Robinhood used to shine thanks to its easy-to-use mobile app and $0 trades. However, today, all of the largest online brokers offer free stock and ETF trades. As a result, it is much more difficult for Robinhood to outduel the competition.
Top Takeaways for 2020
After spending five months testing 15 of the best online brokers for our 10th Annual Review, here are our top findings on Robinhood:
- Robinhood's mobile app is intuitively designed and is our top pick for usability in 2020. Also, thanks to a thorough offering of new investor education, Robinhood made our list of recommended brokers for beginners.
- At $5/mo ($60 per year), Robinhood Gold is not a good deal unless you have a large account balance, frequently place trades, and consistently use margin. See "Robinhood Gold" under Commissions & Fees below.
- Robinhood provides a bare-bones trading experience, making it a poor choice for investors seeking the best trading platform. Also, Robinhood's stock research tools are severely lacking when compared to $0 brokers such as TD Ameritrade, Charles Schwab, and Fidelity. Lastly, Robinhood offers no phone option for customer service.
|Commissions & Fees|
|Offering of Investments|
|Platforms & Tools|
|Ease of Use|
Commissions & Fees
Like many other $0 discount brokers, Robinhood charges no commission for trading stocks, ETFs, options, or cryptocurrency.
How Robinhood makes money: Facebook (FB) is a free service. To offset not charging a subscription fee, it generates revenue from collecting your user data and selling ads. In Robinhood's case, it too is a free service. Instead of selling ads though, Robinhood is selling your order flow (the right to fill your order) to wholesale market makers. Thus, Robinhood is not really free. That said, in today's world of $0 trades, nearly all brokers, less Fidelity, engage in the same practice of accepting payment for order flow (PFOF).
Robinhood Gold: In our testing, we found Robinhood Gold to be a bad deal. Robinhood Gold costs $5 per month to gain access to Morningstar reports, Level II streaming quotes, and margin trading (which charges 5% annual interest). Competitors TD Ameritrade, E*TRADE, and Charles Schwab all charge higher margin rates, but offer measurably better stock research, trading tools, customer service, etc. for the same $0 per stock trade price.
Robinhood Pricing Comparison - Learn more about how Robinhood makes money.
|Stock Trade Fee (per trade)||$0.00|
|ETF Trade Fee||$0.00|
|Options Base Fee||$0.00|
|Options Per Contract Fee||$0.00|
|Mutual Fund Trade Fee||N/A|
|Broker Assisted Trades Fee||$0.00|
Offering of Investments
Robinhood offers stocks (including fractional shares), ETFs, options, and cryptocurrency trading. Most online brokerages, with the exception being TradeStation, also do not offer cryptocurrency trading. However, mutual funds and bonds are not supported, nor is futures trading.
Cash management: With Robinhood Cash Management, any uninvested cash sitting in your brokerage account earns interest. The total yield is comparable to what you might find in a high-yield savings account, and it fluctuates alongside interest rates. This makes it convenient for customers to keep cash in their brokerage account that otherwise would need to be transferred out for a higher yield. Robinhood, alongside Fidelity, are the only two brokers who make interest sharing available to all customers, regardless of the account balance.
Trading Platforms & Tools
Robinhood offers its downloadable mobile app as well as a web platform (its website) for customers to use. Both platforms have similar feature sets. Between the two, I prefer the mobile app.
Overall, Robinhood provides a minimalistic experience because it focuses on young investors attracted to the idea of free trades. However, it is important to note that today, all online brokers offer $0 stock and ETF trades. Thus, if you are looking for a trading platform with all the bells and whistles alongside $0 trades, take a look at TD Ameritrade or TradeStation.
Robinhood trading tools screenshots:
Robinhood's mobile app is fast, simple, and my favorite for ease of use. For basic stock trading, Robinhood has the functionality required to be productive: basic watch lists, basic stock quotes with charts and analyst ratings, recent news, alongside simple trade entry.
Watch lists: Robinhood's focus on simplicity also has several notable drawbacks. The watch list functionality is extremely basic and includes few optional columns beyond the last price and percentage change. Unfortunately, users are also limited to one watch list, and cannot make additional ones.
Stock charts: When pulling a stock quote, charts cannot be modified beyond six default date ranges. Also, no technical analysis can be conducted, and even landscape mode is not supported for horizontal viewing. Pulling stock quotes using the free Yahoo Finance or CNBC mobile app, for example, provides a superior charting experience.
Price alerts: Lastly, Robinhood currently only allows users to enable notifications for all of their positions or all of the stocks in their watch list. Basically, unless you hold shares in a stock, you cannot set price alerts for that symbol. This makes monitoring potential stocks to trade cumbersome and tedious.
Robinhood mobile app screenshots:
Research features: Robinhood offers analyst ratings, "people also bought" recommendations and sections such as "about" for company bios. It's a cut and dry experience focused on simplicity. To some investors, this is fine; to others, they will be left wanting more. Side note: To gain access to Morningstar research reports requires subscribing to Robinhood Gold for $5 per month ($60 / year).
Robinhood Snacks: If there is one highlight with Robinhood's research, it is the Robinhood Snacks news blog. The Robinhood Snacks editorial team summarizes the market each day in an easy-to-understand, digestible format. I subscribed to the weekly update for this review over six months ago, and remain subscribed today. It's good stuff.
Robinhood market research screenshots:
For investors looking to conduct the basics, Robinhood gets the job done well. Simplicity is the key advantage of using Robinhood over the competition. Beyond that, Robinhood will leave you wanting more, especially as $0 trades are now available everywhere.
Founded in 2013, Robinhood is an online broker that has raised $539 million in venture capital funding. Robinhood, which appeals primarily to young Millennial do-it-yourself investors, is best known for offering $0 stock, ETF, options, and cryptocurrency trades alongside an easy-to-use website and mobile trading app.
Is Robinhood completely free? The short answer is yes, technically Robinhood is free and charges $0 for stock, options, and cryptocurrency trades. However, certain features require a $5/mo subscription to Robinhood Gold and Robinhood does accept payment for order flow (PFOF). Here's Robinhood's Fees disclosure PDF and here's our full breakdown of how Robinhood makes money.
How do I get my money out of Robinhood without paying any fees? First, sell all your stocks and any other positions. Next, transfer all your cash via ACH to your bank account (ACH transfers are free). Finally, contact Robinhood to close your account. If you transfer stock holdings to another broker, Robinhood will charge you a $75 ACAT fee. Switching brokers? See our list of the best online stock brokers 2020.
Can I day trade stocks using Robinhood? You need at least $25,000 in your account to day trade with Robinhood (all brokers require at least $25,000 by law), otherwise your account is restricted to just three day trades every rolling five business days. That said, even if you had $25,000, I wouldn't recommend Robinhood. Read our best day trading platforms guide.
Can I buy and sell Bitcoin with Robinhood? Yes. Robinhood currently offers seven tradeable cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Dogecoin (DOGE), Ethereum Classic (ETC), and Bitcoin SV (BSV). Ten additional cryptocurrencies can be added to any watch list.
Can you trade penny stocks with Robinhood? No. You cannot trade penny stocks on Robinhood. Over-the-counter (OTC) securities are not supported. However, Robinhood customers can trade company shares listed on the NASDAQ and NYSE whose stock price is currently below $1.00.
Can you trade international stocks with Robinhood? Yes. Robinhood offers customers the opportunity to buy and sell over 250 popular American Depositary Receipts (ADRs), including shares in companies such as Adidas (ADDYY), Tencent (TCEHY), and Nintendo (NTDOY).
Is Robinhood safe? Like its competitors, Robinhood is regulated by the SEC and is a registered member of the SIPC and FINRA (CRD #165998) in the United States. The company has its headquarters in Palo Alto, California, and has had no reported security breaches since its launch in 2013.
Can I trade immediately after opening my Robinhood account? When you open and fund an account with Robinhood, the broker is unique in that it provides you access to up to $1,000 in funds, available immediately for trading while your ACH transfer deposit processes. Under normal ACH transfers, the average processing time is two to three days.
2020 Review Methodology
For the StockBrokers.com tenth annual best online brokers review published in January 2020, a total of 3,540 data points were collected over six months and used to score brokers. This makes StockBrokers.com home to the largest independent database on the web covering the online broker industry.
Participation is required to be included. Each broker completed an in-depth data profile and provided executive time (live in person or over the web) for an annual update meeting. Our rigorous data validation process yields an error rate of less than .001% each year, providing site visitors quality data they can trust. Learn more about how we test.
About the author: Blain Reinkensmeyer As Head of Research at StockBrokers.com, Blain Reinkensmeyer has 18 years of trading experience with over 1,000 trades placed during that time. Referenced as a leading expert on the US online brokerage industry, Blain has been quoted in the WSJ, The New York Times, Forbes, and the Chicago Tribune, among others.