> > Robinhood Review 2024: Is It The Right Platform For you?

Robinhood Review 2024: Is It The Right Platform For you?

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In the past, stock trading platforms charged high fees per trade, which made trading unappealing and costly for retail investors.

Robinhood effectively disrupted the way brokerage firms operate, causing a tectonic shift in the industry that ended up forcing household names like Charles Schwab, TD Ameritrade, and E*TRADE to slash their fees to remain competitive.

The following review provides a closer look at the platform’s services, features, pricing, and other important details to help investors decide if Robinhood is the brokerage firm to help manage their investments and place trades.

Robinhood Investing App Review 2023: The Pros, Cons, and Everything You Need to Know
Robinhood

Overall Rating 3.6

The Modest Wallet Overall Rating (Our Rating Methodology)

Bottom Line: Robinhood allows you to make unlimited commission-free trades in stocks, ETFs, and options. You can access professional research reports, trade on margin, and make bigger instant deposits with Robinhood Gold for $5 a month.

Account minimum

4.5

Fees and trading costs

4.5

Investment selection

3.0

Accounts supported

3.0

Features and tools

3.5

Ease of use

4.5

Trading platform

3.5

Security

3.0

Customer support

3.0

Best for:

    Free trading
  • Mobile traders
  • Fractional shares

Pros:

  • Commission free trades
  • Easy-to-use interface
  • No minimum deposits

Cons:

  • Limited investment options
  • Limited customer support
  • Limited crypto functionality

What is Robinhood?

Robinhood is a financial services company that operates a popular commission-free stock trading platform and app. Founded in 2013 by Vladimir Tenev and Baiju Bhatt, Robinhood aims to provide easy access to investing in the financial markets for all.

The app allows users to trade stocks, ETFs, options, and cryptocurrencies without paying any commissions. This disrupted the traditional brokerage model of charging fees per trade. Robinhood makes money in other ways — through margin trading, interest on cash balances, and selling order flow data to market makers and high-frequency traders (HFTs).

The startup was born out of Tenev and Bhatt’s desire to make the financial markets more accessible and transparent to the average person. They named the company after the English folk hero “Robin Hood” due to the theme of “taking from the rich and giving to the poor.”

Robinhood experienced rapid growth, especially amongst millennials and first-time investors. By late 2020, they claimed to have over 13 million users on the platform. However, 2021 proved to be a difficult year after the GameStop short-squeeze controversy brought regulatory heat and criticism over Robinhood’s practices.

Since then, Robinhood has diversified its services into new verticals beyond trading, offering products like retirement accounts, banking services, and more. Their long-term mission is to be the go-to money app that customers turn to for everything related to money management and investing.

Robinhood homepage
Source: Robinhood

>> Read Also: 12 Best Online Brokers for Stock Trading


How Does Robinhood Work?

Getting started with Robinhood is a quick and straightforward process. You can download their mobile app on iOS or Android devices or access the platform on a desktop browser.

To open an account, you’ll need to provide personal details like your name, email, address, and social security number for identity verification purposes. Robinhood also requires linking your bank account to transfer funds.

Once your account is approved, you can start trading stocks, ETFs, options, and cryptocurrencies commission-free. Robinhood does not charge fees per trade like old-school brokers.

Account Minimum

Robinhood does not require a minimum deposit to open any of the account types it offers. This means that investors can access the trading platform without adding a single dime to their balance. 

For retirement accounts, Robinhood offers to match 1% of customers’ contributions and deposits. Meanwhile, for bank accounts, the website claims that investors can earn interest even if their account balance is as little as one cent.

Types of Accounts Supported 

Robinhood initially offered taxable investment accounts only but has now added retirement alternatives, including individual retirement accounts (IRAs) and joint accounts. Here’s an overview of all the available account types as of today:

  • Cash Account: A taxable individual account that offers access to unlimited day trades but limits the customer’s buying power based on which transactions have been fully settled. These accounts are typically the ones used by customers who have a small balance, often lower than $2,000. All the financial instruments offered by Robinhood can be traded with this account.
  • Margin Account: Another taxable account that gives the holder access to instant deposits, marginable trades, and extended-hours trading. Margin accounts provide customers access to leverage, meaning that they can borrow money from Robinhood to place trades and increase the size of their positions. Margin account holders get access to level 3 options trading and can trade with unsettled funds as well. All the financial instruments offered by Robinhood can be traded with this account.
  • Retirement accounts: Robinhood offers two options for prospective retirees — Traditional IRAs and Roth IRAs. These accounts have tax benefits as taxes on gains are deferred unless the customer makes early withdrawals. Robinhood offers to match 1% of every contribution made by the account holder and as much as 3% for those who enroll in the Robinhood Gold program. Robinhood has also made available a service called Portfolio Builder that is specifically designed for its retirement accounts. This is a robo-advisor that provides customized portfolio allocation recommendations to customers.
  • Robinhood Gold: This is a premium subscription that Robinhood account holders can pay to access better features. With the Gold subscription, customers are entitled to receive higher annual percentage yields (APYs) on their uninvested cash, the maximum threshold for instant deposits is higher, and they can borrow funds at a lower interest rate via the Robinhood Margin account. In addition, the IRA matching contribution is increased to 3%.

Investment Selection

Robinhood offers access to various asset classes, including stocks, exchange-traded funds (ETFs), options, and cryptocurrencies. Here’s an overview of the types of instruments that are available within each of these categories

Stocks

With Robinhood, it is possible to invest in both US-listed and overseas individual stocks issued by companies of all sizes. Foreign stocks are available via American Depository Receipts (ADRs), while the company provides access to stocks listed on all major exchanges, including the New York Stock Exchange and Nasdaq Stock Exchange. In total, Robinhood claims to provide access to more than 5,000 securities, including individual stocks and 650 US-listed ADRs.

Moreover, customers are allowed to buy fractions of a stock via the fractional shares program. This feature lets Robinhood account holders build highly diversified investment portfolios with relatively small account balances.

The smallest purchase possible is $1 per stock. Certain account types also let customers trade stocks during extended market hours. At this time, it is not possible to invest in OTC securities like penny stocks or preferred stocks through the Robinhood platform.

>> Read Also: How To Invest In Stocks

Exchange-traded Funds (ETFs)

ETFs are investment funds whose shares are listed in an exchange and can be traded as if they were regular stock. These funds charge an expense ratio to investors for managing the investment portfolio and provide access to highly diversified baskets of stocks, bonds, commodities, and other securities at a relatively low price.

ETFs can also be traded for free with Robinhood. Most US-listed ETFs are available with this provider. They are also used by this broker’s robo-advisor to recommend portfolio allocations to retirement account holders.

Options

Options are financial derivatives that give holders the right, not the obligation, to buy a certain underlying asset at a predefined price once the expiration date is reached. Robinhood offers access to US-listed options on stocks and ETFs.

These options can be traded for free, with no contract fee or commission involved. Cash account holders get access to Level 2 options only, while margin account holders have the option to engage in Level 3 options trading strategies. 

Robinhood offers access to advanced trading strategies via its Strategy Builder feature, which is a tool that gives traders an overview of the potential outcomes that may result from different strategies and transactions.

Crypto

Robinhood allows customers to trade and invest with a selected number of cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), Chainlink (LINK), and Aave (AAVE). The company operates as a licensed virtual currency broker-dealer authorized by the New York State Department of Financial Services.

Crypto trading is also a commission-free service with Robinhood. This provider claims that most digital assets held on behalf of customers are placed in cold storage for their protection. In addition, a portion of the digital assets under Robinhood’s custody are insured by various insurance companies, including Lloyd’s.

Getting Started with Robinhood

Robinhood allows customers to open different account types — individual taxable accounts, traditional IRAs, Roth IRAs, and joint accounts. Each account gives users access to the trading interface, although some features are reserved for those who sign up for the Robinhood Gold program.

To open a Robinhood account, simply follow these steps:

  • Step 1: The process of opening an account with Robinhood starts by clicking the “Sign Up” button, located in the upper-right corner of the firm’s official website.
  • Step 2: The user will be directed to a page where a free stock can be claimed. Once the “Claim your free stock now” button is clicked, the system’s algorithm will pick a stock randomly, and that stock will be credited to the user’s account once a bank account is synchronized.
  • Step 3: The firm’s website discloses that there is a 98% chance that your bonus stock will have a value ranging between $2.50 and $10.00. The maximum amount that a user can obtain from this offering (at the time of writing) is $223.30. This amount varies depending on the fluctuation in the price of the shares included in the program.
  • Step 4: The user will be required to add some basic contact information, including first and last name, e-mail, and password. Currently, only US residents are allowed to open an account with Robinhood. 
  • Step 5: The user will receive an email to confirm that the application has been approved. (It should be noted that further documentation may be required to complete the registration process). In some cases, Robinhood can take up to 7 days to approve the application, although the process is usually much faster. And one feature worth mentioning is that an account can be opened with Robinhood without making a deposit. 
  • Step 6: Customers will be prompted to link their bank accounts after their application is approved to start making trades within the platform.

The Robinhood interface displays real-time market data, letting you monitor asset prices and trends. You can search for stocks and funds to trade based on the company name, ticker symbol, or economic sectors. Their app also provides news, analyst ratings, and other data to inform your trading decisions.

To place a trade, simply tap the stock you want and enter the share amount or dollar value. Market, limit, and stop orders are supported. You’ll then preview and submit the order, which Robinhood sends to market makers for execution.

In addition to trading, Robinhood provides charting, price alerts, lists to discover new investments, and educational content on investing. Users can also participate in IPO deals through the platform before shares hit the open market.

Robinhood create an account
Source: Robinhood

Robinhood Features and Tools

Robinhood’s offerings have grown along with the firm. From cash management to crypto, Robinhood is a commission-free broker with lots of great features.

Minimum Investment$0
Stock & ETF Fees$0 per trade
Options Fees$0
Mutual Funds FeesN/A
Inactivity Fee$0
Withdrawal Fee$0
Investment TypesStocks, ETFs, Options and Cryptocurrencies (through Robinhood Crypto)
Account TypesIndividual Taxable, Traditional IRA, and Roth IRA
PlatformWeb-based, Mobile (iOS / Android) and Watch (watchOS)
Account FundingBank Transfer
Paper TradingNo
SIPC Protectionyes
Banking Servicesyes
SupportEmail

Stock & Funds Trading

Robinhood offers zero-commission trades for more than 5,000 US-listed stocks and exchange-traded funds.

Additionally, the firm offers the chance to trade  American Depositary Receipts (ADRs), which are foreign stocks that have also been listed on an American stock exchange. The firm also offers a small subset of Canadian and Israeli-listed stocks.

The company does not currently offer the possibility to trade OTC equities, foreign stocks, mutual funds, or bonds.

Margin Trading

Margin trading gives Robinhood users the opportunity to make trades by using leverage (which means taking a loan from the brokerage firm to increase the size of the position).

Margin trading is available for Robinhood Instant and Gold accounts, with the latter providing a higher percentage of margin on trades.

The amount that an investor can borrow to place trades on his margin account will be displayed within Robinhood’s trading platform.

A minimum balance of $2,000 or 100% of the security’s purchase price is required to access this feature (whichever is less between the two).

If a margin account falls under any of these requirements at any given point, the user may be subject to an action known as a margin call, which could trigger the forced liquidation of the positions held in the account if the user does not add additional money.

Users can either deposit more money into their accounts or liquidate some of their positions once a margin call notice is received to avoid a forced liquidation.

Robinhood’s margin rate is 12% for all customers and 8% for Robinhood Gold subscribers.

>> Read Also: Webull Review: Is Webull the Ultimate Free Investing App?

Market Insights

Level II Market Data is available for users who have upgraded their account to Robinhood Gold.

This information is provided by the Nasdaq stock exchange, and it showcases the number of buy and sell orders within the system at any given point in time and their respective prices.

Traders can use this information to track the evolution of supply and demand for individual stocks and ETFs that can be traded through Robinhood’s platform to make decisions and place trades accordingly.

This information, although significantly useful for high-frequency traders and day traders, is limited to the trades made directly on the Nasdaq exchange and does not include those made outside this system.

Options Trading

Options are derivative instruments that give holders the right (not the obligation) to buy (call) or sell (put) the underlying security at a pre-defined price — known as the strike price — once the expiration date of the instrument is reached.

Apart from most other brokerage firms, Robinhood offers the chance to trade options for free — the firm does not charge any commissions or per-contract fees.

The firm currently offers options for a wide range of US-listed stocks and ETFs and for a selection of ADRs as well.

It is important to note that options are complex financial instruments, and traders should understand all the risks that these financial assets carry before exposing their money to them.

That said, zero-commission option trades are particularly advantageous for options traders who use complex strategies such as spreads, straddles, strangles, and condors, as they can save a significant amount of money in transaction fees.

Fractional Shares

Fractional shares are an innovative way to allow investors with small account balances to expose their portfolios to high-priced stocks. 

These instruments work by giving investors ownership of a portion of an entire stock, and investors can either choose to purchase a fraction of them or invest a fixed dollar amount. Dividends are paid on a fractional basis as well.

Fractional shares can be purchased for any of the stocks supported by the program with as little as $1. 

Any stock that is worth more than $1 and has a total market capitalization above $25 million is eligible as a fractional share within Robinhood’s trading platform.  

>> Read Also: M1 Finance Review: A Hybrid Robo-Advisor & Brokerage

Education and Tools

Robinhood’s educational and news hub, known as Robinhood Snacks, features multiple types of content, including blogs, a podcast, and a daily newsletter that includes the most relevant financial news investors should know to start the day.

Users can subscribe by providing their email. The daily podcast — which consists of a 15-minute take on the three most relevant news reports of the day — can be listened to and followed on Apple, Google, and Spotify’s podcast platforms.

Robinhood Snacks emerged from the acquisition of Market Snacks in March 2019. The goal of this financial news service is to communicate the most relevant news on the financial landscape in a way that anyone, despite their level of financial expertise, can understand.

Referral Program

The Robinhood referral program provides users with free stock if they invite their friends to join the platform. 

The program also allows customers who have already signed up with Robinhood the opportunity to earn up to $1,500 in stock rewards during a single calendar year if their friends sign up.

The free stock Robinhood offers both users and their referrals is picked randomly by the broker’s algorithm. Although there’s a chance that investors may be assigned a high-priced share, there’s also a 98% chance that individuals will end up getting a share valued between $2.50 and $10.00, according to Robinhood.

IPO Access

Robinhood allows its users to purchase shares of an IPO as the stock becomes available to the general public. At the moment, this feature is only available to certain users, but Robinhood plans to roll it out to all its users shortly.

Once users have access to this feature, they will be able to request IPO shares by following these steps:

  • Find an IPO you’re interested in
  • Tap the “I’m interested button”
  • Review the checklist and confirm eligibility
  • Tap the “Request shares button”
  • Enter the details
  • Tap the “Review button”
  • Swipe up to submit request

Robinhood Cash Card

The Robinhood Cash Card is a banking product offered by Robinhood Money LLC, a licensed money transmitter. This product consists of a debit card that customers can use to earn rewards on their day-to-day purchases with eligible vendors.

This new program substitutes the Cash Management product that Robinhood previously offered to customers. With the Robinhood Cash Card, customers can set automatic deposits to the investment account and get paid up to two days before their paycheck arrives.

In addition, Robinhood offers a program called Round-ups, where customers can set up automatic stock and crypto purchases with the leftover cash from their Cash Card transactions.

The Robinhood Cash Card is issued by Sutton Bank. The funds held in the checking account that is used to fund the purchases made with this debit card are protected by FDIC insurance for up to $250,000.

No maintenance, inactivity, in-network ATM withdrawal, transfer, or card replacement fees are charged by Robinhood. In addition, the Cash Card features overdraft protection from the Mastercard® Zero Liability Protection program.

Robinhood Gold

Robinhood Gold is a premium subscription offered by the firm to enjoy some additional benefits on existing features. Gold users are entitled to receive a higher annual percentage yield (APY) on their uninvested cash. This enhanced APY stands at 5% at the moment this is written, compared to only 1.5% that non-Gold users currently receive.

Gold subscribers also pay a lower interest rate on their borrowings when using a Robinhood margin account. At the time this is written, Gold users pay 8% on their borrowed funds compared to 12% charged to non-Gold customers.

Moreover, Gold users who have opened a retirement account — IRA or Roth IRA — will enjoy higher matching contributions of 3%. Basic users only get 1%.

In addition, the maximum threshold for instant deposits with Robinhood is increased from $1,000 (basic users) to as much as $50,000 for eligible account holders based on their balance and account status. Their account must be in good standing to be eligible to receive instant deposits. 

Instant Deposits is a feature that allows investors to get access to the funds they have deposited immediately without having to wait for the money to be cleared (which usually requires a 24- to 48-hour waiting period).

Gold account holders are also allowed to access Level II market data and professional research materials from Morningstar.

To subscribe to the gold program, investors have to pay a $5 monthly subscription fee.

Robinhood Crypto

Robinhood currently supports trading for more than 10 different crypto assets, including Bitcoin (BTC), Ethereum (ETH), Shiba Inu (SHIB), Dogecoin (DOGE), and Litecoin (LTC). These instruments can also be traded for free, and one of their distinctive features compared to traditional financial assets is that their market remains open 24/7.

It is now possible to send and receive cryptocurrencies from external wallets by using the Robinhood app. Customers can use this feature to pay for goods and services by using their digital assets or to get paid or transfer money from other brokerage firms to their Robinhood accounts.

The cryptocurrencies held with Robinhood are mostly kept in cold storage, meaning that the wallets that hold them are entirely disconnected from the internet. Moreover, Robinhood claims to have an insurance policy that covers a portion of the assets that are held across their storage systems. The insurance is underwritten by Lloyd’s and other companies. 

The crypto brokerage and custodial services offered by Robinhood are performed under a license obtained by Robinhood Crypto LLC — a subsidiary of the company — that is issued by the New York State Department of Financial Services.

Recurring Investments

Robinhood allows its customers to set up automated investments by using the balance available in their accounts to grow their exposure to specific financial instruments. These recurring orders can be set up by opening a regular trade order and choosing the “Recurring Investment” order type.

Customers will be prompted to provide details about how many shares or how much money they would like to invest in that particular instrument and when. The financial assets supported include stocks, ETFs, and crypto.

For example, a user could opt to buy 3 shares of Apple every single Tuesday. The customer would have to choose a preferred payment method, and it is possible to add a backup method as well to make sure the order continues to be executed even if the account runs out of buying power.

The recurring investment feature is a great alternative for investors who adopt the dollar-cost averaging (DCA) methodology, which spreads investments across time to prevent market timing and ensure a smoother cost basis on all positions.

In addition, it is also possible to automatically split the customer’s paycheck into two deposits – one going to the Robinhood checking account and the other deposited into the investment account to support these recurring investments.

These are tools that help investors stay on track and maintain a disciplined approach, as the system will execute all the required transactions and eliminate any subjectivity and emotional biases involved.

Robinhood Retirement

In July 2023, Robinhood officially started to support two types of retirement accounts: individual retirement accounts (IRAs) and Roth IRAs. These two accounts allow customers to grow their retirement funds via a tax-deferred vehicle that postpones the payment of taxes on all investment gains.

Robinhood offers to match 1% of all customers’ IRA contributions up to the maximum annual limit permitted by the Internal Revenue Service (IRS). The percentage increases to 3% for those who subscribe to the Robinhood Gold program.

Retirement accounts can be used to invest in most of Robinhood’s available trading assets, including stocks, ETFs, and options. For now, crypto investments are not permitted for this type of account. However, customers are also allowed to enroll in the ‘Stock Lending’ program, which lends the customer’s existing holdings to third parties in exchange for an interest payment.

It is possible to rollover different types of retirement accounts, including existing 401(k)s, 403(b)s, and IRAs, to Robinhood without cost. Robinhood has made available a robo-advisor that will provide portfolio recommendations to customers consisting of a mi of around 5 to 8 exchange-traded funds (ETFs) that the algorithm will choose based on the customer’s risk tolerance and financial goals.


Robinhood Trading Platform

Robinhood currently offers a web-based and mobile trading platform through which users can place trades, track their account balances, upgrade or downgrade their accounts, and browse the firm’s selection of available securities and research materials.

Robinhood’s web-based platform is fairly intuitive and user-friendly. It is primarily designed for beginners — it lacks the advanced features other platforms incorporate.

The web-based version includes a search bar investors can use to locate any instrument they wish to trade. They’ll also find a menu tab that lets them jump to the different available features.

Robinhood users can take advantage of elements such as a newsfeed, a trading ideas hub, basic fundamental data on stocks, analysts’ ratings, basic charts with a few indicators, and the ability to set alerts and notifications for multiple events — including price movements, dividend payments, and corporate actions.

The mobile app includes most of these features as well, although the functionality is much more limited due to the reduced screen space.

The following types of trade orders can be placed using Robinhood’s trading platform:

  • Market
  • Limit
  • Stop Loss
  • Stop-Limit
  • Trailing Stop

>> Read Also: What is Micro Investing? Is It the Best Way to Start Investing?


Robinhood Fees 

As far as pricing, users who sign up for a Robinhood Gold account have to pay a $5 monthly subscription fee for access to this level of account (which includes zero interest charges on the first $1,000 in margin). From that point forward, the interest rate charged on margin balances above $1,000 is 8%.

As we stated earlier, Robinhood does not charge any commissions or fees for trading US-listed stocks, options, ETFs, or American Depository Receipts (ADRs). That said, some ADRs may generate a custody fee.

Aside from this, Robinhood does not charge a fee for domestic or international wires, which is a plus, as most providers tend to charge significant fees for these services — particularly international services.

Other non-trading fees include a $75 fee for outgoing ACATS, a $20 fee for domestic overnight check deliveries, $5 for paper statements, and $2 for paper confirmations.

Finally, Robinhood’s Cash Management account does not generate any fees, with the exception of withdrawals made from ATMs that are not part of Robinhood’s network.


Robinhood Customer Support

Robinhood has created a Support section that offers answers to the most frequently asked questions (FAQs) concerning topics such as account management, banking products, investment accounts, retirement planning, taxation, and general questions.

This help center is a great place to solve basic issues and resolve possible doubts that customers may have about the company’s services and operations. 

Meanwhile, Robinhood customers can log into their accounts and go to the ‘Contact Us 24/7’ section to get in touch with a company representative via live chat or phone call. This section is available on both the mobile app and web-based platform.

The Robinhood customer support number at this time is 650-761-7789, and any queries associated with the company’s crypto and banking service can be addressed by calling 888-275-8523. Non-customers are not allowed to get in touch with a customer service representative.

Robinhood’s Trustpilot review site has not been claimed by the company, meaning that it is not monitored by a company representative. The same goes for the site’s Consumer Affairs profile, which has also not been claimed by the firm.

In both cases, the ratings are pretty low, but they cannot be considered a trusted representation of the quality of Robinhood’s services as customer support representatives from the company will not be responding to users’ issues or concerns while many of the reviews left by these consumers cannot be confirmed to be real.


Robinhood Ease of Use

Robinhood is a platform built primarily for beginner traders and investors. The app is highly user-friendly and intuitive, and it somehow ‘gamifies’ the process of investing by introducing animated responses to user’s actions such as buying a stock, funding an account, and earning rewards on their debit card purchases.

The Robinhood interface aims to educate users about how some complex financial instruments like options and cryptocurrencies work by providing explanations whenever customers are getting ready to place trade orders.

This has made the app very popular among young investors who were typically unfamiliar with the intricacies and caveats of the financial markets until this platform came up. However, the company’s reputation for advocating for users’ rights was a bit tainted by the incident involving so-called ‘meme stocks’ in 2021.

Back then, Robinhood placed restrictions on users’ ability to trade with certain stocks like GameStop and AMC Entertainment, and this prompted some severe backlash.

For this reason, the app’s ratings went down a bit on both the Google Play Store and Apple App Store. At this time, the Robinhood app has received a 4.1-star rating after nearly 500,000 reviews on the Android mobile app marketplace. The app has been downloaded more than 10 million times.

Meanwhile, on the Apple App Store, the rating stands at 4.2 stars after an eye-popping total of 4.2 million reviews from customers.

Robinhood is primarily an investment app, meaning that users will get the most out of its trading interface via their smartphones, not the web-based version. All of the appealing features that this broker has to offer are available within the app, and the entire process of opening an account, making trades, managing investment portfolios, accessing educational materials, and even engaging in complex options trading strategies can be performed from the comfort of a mobile phone.


Robinhood Security

Robinhood operates via several subsidiaries to provide its services. Robinhood Financial and Robinhood Securities are the broker-dealer and advisory arms of the company. The two are registered with the US Securities and Exchange Commission (SEC) and are authorized to provide their services to customers within the United States.

All investment accounts opened with this provider are protected by SIPC insurance for up to $500,000 in securities, including $250,000 in cash in case the company goes under. In addition, Robinhood has purchased a private insurance policy that covers an aggregate amount of $1 billion for all assets held with Robinhood, resulting in an individual coverage of up to $50 million in securities and up to $1.9 million in cash.

None of these insurance policies cover investment losses. They are all available to customers in case the company goes out of business. 

Moreover, Robinhood claims to protect its user data by using encryption protocols like TLS to make sure information can be safely transferred from customers to its services via both its mobile app and website. Account passwords are encrypted by using a hashing algorithm called BCrypt.

Finally, Robinhood encourages its customers to set up two-factor authentication (2FA) for their accounts. This protocol consists of a one-time verification code or device approval request that confirms that the account is being accessed by its rightful owner or an authorized third party.


Robinhood Pros Explained

  • Inexpensive brokerage services.
  • Margin rates are below the industry average.
  • US-based regulated broker with millions of users registered.
  • The instant deposit feature allows users to access needed funds in a matter of seconds.
  • Robinhood provides access to cryptocurrencies, which many brokers have yet to make available to customers (as of this writing).
  • The firm provides a free stock upon registration.
  • Robinhood is one of the few brokers that lets users trade options commission-free.
  • Fractional shares allow users with a small account balance to get exposure to high-priced stocks.
  • The firm’s Gold account provides access to advanced market data and research materials.

Robinhood Cons Explained

  • Robinhood lacks an automated portfolio management feature (such as a robo-advisor).
  • The firm has experienced outages and downtime during days of extreme market volatility.
  • The number of account types offered by this provider is fairly limited compared to its competitors.
  • Trades are routed to third-party market makers to generate revenue via Payment for Order Flow (PFOF). While it’s true that you pay no commissions at Robinhood, its PFOF practices are obscure and potentially a conflict of interest.
  • Cryptocurrencies can only be bought and sold through the app.

Robinhood Alternatives

There are a number of Robinhood alternatives out there offering similar or even better features. Before opening an account, it’s wise to check other options.

Robinhood vs. Webull

Webull and Robinhood offer very similar services, although their fees differ. For example, neither firm charges any trading fees for US-listed stocks, ETFs, or options, but Webull does charge a fee for withdrawing and depositing money via wire transfer.

Additionally, Webull’s margin rates are higher than those offered by Robinhood for accounts with less than $500,000.

That said, Robinhood’s trading interface and advanced charting features are fairly limited compared to those offered by Webull’s platform. Read our full Webull review to learn more.

Robinhood vs. Fidelity

Fidelity Investments is a long-standing provider of financial and brokerage services to customers in the United States. The company provides services similar to Robinhood, including access to self-directed trading accounts and zero-commission transactions.

Fidelity offers a more ample portfolio of account types and access to financial instruments like mutual funds that are not available with Robinhood. In addition, they have made available a more complete guided investing program that offers both access to a robo-advisor and human advice depending on the customer’s available investment funds.

However, Robinhood excels in areas like matching contributions to IRAs of up to 3% (Robinhood Gold) and commission-free options trading. Read our full Fidelity Investment review to learn more.

RobinhoodWebullFidelity Investments
Our Rating

3.6

4.0

4.9

Account Minimum$0$0$0
Trading Fees$0$0$0
AppsMobile (iOS and Android)Mobile (iOS and Android)Mobile (iOS and Android)
PromotionsGet 1 free stock (*after linking your bank account —stock value range $5.00-$200)Get up to 12 free stocks (*when you open and fund a new account)None
Margin TradingYesYesYes

Who Is Robinhood Best For?

Robinhood’s easygoing approach to trading and investing is what makes this broker appealing to younger generations. That said, the incorporation of cryptocurrencies into their portfolios, along with below-average margin rates and commission-fee options trades, make this provider an interesting choice for any investor, regardless of their age.

Because Robinhood is a self-directed trading platform, the firm’s services are not a good fit for investors who prefer to let a professional build their investment portfolio.


Notable Robinhood Updates and News

  • On November 15, 2023, Robinhood announced that it would be raising its annual percentage yield (APY) for its flagship banking product to 5% for Robinhood Gold users. The company claims that this offering is 8 times higher than the national average.
  • On September 18, 2023, Robinhood appointed Matt Billings as the VP and President of Robinhood Financial and Robinhood Securities.
  • On August 30, 2023, Robinhood announced that its crypto wallet will now support Bitcoin and Dogecoin transfers along with asset swaps within the Ethereum network, enabling users to send and receive over 200 crypto assets that use the latter blockchain as their preferred network.

Robinhood FAQ

We’ve found some of the most frequently asked questions about Robinhood and its features, here are our answers:

Is Robinhood Legit?

Yes, Robinhood has been around since 2017, and as of this writing, over 15 million users trust the brokerage to provide trading services for them.

Additionally, the company is regulated by top-tier U.S. agencies, and it is backed by various institutional investors, including DST Global, D1 Capital Partners, Green Oaks Capital, and Thrive Capital.

Is Robinhood Secure?

Robinhood is regulated by top-tier agencies, including the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) of the United States.

These regulators ensure that Robinhood’s operations comply with the policies and procedures established by U.S. laws to prevent any foul play against investors.

How Does Robinhood Protect My Money?

Robinhood Financial LLC is a member of the SIPC, an agency that provides coverage for investors’ accounts up to $500,000 (including $250,000 in cash claims).

That said, investors’ accounts are subject to market volatility, and any losses caused by market downturns are not covered by SIPC protection.

Further, all the banking products offered by Robinhood are issued by FDIC member banks. The FDIC covers up to $250,000 in cash held in these bank accounts.

Is Robinhood a Good Way to Invest?

Robinhood is a self-directed trading platform, which means that investors have to build their investment portfolios on their own without the assistance of a financial professional. This increases the risk of losing money, especially if the investor has no prior financial expertise or background.

That said, Robinhood’s inexpensive trading services may make this provider a good alternative for those who do prefer to manage their portfolios without involving a third party.

How Do I Get My Money Out of Robinhood?

Robinhood users can withdraw as much as $50,000 per business day from their accounts.

This can be done by clicking the Transfers tab and filling in the required fields in the mobile trading platform, or by clicking the Account button located in the upper-right corner of the screen and clicking on Banking within the web-based version.

How Does Robinhood Make Money?

Robinhood makes money from the subscription fees it charges its Gold account holders, along with the interest income it collects on margin accounts.

Additionally, the firm receives rebates for directing its order flow to certain clearing houses, from stock loans made to third parties, and other similar fees.

It is important to note that the sale of Robinhood’s order flow has been the subject of controversy. The Wall Street Journal reported that the SEC is investigating the firm for failing to fully disclose to its clients the true impact that this activity has on the pricing of the different instruments offered by the platform.

In A Nutshell

  • Account Minimum: $0
  • Fees: Zero-commission stock, ETF, and per-leg options trading
  • Promotion: 1 free stock
Robinhood

on Robinhood’s website


Final Thoughts

Robinhood is an innovative and easygoing self-directed trading and investing platform that offers zero-commission trades for multiple instruments, including stocks, ETFs, ADRs, cryptocurrencies, and options.

Although the firm’s services have primarily been conceived to attract younger audiences, the inexpensiveness of their brokerage services and the offer of other features, such as fractional shares, may make this provider a very appealing choice for retail investors, whatever their age.

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