Thanks to sites like Robinhood, it’s easier than ever to invest and grow your money. Instead of hiring a broker, you can simply sign up and buy stocks on your laptop or mobile phone. Robinhood allows you to make unlimited commission-free trades in stocks, trades and options, plus you can buy and sell cryptocurrencies with Robinhood Crypto.
When I first signed up to Robinhood you could only buy whole shares, but now you can buy fractional shares too, meaning you can invest in companies even if you have only a small amount of cash to start with.
I’ve spent roughly a year using Robinhood and it’s the only site I use to buy individual stocks. It’s a great platform for beginner investors, and I’ll explain it in more detail with my full Robinhood app review:
Why I love Robinhood
It’s easy to use
The best thing about Robinhood is how easy and clear it is to use. The website has a very simple interface and the designers did a great job with the overall design. The Robinhood app is also slick and I usually trade stocks on my phone.
Getting started is simple
To sign up you’ll need your SSN, a legal US residential address and to be 18 years or older. You’ll also need to be a U.S citizen, U.S permanent resident or have a valid U.S visa. Robinhood may ask you for a document to verify your identity after you sign up, which you can upload in the app or online with a secure portal.
With a free Robinhood account you can link your bank account and transfer up to $50,000 per business day into your account. You get $1,000 in instant deposits, so even though the ACH withdrawal may take up to 5 business days to happen after you initiate the transfer, any amount up to $1,000 will be instantly available to use. Robinhood gives you this amount in good faith that the transfer will go through. Amounts over $1,000 will take up to 5 business days to be available.
You’ll just need to make sure you have the funds available in your bank for at least 5 days otherwise a transfer reversal can happen.
Stocks are simple to search
You can enter the name of the company you’d like to invest in in the search bar, or you can get some investing ideas by looking at popular lists such as “100 most popular”and “top movers”. Robinhood also lists stocks by categories such as “cannabis” or “tech, media & telecom”.
Helpful news and insights
For each stock, Robinhood includes insights such as analyst ratings (whether it’s a buy, hold or sell) and news stories about that particular stock. You can see charts showing how the stock has performed over the day, week, month or year, as well as some quick stats such as trading volume and market cap.
Once you’ve picked your stock, it’s time to place your order. Trades placed during market hours are executed at the time, so you’ll always know the share price. If you place your order out of hours, your order will be executed when the market opens.
All you have to do is click “buy” and then select the amount you’d like to invest, it really is that simple. If you’d like to sell your stock, then you do the same thing but click “sell” and enter the amount you’d like to sell.
Watchlists to keep track of stocks
Another great feature of Robinhood is that it allows you to keep track of stock prices by creating watchlists. Give your list a title like “stocks to watch” or “Tech stocks” and then add the stocks that you’re interested in following.
Get free stocks
When you sign up for Robinhood you get a free stock, which is selected randomly from their inventory. I got a share of General Electric (to give you an idea GE currently trades at roughly $11) but you could receive a stock of higher or lower value.
If you refer a friend, they get a free stock and you get a free stock, so it’s a win-win. (You can sign up with my invite link here: https://join.robinhood.com/victorb1897) At the time of writing, Robinhood says you get a stock worth anywhere between $2.50 and $200, and this fluctuates based on market movements. However, there’s a 98% chance of the stock bonus having a value of $2.50-$10.00, so don’t get too excited.
The only slight caveat with their friend referral program is there’s a cap on the amount of free stock you can earn. The limit is $500 per year, but you’d probably have to refer quite a few friends to earn that much anyway.
Easy tax reporting with Turbotax
If you file your own taxes then do them with Turbotax because Turbotax allows you to import your Robinhood trade history, so you won’t need to worry about how to report your investments on your tax return. When you start filling out the information for “Stocks, Mutual Funds, Bonds, Other” you’ll be able to import your relevant 1099 forms. If you trade crypto then you’ll upload your CSV file from Robinhood in the cryptocurrency section on Turbotax. Cryptocurrency reporting is a minefield because you’re asked to report every trade, and people who trade a lot end up having to buy crypto reporting software. Robinhood allows you to import up to 2,250 crypto transactions, which is sufficient for most people. If you’re day trading crypto, however, then you may make more than this number of transactions in a given year.
Note: the company recommends waiting till February to file your taxes as it can take them up until mid-March to issue your 1099 forms.
Things I don’t like about Robinhood
There isn’t much I don’t like about Robinhood, but it’s important to note that when you sell your stocks, the money isn’t instantly available to withdraw. If you sell a stock you have to wait for the funds to “settle”, and the settlement period is the trade date plus two trade days. If you sold your stock on a Friday, you wouldn’t have the funds available to withdraw until Tuesday. If you need to get your cash instantly in an emergency, then it may not be for you.
Are there hidden fees to use Robinhood?
Robinhood offers commission-free trades and there are no fees to open account, maintain it or withdraw funds.
So you must be thinking…if Robinhood offers commission-free trades then is there anything else that does Robinhood charge me?
Full info about Robinhood fees can be found here. Self-regulatory organizations such as the Financial Industry Regulatory Authority (FINRA) charge Robinhood a small fee for sell orders, which is passed on to you, the customer.
The regulatory transaction fee (SEC fee) is $22.10 per $1,000,000 of principal (sells only) and the rate is subject to annual and mid-year adjustments. Robinhood does not pass this fee on to customers for sales with a notional value of $500 or less.
FINRA also charges a trading activity fee, which Robinhood passes onto customers, except for sales of 50 shares or less. The fee is $0.000119 per share (equity sells) and $0.002 per share (options sells). This fee is rounded up to the nearest penny and no greater than $5.95.
There are also American Depositary Receipt (ADR) Fees, which are certificates that represent foreign stocks and can trade on American exchanges. The banks issuing these certificates may charge custodial fees that typically range from $0.01-$0.03 per share.
How does Robinhood make money?
Robinhood makes money from its premium membership service, Robinhood Gold, which costs $5 per month (explained below). The company also makes money from rebates from market makers and trading venues, stock loans, Cash Management and income generated from cash (interest on your uninvested money). All the ways Robinhood makes money are listed here.
Is Robinhood legit and is it safe?
Yes, Robinhood is a legit way to make commission-free trades. Robinhood is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). You must keep in mind though that crypto is not protected by SIPC.
Is Robinhood Gold worth it?
Robinhood Gold is a membership service that starts at $5 per month. You can get larger instant deposits, meaning you can get instant access to $5k – $50k, depending on your account balance (with the free version you only get instant access to $1K). You also have access to in-depth professional stock research from Morningstar and Level II market data. In addition, Robinhood Gold gives you access to margin trading, meaning you can “borrow” money from Robinhood to make larger trades.
In my opinion Robinhood Gold is only really worth it if you’re planning to deposit larger amounts or you wish to try margin trading. If you’re investing with under $1000 and making smaller trades, then you’ll be better off with the free version. Robinhood Gold is better for those who have more knowledge about trading and are comfortable with the risks associated with margin trading, as you can lose more than you have.
Robinhood has everything you need as a beginner or intermediate investor and the website is really well designed. With no account fees (unless you sign up for Gold) and commission free trades, you can easily buy and sell stocks and gain access to market info. If you don’t wish to research and choose individual stocks then you may want to try a managed portfolio like Acorns or Ellevest, but if you’re happy to learn about companies and choose your own stocks, then Robinhood is your go-to platform.
Want to give it a try after reading my Robinhood investing review? Sign up for Robinhood and claim your free stock.