Robinhood Review

Our Take

Robinhood started out as an innovative disruptor in the brokerage industry. Its brand has since grown steadily, thanks to a no-fee model and sleek, easy-to-use trading experience. Originally, the company’s biggest differentiator was fee-free trading; however, many competitors have since lowered their fees in response. Users can easily trade stocks, ETFs, options, and cryptocurrencies and spot Bitcoin and Ethereum ETFs on the Robinhood platform, but it lacks the more sophisticated financial tools, asset categories, and research capabilities that advanced traders look for in a broker.

Though there has been a clear focus on improving access to a growing library of educational content, offering more retirement account benefits, and enhancing basic charting capabilities, there is still much work to do before the platform reaches the standards now set across an increasingly competitive landscape. We’ll explore Robinhood in more detail so you can determine if the platform makes sense for you.

Introduction

Robinhood was founded in 2013 by two former Stanford roommates, Vlad Tenev and Baiju Bhatt. Launched with a desire to expand access to the market by reducing barriers to entry, the platform quickly found a home with young, tech-friendly traders thanks to a simple design and intuitive trading experience. It’s clear that Robinhood’s brand struck a chord early on. It continues to grow, although at a less frenetic pace in recent years. As of May 8, 2024, the brokerage boasts 23.9 million funded customers, 13.7 monthly active users, and $129.6 billion in assets under custody.

No-fee and no-minimum trading makes it easy for beginners to get started with investing, and the ability to trade fractional shares gives users access to a greater range of assets than they might otherwise be able to afford. The platform provides a simple menu of assets such as stocks, ETFs, and direct cryptocurrency trading, further streamlining the app and trading experience. Options trading is offered as well, although some limitations in order types and concerns about the quality of trade executions may deter more serious investors. Previously, Robinhood only offered individual accounts, but on Jan. 12, 2023, the company announced that Robinhood Retirement, which launched via waitlist in December, had become available to all eligible customers.

Robinhood’s limitations are a recurring challenge for advanced traders and are significant enough to drive sophisticated investors to seek alternative broker options that better align with their trading approach. For example, Robinhood offers no fixed income, mutual fund, or foreign exchange, thereby restricting trading and investing strategies that require a wide array of asset classes. This lack of assets combined with an overall lack of tools, calculators, and advanced charting features makes it very difficult to execute more complex trading strategies.

Robinhood now offers a 24 Hour Market product, allowing customers to trade select stocks and ETFs 24 hours a day, 5 days a week. The broker also continues to expand its Learn section with more material and has enhanced the onboarding questionnaire to help users understand investing basics while setting risk parameters that match their tolerance. 

Robinhood’s platform is receiving focus in other areas as well. Cash management enhancements such as providing a higher interest rate on uninvested cash as well as a cash card product aim to round out the platform and draw in more clients. Still, questions linger about Robinhood’s reliability and motivations due to significant platform outages, fallout from restrictions placed on certain meme stocks like GameStop in January 2021, and misleading customers about sources of revenue related to order routing. 

Pros & Cons

Pros Explained

• Very simple, intuitive trading experience: Robinhood's platform lets investors trade in the market seamlessly. The sleek mobile app design reflects Robinhood’s mobile-first disposition, although a web-based platform is available as well. Robinhood leans into its expertise as a mobile offering, catering to traders who are looking for basic features that are easy to navigate quickly. 
• No trading fees or commissions: This is the hallmark of Robinhood’s platform. Thanks to its innovative challenge to the industry, many brokers were forced to reduce or eliminate their trading fees to remain competitive.
• Fractional share trading and direct cryptocurrency access: Fractional share purchases can be made with as little as $1, and the dividend reinvestment program (DRIP) automatically reinvests dividends from stocks or ETFs (provided the positions support fractional shares). Direct crypto access allows traders to buy and sell different coins with ease.
• Solid cash management features and recurring investment functionality: An innovative cash card lets users invest rewards earned from purchases. Interest on cash sweep accounts allows users to earn up to 1.00%. The recurring investment feature is straightforward to set up, allowing users to quickly automate how much they put in the market at a cadence that makes sense for them. Robinhood Gold members can now earn 5.00% on uninvested cash.
• IRA match: Robinhood will actually give cash to its customers as a match on their IRA contributions. It matches 1% for regular customers and 3% for gold-level subscribers. The gold-level subscription costs $50 per year, so even a $2,000 contribution becomes worthwhile. However, to keep the match, the customer must keep the gold subscription for one year and maintain a balance greater than the contribution for five years.

Cons Explained

• Limited asset types: Robinhood has recently added retirement accounts but still doesn’t offer all of the assets some investors are looking for, including fixed income, mutual funds, foreign exchange, or futures trading. Moreover, because only brokerage, IRA, and Roth IRA accounts can be opened on Robinhood, investors are deprived of savings and other account types available elsewhere.
• Limited research: Research tools and information at Robinhood don’t measure up to competitor standards, making it difficult for traders to get the most out of the platform. There are no stock or ETF screeners available at all, and other research tools are rudimentary at best.
• Lack of transparency: Robinhood's lack of transparency on outages and trading restrictions with meme stocks in 2021 gave many traders pause before utilizing Robinhood as their preferred platform. During the aftermath of those account restrictions, investors were not confident that they would have access to their positions. Since then, Robinhood has become more transparent about payment for order flow and publishes its 606 report, but the typical customer’s understanding of how reliant Robinhood is on PFOF is not likely where it should be. Because the largest part of revenue comes from this income stream, traders should recognize that they are not Robinhood’s primary customers—the exchanges are.

Usability

Robinhood’s app is very simple and user-friendly. Robinhood’s mobile-first approach to its trading experience makes it an easy choice for investors who prefer to trade from their phone. The web-based platform's look and feel are similar to the app's. Traders will find the same types of orders, assets, and functionality in either version. 

The main menu is easy to navigate, with intuitive screens that let investors easily see their portfolio value and positions. The search functionality gives traders a good overview of a stock’s details, such as highs and lows, P/E ratio, and market capitalization. A news feed and composite of analysts’ rankings gives traders even more insight into a company profile. As you’re looking through a stock’s information, the “Trade” icon follows you as you scroll, allowing you to buy or sell as soon as you’ve made a decision. 

Notably, Robinhood rolled out improvements to its charting functionality in August 2022, much to the delight of traders who have long requested changes. New chart features such as moving averages let traders better visualize and analyze stock trends to make more informed investment decisions. 

Overall, the trading experience itself is excellent. However, there are still some limitations to how much you can customize the experience because there’s not much you can do to further tailor the app to your preferences. The user-friendliness of the app was dampened, however, by the platform’s significant outages in February and March 2020, which still linger in many traders' minds.

Trade Experience

Robinhood’s trading experience is fast and easy to use, appealing to new investors in particular as it allows them to get up and running quickly. The sleek mobile app has a straightforward design that lets traders seamlessly enter, exit, and monitor positions. Robinhood’s focus on simple functionality makes the platform more geared toward investors using uncomplicated strategies, regardless of experience level. 

Robinhood users get access to basic watch lists and historical stock quotes paired with charts, analyst ratings, and news. The improved chart overlays give investors a more comprehensive look into stocks and their positions. Beyond this, there’s not much in the way of in-depth insights and customization ability. Sophisticated traders will likely not find all they need to execute more complex trading approaches, even with the improvements to charting functionality.

Mobile Trade Experience

​​Robinhood is a mobile-first brokerage that aims to make trading simple without complicating the experience with more in-depth features. It makes sense, then, that more complex trading tools and research options are largely absent from the mobile trade experience. For instance, no chart drawing tools are available on mobile, and trades can’t be executed directly from charts. Order staging and simultaneous order entry options are also not available. 

More basic order types, like trailing stop orders and stop limit orders, are about the extent of what you’ll get through the app. Advanced traders will notice that conditional orders aren’t supported. That said, quotes from the Robinhood app do at least stream in real time.

Range of Offerings

Robinhood’s range of offerings is extremely limited in that it only offers stocks, ETFs, options, and cryptocurrency trading. Robinhood doesn’t support mutual funds or fixed-income products, and you can’t trade commodities, forex, or futures. If you choose Robinhood as your broker, you can invest in:

• Stocks: Long only; no short selling; American depository receipts (ADRs) available
• Fractional shares: Stocks worth over $1.00 per share with a market capitalization over $25,000,000 are eligible for fractional share orders; Robinhood offers both stocks and ETFs 
• Options: Single and multi-leg
• Cryptocurrency: A range of coins is available to trade. 
• Non-custodial wallets: Robinhood offers a web3 wallet for iOS and Android which allows customers to control crypto in a seamless, decentralized web experience.
• Stock lending: Announced in May of 2022, Robinhood users can lend out fully paid stocks in their portfolio.

Order Types

Robinhood has a limited number of available order types. It offers a range of market and limit orders but no conditional orders. Order staging is also absent. These limitations affect all types of investors because they meaningfully restrict trading strategies. 

Support for more sophisticated order types, like order-triggers-other (OTO) is important because they help traders navigate risk, quickly enter and exit positions, and take gains off the table. As a result, traders using conditional orders can spend more time analyzing the market and planning their next move without having to watch current trades as closely. This is another sign that Robinhood isn’t meant for active traders. 

As far as tax optimization, tax lots default to first-in, first-out (FIFO) for all equities. There is no option to change this and select which shares will be sold for tax optimization purposes.

Trading Technology

The way a broker routes your order determines whether you are likely to receive the best possible price at the time your trade is placed. This best price is known as price improvement. Robinhood states that its trading systems are set up to automatically route your order to the market maker most likely to give you the best price based on historical performance. Robinhood reports that 96.85% of orders are executed at National Best Bid and Offer (NBBO) or better. The average price improvement is $2.77 per 100 shares of stocks, but the company doesn’t report figures for options. 

In terms of other trading technology, Robinhood gives you the ability to make recurring investments, which is a helpful feature. In keeping with its simplified approach to investing, Robinhood doesn’t allow you to perform backtests or offer a demo account.

Costs

Similar to most of its competitors, Robinhood does not charge trading fees. There are some other fees unrelated to trading that are listed below.

• All equity trades (stocks and ETFs) are commission-free.
• There are no fees for options trades
• The standard margin interest rate for non-Gold users is currently 6.75% as of June 13, 2024.
• Robinhood Gold members get $1,000 in free margin trading. The subscription costs $5 per month and comes with a number of other benefits.
• There is a $100 account transfer out fee.
• There are no domestic or international wire fees.
• There are no account opening, account maintenance, or account inactivity fees.
• To send a domestic check overnight, the fee is $20.

How This Broker Makes Money From You and for You

The fees and commissions listed above are visible to customers, but there are a few behind-the-scenes ways Robinhood makes money from you (and for you).

• Interest on cash: Like most brokers, Robinhood generates interest income from the difference between what you are paid on your idle cash and what it can earn on customer cash balances. Some brokers pass part of these earnings on to customers. At the time of this review, U.S. Robinhood clients earn 1.00% interest on cash balances. Gold members earn 5.00%.
• Payment for order flow: Many brokers generate income by accepting payment from market makers for directing orders to those trading venues. This is called payment for order flow (PFOF). For more details on Robinhood's payment for order flow practices, SEC disclosures can be found online.
• Stock loan programs: Stock loan programs generate revenue for brokers when stocks held in customer accounts are loaned to other traders or hedge funds, usually to sell that stock short. Robinhood pays you 15% of the income it earns from lending the shares. The program is available to customers who have trading experience other than "none," at least $25,000 of reported income, or at least $5,000 in account value.
• Price improvement: Robinhood's smart order router seeks out price improvement, which benefits you as the customer, and attains an average of $2.77 per 100 shares.
• Margin Interest: Robinhood offers the ability to trade on margin, which is borrowing money to trade with. Like any other loan, interest is charged on the money borrowed, creating a source of revenue for Robinhood. The standard margin interest rate as of October 13, 2023, is 6.75%. Robinhood Gold members can borrow the first $1,000 for free.
• Retirement account matches: New contributions from outside the platform to IRA or Roth IRA accounts (up to the IRA contribution limit) receive a 1% match from Robinhood. To retain the match, however, the contribution amount needs to stay on the platform for five years.

Account and Research Amenities

Although the overall account and research amenities are meager in comparison to those of larger rivals, there are some useful features including cash sweeps and basic charting. However, no screening functionality is available.

Stock Screener

Robinhood offers a stock screener with over 20 filters.

ETF and Mutual Fund Screener

Robinhood does not offer any ETF or mutual fund screeners. However, ETFs may be searchable with the stock screener.

Options Screener

Robinhood does not offer any options screeners.

Fixed-Income Screener

Robinhood does not offer any fixed-income screeners.

Tools and Calculators

Robinhood does not offer any tools or calculators.

Charting

Robinhood rolled out improvements to its charting capabilities in August 2022. The new features include more advanced charts and indicators such as moving averages, relative strength index (RSI), moving average convergence divergence (MACD), Bollinger Bands, and more. Line and candlestick charts are also available for stock and crypto trading.

Both the web and mobile platforms include these updates. These improvements help investors get a better sense of a position’s trends so that they can make more informed trading decisions. However, you can’t customize charts, and Robinhood doesn't provide drawing tools.

Trading Idea Generators

Robinhood does not offer trade idea generators. However, you can access trusted news sources for free through its newsfeed.

News

As a Robinhood customer, you can stay up to date with in-app Wall Street Journal market coverage, as well as news from Reuters and Barron’s, and video from CNBC Business, Reuters, and Cheddar. Additionally, Robinhood offers Robinhood Snacks, which is a daily three-minute newsletter that anyone can subscribe to. Robinhood also produces podcast and video content.

Third-Party Research

Robinhood Gold members are provided with unlimited access to Morningstar's premium, in-depth stock research reports. These reports are available on about 1,700 stocks and are updated frequently to reflect important company events. As a Robinhood Gold member, you will have access to Nasdaq Level 2 market data powered by Nasdaq TotalView.

Cash Management

Robinhood does not support money market funds. However, its cash management brokerage feature offers 1.00% on uninvested cash balances to customers enrolled in its deposit sweep program. Robinhood Gold members can now earn 5.00% on uninvested cash. The auto-sweep feature is enabled by default, which is an added bonus.

Robinhood offers an innovative Cash Card. This new take on a debit card allows users to earn stock and crypto rewards with each purchase. The card allows you to round up purchases to invest in stocks and crypto. The rewards then come in the form of a weekly bonus as a percentage of your round-ups. Cash Card holders can also use 90,000 ATMs without paying a fee. The card builds on Robinhood’s mission of democratizing finance and investing in a new, enjoyable format.

Fractional Dividend Reinvestment Plan (DRIP)

As a Robinhood user, you can specify dividend reinvestment at the time you purchase a dividend-paying stock. If the stock is eligible for fractional shares, the DRIP will purchase them with any leftovers.

SRI/ESG Research Amenities

Although there are no socially responsible investing (SRI) or environmental, social, and governance (ESG) screeners per se, Robinhood Lists enables you to search and discover various sectors and themes within the market, including companies focusing on SRI and ESG.

Portfolio Analysis

Robinhood offers very little portfolio analysis, especially in comparison to its larger rivals. You can see real-time balances, margins, and buying power, but that’s about it. The home screen shows a one-day graph of your portfolio value, and you can click or tap a different time period at the bottom of the graph to see specific dates and values.

There is no asset allocation analysis, internal rate of return, or ability to estimate the tax impact of a planned trade. There is also no trading journal. To perform any kind of portfolio analysis, you'll have to import your transactions into another program or website.

Education

Robinhood has made efforts to inform and enlighten its users through many avenues of market-based commentary. Through the platform's enhanced e-mail newsletter offerings (published by a subsidiary, Sherwood Media), the platform informs investors on a variety of subjects including market dynamics and trade ideas.  

Now, through Sherwood Media, Robinhood also offers Snacks, a three-minute newsletter that delivers the day’s top financial news stories to its readers every weekday. Snacks boasted a robust following of 40 million subscribers as of April 2022. The format for Snacks content is intended to provide exciting and helpful visuals to make financial news less intimidating. 

Another content option from Robinhood is the Under The Hood podcast hosted by one of the co-founders. Additionally, the learning section contains more far-ranging articles on investing basics, market insights, and general knowledge-building material than previous versions. A new First Trade Recommendations feature was introduced in January 2022. The tool is designed to help new investors begin their financial journey. Content helping traders understand more advanced options trading strategies has also launched. The acquisition of Say Technologies lets traders take more ownership of the companies they invest in, empowering users to participate by asking questions to companies and leadership teams. All these features help to advance investor knowledge.

Customer Service

Robinhood's main customer service contact point is through the website and app. The company offers 24/7 live chat support as well as a large library of support articles. To speak with a support agent, you must give your number for a call back. Robinhood says the phone number is for information only, not support. The company also has social media channels, but it's better to contact support through the website or app. Robinhood offers extended-hours trading from 7 a.m. to 8 p.m. ET.

Security and Reliability

• Mobile app users can log in with a face or fingerprint scan.
• Robinhood encourages users to enable two-factor authentication.
• New logins from unrecognized devices also need to be verified with a six-digit code that is sent via text message or email in case two-factor authentication is not enabled.
• Robinhood is a member of the Securities Investor Protection Corporation (SIPC), which protects its members' securities customers for up to $500,000 (including $250,000 for claims for cash). The company has purchased additional insurance with a $1 billion aggregate limit for securities and cash. The per customer limit is $50 million total in securities and $1.90 million for cash. Both forms of insurance do not protect against a loss in the market value of securities.
• Robinhood has reported data breaches within the past four years. The most recent was in 2021. A customer list of around five million email addresses with other information along with another list of around two million names and other information was obtained. No financial loss occurred and no financial information was obtained by the hackers.

Transparency

Robinhood was once a disruptive fintech player in the brokerage industry, helping young investors get into the market. In recent years, the company’s motives have been questioned, with issues centered around data, transparency, and trust. In December 2020, the SEC fined Robinhood $65 million for “misleading customers about revenue sources and failing to satisfy duty of best execution." The SEC declared that Robinhood failed to tell customers between 2015 and 2018 that its largest revenue source was derived from the market makers to which it routed customer orders. This is a practice that ultimately resulted in trades that generated less money for customers than they would have gotten at other brokers.

Robinhood also falsely claimed on its website that its execution quality matched or beat that of its competitors. The SEC concluded that Robinhood’s inferior trading prices ultimately deprived investors on its platform of $34.1 million.

Robinhood was brought into the spotlight again in January 2021, after it decided to restrict access to certain securities such as GameStop, AMC Entertainment, Nokia, and others during the market frenzy surrounding the Reddit short squeeze on the stocks. One of Robinhood's primary market makers, Citadel Clearing, has ownership in the hedge fund Melvin Capital, which was one of the largest short sellers of GameStop and others. The decision to restrict customer buy orders for these stocks led many to suspect a conflict of interest, spurring class-action lawsuits and the attention of some members of Congress.

What Type of Account Should I Open at Robinhood?

Robinhood only offers brokerage account options as either margin or cash accounts. It also made IRA and Roth IRA accounts available to eligible customers on Jan. 12, 2023, but the still limited options continue to restrict the ability of traders with more robust financial goals from using the platform.

The Bottom Line

Robinhood’s focus on delivering more access to the markets and reducing barriers to entry is clearly evident in its user-friendly, expertly-designed trading experience. The absence of fees, commissions, and account minimums helps empower investors to start their trading journey without financial commitments. Traders can seamlessly invest in stocks, ETFs, and cryptocurrencies and get useful, albeit relatively basic, insights into the market and their positions. The newsfeeds and podcasts available through Sherwood Media are also lively and helpful for new users to follow.

Beyond this, though, Robinhood isn’t a place for either sophisticated investors or users who want to execute anything more than the most simple trades. A lack of assets like fixed income, mutual funds, and foreign exchange, is a serious limitation. Order types, trading tools, and research amenities are still very limited or excluded altogether, although Robinhood has recently added retirement accounts to its platform. Overall, Robinhood provides a platform that makes it easy to trade, but a shortage of features and functionality means the app won’t be the primary broker for many traders.

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