Robinhood started out as an innovative disruptor in the brokerage industry and its brand has since grown to be very popular with tech-savvy investors and new traders, 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 on the platform, but it lacks 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 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.
Robinhood was founded in 2013 by two former Stanford roommates, Vlad Tenev and Baiju Bhatt.3 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 has struck a chord, with more than 10.3 million monthly active users and $87 billion in assets under custody as of September 30, 2023.4
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 January 12, 2023, the company announced that Robinhood Retirement, which launched via waitlist in December, had become available to all eligible customers.1
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, foreign exchange, or futures trading, thereby restricting trading and investing strategies that require a wide array of asset classes.5 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.
Educational content, while improving, still isn’t up to par with many of Robinhood’s competitors’ offerings. An intentional focus on enhancing this area is apparent, though. Robinhood 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.6
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.789
Pros
Cons
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 just 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.14 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 of 2020, which still linger in many traders' minds.15
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 a 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.
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.
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:
According to Investopedia's latest Sentiment Survey, a growing number of respondents say they are increasing their stock market exposure to levels greater than last November, despite lingering concerns about bubbles and political unrest.
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.
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 $1.28 per 100 shares of stocks, but the company doesn’t report figures for options.19
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.
Similar to most of its competitors, Robinhood does not charge trading fees. There are some other fees unrelated to trading that are listed below.
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):
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.
Robinhood offers a stock screener with over 20 filters.30
Robinhood does not offer any ETFs or mutual fund screeners. However, ETFs may be searchable with the stock screener.
Robinhood does not offer any options screeners.
Robinhood does not offer any fixed-income screeners.
Robinhood does not offer any tools or calculators.
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.31
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.
Robinhood does not offer trade idea generators. However, you can access trusted news sources for free through its newsfeed.
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.32 Additionally, Robinhood offers Robinhood Snacks, which is a daily three-minute newsletter that anyone can subscribe to. Robinhood also produces podcast and video content.
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.33 As a Robinhood Gold member, you will have access to Nasdaq Level 2 market data powered by Nasdaq TotalView.
Robinhood does not support money market funds. However, its cash management brokerage feature offers 1.50% 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.25
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.34 The card builds on Robinhood’s mission of democratizing finance and investing in a new, enjoyable format.
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.
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.
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 a way 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.
Investopedia's latest Sentiment Survey has uncovered that "While ETFs and stocks remain our readers’ top choices for what they are currently doing with their money, the perceived frothiness of some sectors and the overall market would not necessarily deter them from buying more—especially if they had an extra $10,000 to spare."
Robinhood has made improving education a core focus of late. The platform's enhanced Learn 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.35 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.36
All these features help to advance investor knowledge. Robinhood also offers Snacks, a three-minute newsletter that delivers the day’s top financial news stories to its readers every weekday.37 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 cofounders.38
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. Eastern Time and is working toward 24/7 trading.
Unlike traditional brokerage firms, cryptocurrency exchanges are not members of the Securities Investor Protection Corporation (SIPC). Therefore, unless user terms specify otherwise, investors with cryptocurrency assets on a custodial cryptocurrency exchange could potentially lose their funds as unsecured creditors.
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, and these issues center 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.41
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.42
Robinhood only offers brokerage account options as either margin or cash accounts. They also made IRA and Roth IRA accounts available to eligible customers on January 12, 2023, but the still limited options continue to restrict the ability of traders with more robust financial goals from using the platform.
Robinhood’s focus on delivering more access to the markets and reducing barriers to entry is clear from the way the platform is designed. A user-friendly, expertly designed trading experience lets users enjoy a refreshing way to enter the market. No fees, commissions, or account minimums help 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.
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 fund, foreign exchange, or futures trading options 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. Though educational content and some features, like charting, are improving, there's still a lot of work to do to meet the standards other brokers are setting and to match the expectations of advanced users. A history of lacking transparency into outages and trading restrictions is another key consideration. 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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