Robinhood is one of the newer brokers on the block as it was founded in 2013. It’s a very trend setting firm as it was the first one to offer commission-free trades and no account minimums. Per the site, its goal is to democratize investing so that investors with little funds can access the market.

It was launched by Vlad Tenev and Baiju Bhatt who worked together at a hedge fund. They were initially rejected by over 75 venture capital firms. Despite this, they grew Robinhood to a billion-dollar company that might go public soon.

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Available investments

Like most of the choices on this list, Robinhood offers common investments like:

• Stocks
• ETFs
• Options
• ADRs for global companies. ADRs or American Depository Receipts let investors buy foreign company shares on US stock exchanges like the NYSE.

Investors can also trade cryptocurrency coins like Bitcoin, Ethereum, and Dogecoin with this platform. Robinhood is a simple app as it doesn’t offer mutual funds, bonds, forex, futures, or more complex options. It also lacks various account types like IRAs, Roth IRAs, business entity accounts, or options for money managers. Those that want to save for retirement or are institutional investors would be better off with a competitor.

Despite this, Robinhood has a gold version that provides premium reports from Morningstar and more intricate data to time trades. Gold members can also deposit as much as $50K on the platform and purchase investments on margin. The gold membership is affordable since it only costs $5/mo. However, other brokerages offer free investment and research reports.

Customer service 

Robinhood was meant to be a simplified investing tool for beginners and younger investors like millennials. It doesn’t have physical branches, financial advisors, licensed brokers, nor phone support. Instead, users can access support via email, chat, or submitting a question via the FAQ page. The support section breaks down assistance by topics like tax documents, investing, and basic account info. It also has helpful blog posts and definitions on its learn platform. However, many of these guides are simplistic and are geared toward novice investors.

Per Trustpilot, Robinhood doesn’t have the best customer service reviews since it has a 1.5 rating. Many users have complained that account cancellations took a long time and that customer service failed to acknowledge questions. One review stated that he or she couldn’t access the proceeds or principals from its “free stock promotion.”

Ease of use

One area where Robinhood shines is the ease of use. It was designed to be simple, and traders can create and be approved for investment accounts in less than an hour. Investors can deposit, invest, and withdraw $1,000 or less in just minutes with larger amounts taking up to 5 business days. Like Micro Investing app, Acorns, users can establish automatic weekly, biweekly, monthly or quarterly deposits. Automatic deposits will make it easier to establish sizable investment accounts over the long run.

Users can also customize stock watchlists using the collections feature. This feature will let them screen for stocks that are in certain sectors like oil, sustainability, or real estate. There is also a tab at the bottom of the account that lets traders access statements, view balances, find past transactions, and manage watch lists.

Key differentiators

One main key differentiator is that Robinhood is very streamlined and basic. This is a double-edged sword because it doesn’t offer common investments like bonds or forex platforms. But, this is great for young investors making their first trades. It’s a nice choice for those on a budget since it doesn’t charge trading commissions for any investment!

Robinhood doesn’t require minimum balances, except for those that want to trade on margin. Margin accounts must have at least $2,000 as this is a regulatory requirement set by FINRA. It doesn’t have maintenance or inactivity fees. However, it charges $5/mo. For gold memberships and $75 for outgoing ACAT transfers.

Investors can also purchase fractional shares with as little as $1. This will let them gain exposure to stocks that could be trading for hundreds of dollars per share.

Pros

• Commission-free trading. Robinhood has commission-free trading for all investments, not just US stocks or ETFs. Other brokers have small fees for options contracts, but Robinhood doesn’t have these.
• Easy to set up and transfer funds. Robinhood prides itself on efficient, secure technology that lets users be approved for accounts in less than an hour. Investors can set up automatic deposits and transfer funds without hassle.
• Free stock promotion. Investors that refer others to the platform will receive a free share of stock. The referred person will receive a free share as well.
• Helpful educational content. Its FAQ/blog section is very helpful as they have simple along with detailed guides on many financial topics. Investors that want more detailed investment reports can access these via the Gold membership.

Cons

• Only one type of account. Investors can only open brokerage accounts with Robinhood. They can’t have IRAs, SEP IRAs, or other tax-advantaged accounts.
• Mediocre support. Robinhood might be too simple, as traders can’t speak with a support representative or licensed broker. They also can’t schedule a consultation with a financial advisor.
• Limited investment choices. Their investments might be commission-free, but they lack bonds and mutual funds. Many investors, especially older ones, need these investment choices to diversify risk to create their portfolios.
• No accounts for institutions or financial advisors. It’s obvious that this company appeals to millennials as institutions nor financial advisors won’t have custom options. It doesn’t have custodial platforms for advisors looking to manage their clients’ accounts.

Bottom line

Robinhood is a very influential broker as it started the free trading and no account balance movement. Its main goal was to enable the average person to enter the stock market. Also, it was one of the first brokerages to offer mobile trading, which lets users invest on the go. While this broker has many advantages, it’s best suited for beginner investors that want affordable, simple investing. Those that want to try day trading, forex, or just open a retirement account would be better at another brokerage firm.