Robinhood Review |
|
📅 Year founded |
2013 |
📈 Multiple top-tier regulation |
Yes |
📍 Headquarters |
Menlo Park, California |
🌍 Country of regulation |
United States |
✅ Regulators |
SEC / FINRA / SIPC / FDIC |
📈 Execution Type |
Market Execution |
💰 Minimum Deposit |
None |
🛡️ Negative Balance Protection |
Yes |
📉 Trading Platforms |
Robinhood Trading App |
☪ Islamic account |
None (no swap-fees charged however) |
📉 Trading Instruments |
Stocks / ETFs / Cryptocurrencies / Options / Gold |
📱 Mobile trading |
iOS / Android / Windows |
💳 Payment Types Accepted |
Bank Wire Transfer |
🎮 Demo Account |
None |
ⓒ Copy Trading |
Yes |
🎁 Bonus Offer |
Trading Rebates / Transfer Bonus |
💰 Account Currencies |
USD |
📈 Minimum Trade |
0.01 Lots |
📈 Account Types |
PAMM |
📈 Margin Trading |
Yes |
📈 Trading fees |
Low |
📈 Inactivity fee |
None |
💰 Withdrawal fee |
$25 USD |
☎ Customer Support |
24/7 |
💰 Max. Leverage |
2:1 |
✔️ Hedging Allowed |
Yes |
✔️ Scalping Allowed |
Yes |
💰 Commission |
None |
💰 Spreads |
Unknown |
💰 Leverage |
Flexible |
💰 Currency Pairs (Total Forex pairs) |
N/A |
🔢 Number of clients |
1 420 000 + |
🥇 Instruments Offered |
5 000 + |
📙 Education |
Robinhood Learn |
WHAT IS ROBINHOOD?
Robinhood is an innovative financial services company based in the United States that revolutionised the brokerage industry by introducing commission-free trading.
Founded in 2013, it has rapidly become a favourite among a new generation of traders and investors, especially appealing to millennials due to its mobile-first approach and straightforward user interface.
Robinhood’s primary mission is to make financial markets accessible to everyone, not just the affluent. It achieves this by eliminating trading fees, which historically have been a barrier to entry for many potential investors.
This has not only disrupted traditional brokerage models but has also spurred many of its competitors to adopt similar practices.
The platform is strictly available to U.S. citizens, aligning with regulatory standards and focusing on domestic traders. Robinhood is regulated by several top-tier U.S. regulatory bodies: the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and it’s a member of the Securities Investor Protection Corporation (SIPC), which provides protection for customers’ cash and securities.
Additionally, uninvested funds in Robinhood accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to certain limits, providing an extra layer of security for its users.
This regulation ensures that Robinhood adheres to the highest standards of safety and governance, making it a trustworthy platform for engaging with financial markets.
INTRODUCTION
Since its inception, Robinhood has aimed to democratise finance by making trading accessible and affordable for all, through its user-friendly interface and zero commission fee structure.
As the platform has grown, it has continued to attract a diverse user base, from young adults making their first investment to more seasoned traders looking for a simplified experience.
Whether you’re considering making your first stock purchase or seeking a new trading home, this review will equip you with the essential information needed to make an informed decision.
PROS & CONS
PROS
- Users enjoy zero commission fees on most trades.
- The platform is designed for ease of use.
- Apart from traditional assets, users can trade popular cryptocurrencies.
CONS
- Lacks options like forex, mutual funds and bonds.
- More experienced traders might find the tools inadequate due to its simplicity.
TRADING INSTRUMENTS
Robinhood provides a focused range of trading instruments that cater to the preferences of modern traders, particularly those new to the financial markets or looking for a streamlined trading experience.
Stocks
Robinhood offers access to a wide array of U.S. stocks, allowing users to trade shares from all major sectors. Whether traders are interested in technology giants, retail brands or energy companies, Robinhood makes it easy to invest in traders’ preferred companies without paying commissions.
ETFs
Exchange-traded funds (ETFs) are available on Robinhood and serve as a popular choice for diversification. These funds cover various asset classes including indices, commodities and bonds.
ETFs on Robinhood are a great way for traders to gain exposure to a broad market or specific sectors with a single transaction.
Cryptocurrencies
In response to the increasing demand for digital assets, Robinhood has expanded its offerings to include cryptocurrency trading. Users can buy and sell popular cryptocurrencies like Bitcoin, Ethereum and Dogecoin directly through the app.
This integration of cryptocurrencies into a traditional trading platform underscores Robinhood’s commitment to aligning with current financial trends and providing a diverse trading experience.
Options
For those looking for more advanced trading strategies, Robinhood offers options trading. This allows users to speculate on the direction of stock prices with a potentially lower upfront investment compared to buying stocks outright.
Options trading on Robinhood includes calls and puts and users can execute various strategies to suit their risk tolerance and market outlook.
Gold
Robinhood also offers the ability to invest in gold, an asset class that is often considered a safe haven during times of economic uncertainty. Users can trade gold through various ETFs that track the price of physical gold or gold mining companies.
This adds an important dimension to portfolio diversification, providing exposure to a commodity that historically has been a hedge against inflation and currency devaluation.
This range of trading instruments, with over 5 000 available, makes Robinhood a versatile platform suitable for different types of investors and traders. Whether traders are looking to invest in the equity market, explore the fast-paced world of cryptocurrencies or hedge with options and gold, Robinhood provides a straightforward and cost-effective platform to engage with the global markets.
TRADING PLATFORMS
Robinhood’s trading platform is designed with simplicity and accessibility at its core, available through both a mobile app. The platform is entirely proprietary, built in-house to suit the specific needs of Robinhood’s user base.
The Robinhood mobile app is where the platform truly shines and differentiates itself from competitors. It’s built for those who prefer to manage their investments on the go.
The app features a clean, intuitive design that makes navigating through trading functions seamless and straightforward. Key functionalities include real-time market data, easy-to-execute trades and a streamlined portfolio overview.
The mobile app also sends push notifications about price movements, transactions and news, ensuring traders are always up-to-date with the latest market developments.
Additionally, features like candlestick charts, historical market data and an activity feed are all accessible, allowing for deeper analysis and tracking of investment performance.
The platform is characterised by their minimalist design, which avoids overwhelming users with excessive data or complex navigation paths. This approach aligns with Robinhood’s mission to make trading accessible for novices and casual investors.
However, it’s important to note that while the simplicity of Robinhood’s platforms is ideal for beginners and intermediate users, it may fall short for advanced traders who require sophisticated tools and indicators commonly found in more specialised trading platforms.
Robinhood’s proprietary trading platform offers an efficient, user-friendly interface designed to make the trading process as smooth as possible. These platforms cater well to the needs of modern traders who value straightforward, fast, and intuitive trading tools.
ACCOUNT TYPES
Robinhood offers a variety of account types designed to cater to different trading preferences and strategies, each specifically tailored to certain types of trading instruments. This segmentation allows users to focus on the markets and instruments that best suit their investment goals.
Stocks and ETFs Account
This account type is designed for traditional equity traders and those interested in exchange-traded funds (ETFs). It allows users to invest in a wide range of U.S. stocks and ETFs without paying commission fees.
This account is ideal for both new and seasoned investors looking for exposure to the stock market.
Options Account
For traders interested in more sophisticated trading strategies, the Options Account provides the necessary tools. This account type supports the trading of options, which are financial derivatives that give buyers the right, but not the obligation, to buy or sell an asset at a specified price within a certain period.
This account is suitable for those with a higher risk tolerance looking to potentially leverage their investments for higher returns.
Gold Account
The Gold Account is tailored for investors interested in precious metals, specifically gold. Through this account, users can trade gold-related assets, such as gold ETFs, which track the overall price of gold or the performance of gold-mining companies.
This type of account appeals to those looking to hedge against inflation, diversify their portfolios, or invest in gold as a safe-haven asset during times of economic uncertainty. It is important to note that for traders who access the Gold Account, they are required to keep a minimum of $2 000 USD in the account.
Cryptocurrencies Account
Reflecting the growing interest in digital currencies, Robinhood offers a Cryptocurrencies Account that enables users to buy and sell popular cryptocurrencies like Bitcoin, Ethereum and Dogecoin directly through the platform. This account type is aimed at those looking to enter the crypto market with ease and without the need for a traditional crypto wallet or exchange.
Each of these accounts is integrated within the Robinhood platform, allowing users to manage their investments from a single interface. This streamlined approach to account management makes it easy for users to switch between different markets and instruments, depending on their changing interests or market conditions.
Additionally, Robinhood has designed these accounts with its signature approach to accessibility and simplicity, ensuring that even those new to investing can navigate and make use of the platform effectively. However, it’s important to note that while Robinhood provides these specialised accounts, each comes with inherent risks and benefits, making it crucial for users to understand their personal financial goals and risk tolerance before diving into different market segments.
HOW TO OPEN AN ACCOUNT
Opening an account with Robinhood is straightforward and can easily be done from the broker’s website. Firstly, traders are required to supply their personal information as well as the documents required by the broker, for verification.
Once these documents have been verified, traders may select their account type, deposit funds and begin trading.
DEMO ACCOUNT
Robinhood does not offer a demo account, which can be a drawback for beginners wanting to practice without financial risk. This would certainly be a great feature for the broker to add in future.
SOCIAL TRADING AND COPY TRADING
Robinhood does not support social or copy trading, which may be a limitation for those looking to mimic the trades of experienced investors.
However, for investors who are looking to be passive, the broker has added a retirement account which supplies recommendations and a 1% bonus on top of all money transferred to it.
COMMISSIONS AND FEES
Robinhood is known for its commission-free trades. However, regulatory fees on trades and margin trading fees for Robinhood Gold subscribers do apply, although this amount is unspecified.
The broker makes its commissions on spreads, which the broker does not supply any information on. Additionally, the broker does not charge any swap-fees, meaning that all the broker’s account types are Sharia law compliant.
LEVERAGE
For margin accounts, Robinhood offers leverage of up to 2:1, which is modest compared to other brokers that might offer higher leverage options. For other account types, there are no leverage options made available by Robinhood.
WITHDRAWALS AND DEPOSITS
Robinhood allows users to deposit funds via bank transfers. Withdrawals can be made to bank accounts, typically taking 3-5 business days to process.
The withdrawal and deposit options are limited which may be a drawback for some traders, however, there are no fees charged on these transactions by the broker.
CUSTOMER SERVICE
Customer service has been a mixed bag for many users, with some reporting quick helpful responses and others facing long delays. The customer service is available 24/7 which is an added bonus, however, it is only available in English as the broker only caters to clients in the U.S.
SAFETY AND SECURITY
Safety and security are paramount in the world of online trading and Robinhood takes this aspect seriously by adhering to the standards set by several top-tier regulatory bodies.
This commitment helps ensure that clients’ investments and personal information are protected with the highest level of oversight and compliance measures.
Securities and Exchange Commission (SEC)
Robinhood is registered with the SEC, which is the primary federal regulatory agency responsible for enforcing federal securities laws and regulating the securities industry in the United States.
This registration ensures that Robinhood operates under the strict guidelines and standards set for transparency, accountability and fairness in financial transactions.
Financial Industry Regulatory Authority (FINRA)
Robinhood is also a member of FINRA, a non-governmental organisation that acts as a self-regulatory body for brokerage firms and exchange markets. FINRA’s role is to protect investors by maintaining the fairness of the U.S. capital markets.
Membership in FINRA requires Robinhood to comply with stringent rules around trading practices and investor protection including the enforcement of the ethical conduct of its operations.
Securities Investor Protection Corporation (SIPC)
As a member of the SIPC, Robinhood provides its customers with SIPC insurance. This insurance protects the securities and cash in a customer’s brokerage account up to $500 000 USD with a $250 000 USD limit for cash.
This protection comes into play in the event of a brokerage firm’s failure, safeguarding investors from a total loss of their traded assets and uninvested cash.
Federal Deposit Insurance Corporation (FDIC)
For uninvested funds, Robinhood uses banks that are members of the FDIC. The FDIC insures these funds up to the standard maximum deposit insurance amount which is $250 000 USD per depositor, per insured bank.
This provides an added layer of security, ensuring that customers’ cash balances are protected in the event of bank failure.
In addition to these regulatory safeguards, Robinhood employs advanced security measures to protect users’ data and prevent unauthorised access. These measures include two-factor authentication (2FA), encryption of sensitive information and the use of secure servers.
Robinhood also continuously updates its platform security to deal with new threats, ensuring that its cybersecurity measures are robust and up to date.
Through compliance with these regulatory bodies and the implementation of strong security protocols, Robinhood demonstrates its commitment to providing a safe and secure trading environment for its users. This comprehensive approach to security not only helps protect financial assets but also builds trust with its customer base, which is essential for maintaining a reputable and reliable trading platform.
PROMOTIONS
Promotions are limited but the broker does currently offer a Transfer Bonus, where they provide an extra 3% on any amounts transferred from other brokers. Additionally, for Robinhood Gold members, there are trading rebates available depending on the volume and amounts traded.
RESEARCH
The broker does provide Sherwood News, which contains multiple articles, in the form of a newsletter. Other than this, the research component provided by Robinhood is fairly limited.
EDUCATION
Robinhood offers an array of articles and videos that cover the basics of trading and investing, but it doesn’t provide in-depth educational resources. These resources can be found under the “Learn” tab on the broker’s website and can be useful for beginner traders.
GLOBAL AWARDS
From our research, we were unable to find any awards won by Robinhood for their trading experience, although the team has won awards relating to their company. Although we were unable to find evidence of trading awards, this does not mean Robinhood has not won any, or may not win awards in the future.
SAFE OR SCAM?
Robinhood is a legitimate trading platform that is fully regulated by several reputable financial authorities in the United States including the SEC and FINRA. These regulatory bodies enforce strict guidelines to ensure transparency and fairness, which Robinhood must adhere to as part of its operational requirements.
Furthermore, Robinhood is a member of the SIPC, which provides SIPC protection for its clients’ securities and cash in the unlikely event of the company’s financial failure. Additionally, uninvested funds held in Robinhood accounts are protected by the FDIC, up to $250 000 USD per depositor, per bank, which safeguards cash balances against bank failure.
Given its regulatory compliance, insurance protections and the straightforward nature of its financial services, Robinhood can be considered a safe platform for retail investors. However, like any investment platform, it is essential for users to understand the inherent risks involved in trading and to utilise the tools and information available to make informed decisions.
CONCLUSION
Robinhood has reshaped the investment landscape with its user-friendly, accessible platform. While it’s excellent for beginners and casual investors, advanced traders might find it lacks certain features.
The broker does provide an easy to use platform, with a wide range of trading instruments available, however, the broker’s services are limited to the U.S.
After conducting the above review, the team at Brokersuggest.com can highly recommend Robinhood to novice traders based in the U.S. However, for traders outside the U.S. and more experienced traders, there are certainly better options out there.