the “free fee” corporations have changed their tune or disappeared through the years. I can see costs rising or providers disappearing in their future.

What I might truthfully advocate is opening an IRA or brokerage account at a mainstream brokerage like TD Ameritrade or Constancy.

What most individuals do not realize is that you could open an IRA with no minimal, you will get access to lots of of commission free ETFs, and you’ve got an amazing app to use. You primarily can construct your complete diversified portfolio at no cost, on an app. Take a look at TD Ameritrade for yourself.

Do not just take my word for it with this evaluation, attempt Robinhood totally free right right here: Signup for Robinhood

Have you ever used Robinhood? Did you just like the expertise? Are you going to switch your brokerage with it?