By Blain Reinkensmeyer
February 10th, 2019
Last Updated: February 14th, 2019
The StockBrokers.com Annual Review (9 years running) sets the official industry benchmarks. Our Head of Research, Blain Reinkensmeyer, is respected by executives as the leading analyst covering online brokers. Learn more.
Founded in 2013, Robinhood is an online broker that has raised $539 million in venture capital funding. The brokerage, 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.
Free basic trading comes at a cost though. No phone support is offered, tools and research trail the depth and comprehensiveness of industry leaders such as TD Ameritrade and Fidelity, and hidden costs can drive up the underlying cost of being a customer (more on that later).
If you have only a few hundred or several thousand dollars to trade, Robinhood is a good broker for conducting basic trades with ease. Beyond this, you may find Robinhood’s bare bones approach to investing not worth the commission savings.
- App is well designed and excellent for ease of use.
- $0 trades provide great value for low balance accounts trading only 1 or 2 shares per trade as well as most casual investors.
- Little to no trading or research tools.
- Margin trading and shorting requires a monthly subscription to Robinhood Gold, which charges a monthly fee regardless if it is used or not.
- No phone support.
Commissions & Fees
Robinhood is technically a free service, just like Facebook. Instead of using your data to sell ads though, Robinhood is selling your order flow (the right to fill your order) to wholesale market makers. The market makers then execute your order, make a tiny profit off each trade, then share the profits with Robinhood.
- The practice of receiving payments for order flow is called payment for order flow (PFOF), and it is very common in the brokerage industry. Even with PFOF factored in, Robinhood still is a great deal for investors in the vast majority of cases. View our scenarios breakdown.
- The bottom line with Robinhood is that as your total trading volume increases, so does your net cost for being a customer. The less you trade, the better the overall savings Robinhood provides over traditional online brokers.
- To trade on margin or short stocks, you have to subscribe to Robinhood Gold and pay a monthly fee. While every other brokerage charges interest only for the active margin balance you are using, Robinhood charges its monthly fee regardless if you use the margin or not. The monthly fee equates to roughly a 5% charge, per year, on the total balance tied to the program, which is very expensive.
- Looking at Robinhood’s closest competitors, only two do not accept PFOF: Fidelity and Merrill Edge. This means they pass along any savings back to the customer, resulting in better executions (a higher price for each share sold or a lower purchase price for each share bought).
|Stock Trade Fee (flat)||$0.00|
|Options Base Fee||$0.00|
|Options Per Contract Fee||$0.00|
|Mutual Fund Trade Fee||N/A|
Platforms & Tools
Robinhood offers a website and mobile app. All in all, Robinhood's trading tools are, well, meh.
- Robinhood offers its downloadable mobile app as well as a web platform (its website) for customers to use. Both platforms have similar feature sets.
- In summary, although the web-based version of Robinhood is good, the app itself still provides a more immersive user experience. That said, the experiences are very similar.
- Looking at the entire offering of tools, Robinhood provides a minimalistic experience because it focuses on young investors attracted to idea of free trades. If you are looking for all the bells and whistles, consider a broker like TD Ameritrade or TradeStation.
|Desktop Platform (Windows)||No|
|Watch Lists - Total Fields||7|
|Charting - Drawing Tools||0|
|Charting - Indicators / Studies||0|
|Option Chains - Total Columns||5|
Robinhood's mobile app is fast, simple, and my favorite for ease of use. That said, Robinhood’s focus on simplicity also has several notable drawbacks.
- For basic stock trading, Robinhood has the functionality required to be productive: basic watch lists, basic stock quotes with charts, key metrics, and recent news, alongside a simple trade order form.
- Because the app is so simple, Robinhood is able to provide an extremely clean, crisp design that is very easy to use.
- The watch list functionality is extremely basic and includes few optional columns beyond last price and percentage change. Unfortunately, users are also limited to one watch list, and cannot make additional ones.
- When pulling a stock quote, charts cannot be modified beyond six default date ranges, 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.
- 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 annoying.
|Apple Watch App||Yes|
|Watch List Syncing||Yes|
|Stock Alerts - Basic Fields||Yes|
|Charting - After Hours||Yes|
Robinhood uses primarily data from its users and third-party ratings to drive its research experience. No matter how you slice it, Robinhood is severely lacking across the board.
- Robinhood offers analyst ratings, “people also bought,” and sections in its mobile app that enhance users’ experience. Analyst ratings come from Morningstar, while people also bought recommendations straight from Robinhood’s pool of six million customers.
- The “about” section highlights company details such as CEO, headquarters, and number of employees.
- The overall research experience significantly trails industry leaders Fidelity and Charles Schwab. Unfortunately, it isn’t even close.
|Research - Stocks||Yes|
|Stock Research - Reports||0|
|Research - ETFs||Yes|
|Research - Mutual Funds||No|
|Research - Pink Sheets / OTCBB||No|
|Research - Fixed Income||No|
|Research - Futures||No|
|Research - Forex||No|
Offering of Investments
Robinhood offers only what is required to trade stocks, ETFs, options, and cryptocurrency.
- Most online brokerages do not offer cryptocurrency trading. Robinhood does.
- Compared to its larger, full-service broker competitors such as TD Ameritrade, Fidelity, and E*TRADE, Robinhood’s total offering of investments is poor. For example, mutual funds and bonds are not supported, nor are basic advanced order types such as trailing stop orders.
|OTCBB / Pink Sheets||No|
|Complex Options Max Legs||4|
|Mutual Funds (No Load)||0|
Robinhood provides a mobile app that is functionally flawless and offers the core basics to maintain an online portfolio of stocks, ETFs, options, and cryptocurrencies. The bread and butter of the Robinhood experience is ease of use and its offering of $0 trades, which is the broker’s main highlight, despite its controversial acceptance of payment for order flow.
For investors looking to conduct the bare bones basics, Robinhood gets the job done well. Beyond that, the brokerage will leave you wanting more.
Can I buy 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).
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.
Does Robinhood offer penny stocks trading? 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.
Is Robinhood’s website secure? 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.
Does Robinhood offer bank accounts? Through Robinhood Checking & Savings, customers can earn 3% on any free cash in their accounts, access over 75,000 ATMs, and use a debit card for purchases with no fees. However, it is important to note that Robinhood Checking & Savings is not FDIC insured like a traditional bank and customer assets are not secured by the U.S. government.
Is Robinhood's banking service a good deal? Robinhood's approach to banking is different because it is not an FDIC bank, which means customers do not have the same protections as they would with Bank of America, Chase, Wells Fargo, or similar banks. Through Robinhood Checking & Savings, there are no account fees and customers can earn 3% on their savings.
Is Robinhood's banking service safe? Robinhood Checking & Savings is not insured by the Federal Deposit Insurance Corp. (FDIC) or the Securities Investor Protection Corp. (SIPC). This means that, unlike traditional savings accounts, customers have no protection guarantee on their deposits.
How does Robinhood make money? Robinhood makes money primarily by routing customer orders to wholesale market makers that pay Robinhood for the right to fill its customers’ orders. This is a practice called payment for order flow (PFOF), and it is very common in the brokerage industry. Robinhood earns $.26 for every $1,000 traded on its platform.
Do any of Robinhood’s competitors offer $0 trading? Yes. Both Merrill Edge and Firstrade also offer free trading. To qualify for free trades with Merrill Edge, your combined brokerage and bank account balance must be at least $50,000.
Does Robinhood charge for margin trading? Yes. Robinhood Gold is Robinhood’s version of a margin account, but instead of paying a variable rate, customers pay a flat monthly fee depending on the account balance. For example, with a $5,000 account balance and access to $2,000 in margin, the monthly fee would be $10 ($120 per year). See Robinhood’s full commissions & fees schedule for a breakdown.
Does Robinhood offer drawing on charts? No. Robinhood does not currently offer any advanced studies (technical indicators) for performing technical analysis.
Does Robinhood offer an active trading platform? No. Robinhood does not offer a desktop downloadable trading platform for active trading.
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.