Robinhood review 2024: The comprehensive guide
In this 2024 Robinhood review, explore the platform's features, performance, and user experience to make informed investment decisions.
Our Verdict
Our Verdict
Robinhood is a financial services company that has revolutionized the brokerage industry with its commission-free trading model. Founded in 2013 by Vladimir Tenev and Baiju Bhatt, the platform aims to democratize finance for all, making investing accessible to a broader audience, particularly younger and less affluent individuals who may have been deterred by traditional brokerage fees.
Pros
- User-friendly interface
- Instant access to deposited funds
- No account minimum or monthly fees
- Supports cryptocurrency and fractional share trading
Cons
- Utilizes payment for order flow
- No access to mutual funds or bonds
- Limited educational and research resources
Free plan available
$20,47Options trading
YesReal-time market data
The platform provides real-time market dataUsing Robinhood
On Robinhood, users can engage in trading various assets like stocks, ETFs, options, cryptocurrency, and ADRs, which represent shares in foreign companies. Fractional shares trading is also available. However, trading is restricted for stocks listed on foreign exchanges, preferred stocks, over-the-counter stocks, mutual funds, closed-end funds, foreign currencies, and bonds. Shorting stocks is not permitted. To access Robinhood, users must have a valid social security number, a legal U.S. residential address, and meet the minimum age requirement. Basic services are commission-free, while premium features are accessible through the subscription-based Robinhood Gold.
How Robinhood operates
Robinhood, an online brokerage, has aimed to democratize investing since its inception, catering to novice investors with minimal capital. Its mission mirrors the ethos of Robin Hood, sharing wealth by providing access to financial markets for everyone, not just the affluent. Achieving this through an affordable, user-friendly platform, Robinhood's approach often resembles a game, making trading accessible and enjoyable. Introduced in 2013, its zero commission trades disrupted the industry. Experiencing exponential growth, Robinhood amassed half a million users within a year of its launch, reaching 23 million by 2023.
Trading options on Robinhood
Options trading, once reserved for experienced professionals, has become more accessible with technological advancements, including platforms like Robinhood.
Similar to other platforms, Robinhood limits options trading to knowledgeable investors who meet specific criteria, indicating their understanding of the associated risks and their financial capacity for such endeavors.
To initiate an options trade on Robinhood, follow these four steps:
- Search for the desired security (stock or ETF).
- Select the security.
- Navigate to the security's detail page and choose "Trade."
- Tap the "Trade Options" button.
If you possess multiple types of accounts with Robinhood (e.g., taxable brokerage, IRA, and options trading), ensure you select the appropriate options account before executing the trade.
Additionally, Robinhood users can swipe on existing or pending orders to buy, open, sell, or close them—swiping right for buying or opening orders and swiping left for selling or closing them.
Robinhood charges
Robinhood was the pioneering brokerage platform to eliminate commissions on stock and options trading, sparking an industry-wide shift towards commission-free trading. Today, commission-free trading of stocks and ETFs has become the norm across the industry.
To access a lower-interest margin account, customers must subscribe to Robinhood Gold, which costs at least $6.99 per month or $75 annually. Without Robinhood Gold, users with a Robinhood margin account incur a 12.00% interest rate. Subscribing to Robinhood Gold reduces this rate to 8.00%.
Gold subscribers receive a 3% match on eligible contributions to a Robinhood IRA account, subject to specific criteria such as maintaining contributions in the IRA for at least five years and remaining a Gold member for at least one year after receiving the first 3% match.
In addition to the lower interest rate, Robinhood Gold includes $1,000 in margin credit, access to research materials, and the ability to make larger deposits.
For any margin above $1,000, Robinhood Gold charges an 8.00% annual interest rate, calculated daily and applied to the customer’s account at the end of each monthly billing cycle.
Robinhood's customer support and security
Robinhood offers customer support via text chat and phone assistance, though reaching phone support can be challenging since there's no displayed customer service phone number. Customers need to be logged into their accounts to request a callback from Robinhood. While the platform provides a comprehensive FAQ support page, the lack of direct customer support accessibility may concern some investors.
On the security front, Robinhood provides assurance with robust measures. Account passwords are hashed using the BCrypt algorithm, a standard in the industry, and are never stored in plaintext. The mobile app offers secure access options like Touch ID, Face ID, or a PIN code, along with two-factor authentication.
In terms of fund security, Robinhood is a member of the Securities Investor Protection Corporation (SIPC), safeguarding up to $500,000, including $250,000 in cash, for clients' securities. However, it's important to note that SIPC coverage doesn't extend to cryptocurrency investments through Robinhood Crypto.
Robinhood's research and educational resources
Robinhood's dedication to democratizing investing appears limited in its educational offerings for new investors. The platform lacks stock screeners and research tools, providing Morningstar research exclusively to Robinhood Gold members, who must pay $6.99 monthly or $75 annually for the subscription (with the first 30 days waived).
These Morningstar reports encompass approximately 1,700 stocks and receive regular updates, particularly following significant events like earnings reports. While Robinhood offers fundamental basics through articles in its Learn section, it provides accessible investment news through its Robinhood Snacks newsletter and podcast, catering to beginners without overwhelming them.
