Brokerage Account Robinhood Review and Guide

Robinhood is a commission-free brokerage account that allows users to buy and sell stocks, ETFs, options, and cryptocurrencies with zero account minimums or maintenance fees.

The app is user-friendly, making it easy to navigate for beginners. It's available for both iOS and Android devices.

To open a Robinhood account, you'll need to provide some basic personal and financial information, including your name, address, Social Security number, and bank account details.

Robinhood offers a variety of investment options, including stocks, ETFs, and cryptocurrencies like Bitcoin and Ethereum.

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Robinhood's safety and security features are top-notch. The company is a member of the Securities Investor Protection Corp. (SIPC), which protects up to $500,000 for securities and cash or $250,000 for cash only per account.

Robinhood also provides excess SIPC coverage, which provides an aggregate of $1 billion of coverage—up to $1.9 million for cash and $50 million for securities per customer, should the SIPC coverage become exhausted. This added layer of protection gives investors peace of mind.

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Two-factor authentication (2FA) is another security feature that requires two sources of verification to sign into your account, making entry by unauthorized parties much less likely. Robinhood's security team also encrypts sensitive details such as Social Security numbers, ensuring they are safe from hackers.

Here are the key safety and security features of Robinhood:

Robinhood's account security is a top priority, with two-factor authentication (2FA) requiring two sources of verification to sign into your account, making entry by unauthorized parties much less likely.

The company uses multiple industry-standard measures to protect your account and information, including hashing your account passwords using the BCrypt hashing algorithm and encrypting sensitive information before it is stored.

Both mobile and web applications provide secure communication using the Transport Layer Security (TLS) protocol.

Robinhood is a member of the SIPC (Securities Investor Protection Corporation), providing protection against broker failure for up to $500,000 in cash and securities, including $250,000 of cash.

However, this coverage does not extend to investment market losses or cryptocurrency positions.

In addition to SIPC insurance, Robinhood provides excess SIPC coverage, which provides an aggregate of $1 billion of coverage—up to $1.9 million for cash and $50 million for securities per customer, should the SIPC coverage become exhausted.

Here's a breakdown of the insurance coverage provided by Robinhood:

Robinhood's security features meet industry standards, and the company is also regulated by the SEC as a registered broker-dealer, providing an added layer of protection for investors.

Trading risks can be a major concern for investors, especially those new to the world of finance. The Robinhood app's sleek and minimal design can lead to hasty and uninformed decision-making.

For novice investors, the lack of advanced tools can be particularly problematic. Most reviewers suggest that tracking more than three or four positions isn’t practical with Robinhood.

Overweighting your portfolio with one or two equities is never a good practice, and Robinhood's app doesn't make it easy to manage a diversified portfolio. This can put your investments at risk.

Robinhood doesn't integrate with other financial management tools like Mint or Quicken, making it difficult to track your holdings as part of your overall financial picture.

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Robinhood is a financial services company that allows individuals to trade cryptocurrencies, exchange-traded funds (ETFs), individual stocks, and options commission-free. It offers a mobile platform that's easy to use, even for those new to investing.

The company was founded by Vladimir Tenev and Baiju Bhatt, both Stanford physics graduates, who wanted to make the financial markets more accessible. They launched Robinhood in December 2014 with a waiting list of over 500,000 people.

Robinhood's primary means of driving revenue is making small amounts of money on individual trades at scale. It does this by attracting large numbers of users and earning razor-thin margins on those trades through payment for order flow (PFOF).

The platform permits stock, ETF, cryptocurrency, and options trades, commission-free. You can also invest your uninvested funds in a brokerage cash sweep fund offering interest on the funds for a monthly fee.

Robinhood offers a premium trading platform called Robinhood Gold, which provides investors with premium features for a $50 annual fee. These features include allowing members to trade on margin interest-free up to $1,000, granting bigger instant deposits, and providing access to professional research and Level II market data.

Here are some key benefits of using Robinhood:

Robinhood offers a range of features and benefits that make it an attractive option for investors. You can open a taxable cash or margin account, or take advantage of their IRA and Roth IRA retirement vehicles, which even offer a 1% match up to the annual federal limit if funds are electronically deposited and held in the account for five years.

One notable benefit is that Robinhood doesn't require a monthly fee or account minimum to open or maintain a brokerage account, except for the Gold account. This makes it a great option for those who are just starting out or want to test the waters without committing to a high minimum balance.

Robinhood also offers commission-free crypto trading with no markups and markdowns, and you can even trade fractional shares. If you're looking to grow your wealth, you can take advantage of their high-interest cash option, which offers a competitive 5.00% APY on your uninvested brokerage cash with the Gold tier subscription.

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Here are some key features of Robinhood's accounts:

In addition to these benefits, Robinhood also offers a 1% match each time you deposit funds into a Robinhood IRA, and a 3% match each time you deposit funds into a Robinhood IRA with the Gold tier subscription (expires April 30, 2024, unless extended).

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Robinhood's features and benefits are a mixed bag, with some advantages that make it a great choice for new investors and others that may not be as appealing.

One of the biggest drawbacks is the lack of joint brokerage or custodial accounts, which can be a major inconvenience for investors who need to manage accounts for family members or business partners.

Limited customer support is another con, with no direct phone support or live chat available unless you request it through the app or website.

The app encourages active trading and margin trading, which can be high-risk activities for new investors.

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Here are some of the key cons of using Robinhood:

On the other hand, Robinhood does offer commission-free trading, which can save investors a significant amount of money over time.

The app also offers a Gold tier subscription, which provides research and data for $5 per month - a small price to pay for access to valuable information.

The 3% Gold match requires maintaining a Gold membership for a minimum of one year, which can be a worthwhile investment for serious investors.

The Robinhood IRA match of 1% or 3% is also a great benefit, but requires keeping your IRA account open for a minimum of five years and maintaining the balance that received the match.

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One of the biggest advantages of using Robinhood is that it doesn't require a monthly fee or account minimum to open or maintain a brokerage account, except for the Gold account.

You can start investing with as little as $1, and there are no foreign transaction, inactive account, transfer, or card replacement fees.

Robinhood also offers commission-free crypto trading with no markups or markdowns, which is a huge plus for cryptocurrency enthusiasts.

Additionally, Robinhood is one of the few brokers offering access to Initial Public Offerings (IPOs), giving you the opportunity to invest in new companies before they go public.

One of the unique features of Robinhood is its high-interest cash option, which allows you to earn a higher interest rate on your uninvested cash.

For Gold tier subscribers, this rate is a competitive 5.00% APY, compared to the standard 1.50% APY without Gold.

Robinhood also offers a 1% match on every dollar you contribute to a traditional or Roth IRA, and a 3% match for Gold members when you deposit funds into a Robinhood IRA.

Here are some of the key benefits of using Robinhood:

Robinhood's mobile-first approach makes it a great option for simple trading without unnecessary features. The platform's real-time quote information is a major draw for many users.

Fidelity's mobile offering is more comprehensive, with functionality similar to its desktop trading platform. This includes features like fundamental analysis, charting, and research.

However, Fidelity's mobile app still has some limitations, such as limited fundamental analysis and charting capabilities. These limitations make it less suitable for advanced traders.

Robinhood's mobile app is surprisingly easier to use on the web than on mobile, which is a significant improvement in its web platform. This suggests that while Robinhood's mobile app has its strengths, it still has room for improvement.

Robinhood's research and education features are still improving, but they do provide a "Learn" section to help investors become more effective investors. This section is a great resource for those new to investing.

One notable feature of Robinhood is its Robinhood Snacks newsletter and podcasts, which provide easily digestible updates on the financial markets. These resources are a great way to stay informed without feeling overwhelmed.

Robinhood Gold members have access to more advanced research, but it comes at a cost. This premium program is worth considering for serious investors who want to take their knowledge to the next level.

When comparing costs, Fidelity and Robinhood have some key differences. One area where Fidelity stands out is in its volume-based options discounts, which vary depending on the user's activity. Robinhood, on the other hand, does not offer this feature.

In terms of recurring investment fees, both Fidelity and Robinhood are on the same page - neither charges these fees. This is a major plus for investors who want to save money.

Here's a comparison of the costs per trade for Fidelity and Robinhood:

As you can see, Robinhood has a slight edge when it comes to options contracts. However, it's worth noting that Fidelity offers a range of other features that may make up for this difference.

In terms of account types, Fidelity offers a much wider range of options, including IRAs, 401(k)s, and more. Robinhood, on the other hand, has been expanding its offerings, and now includes IRA and Roth IRA retirement vehicles.

One notable feature of Robinhood's IRA and Roth IRA accounts is the 1% match up to the annual federal limit if funds are electronically deposited and held in the account for five years. This is a great incentive for investors who want to save for retirement.

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Saving is indeed a safe option, but it's not the most effective way to grow your money, especially with interest rates as low as 0.01% offered by some larger banks.

The national average interest rate is a paltry 0.06% as of August 2020, which means your savings won't be growing much over time.

Investing carries some risk, but it also offers the potential for higher returns, and with the right strategy, you can reduce that risk.

Diversifying your portfolio is key to safe investing, especially in volatile market conditions, and it's a concept that Bloom teaches kids to make smart investing decisions.

Long-term investing and practical choices can help minimize risk and set you up for a secure financial future.

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Robinhood's customer support is available through email at [email protected], and you can also use the app or website to chat or request a phone call.

The company provides a detailed FAQ page that can generally answer most questions, making it a good resource for common issues.

Two-factor authentication (2FA) is used to secure your account, requiring two sources of verification to sign in, making unauthorized entry less likely.

Robinhood is a member of the SIPC, which protects your account against broker failure for up to $500,000 in cash and securities, including $250,000 of cash.

You can enter your own phone number for a callback, which is available 24/7, but keep in mind that Robinhood has not earned a good reputation for its customer service.

Robinhood's customer service is mostly available through email at [email protected], although you can also use the app or website to chat or request a phone call.

The company's FAQ page is very detailed and can usually answer most questions, making it a good starting point for help.

You can request a phone call from Robinhood, which is available 24/7, but there's no direct phone number to contact.

Robinhood uses a chatbot to assist with customer inquiries, but it hasn't earned a great reputation for its customer service.

In contrast, Fidelity has a 24/7 phone line, as well as a chatbot, and you can even talk with a live broker or online chat with a live agent.

Fidelity also has branch offices in most major cities across the U.S., providing a more traditional customer service experience.

Robinhood does offer two-factor authentication, which requires two sources of verification to sign into your account, making it more secure.

It's worth noting that Robinhood is a member of the SIPC, which protects your investments up to $500,000 in cash and securities, including $250,000 of cash.

Robinhood's customer service is available through email at [email protected], and you can also use the app or website to chat or request a phone call.

The company's FAQ page is very detailed and can generally answer most questions, making it a great resource for those who prefer self-service.

Robinhood uses two-factor authentication (2FA) to provide account security, requiring two sources of verification to sign in.

This makes it much less likely for unauthorized parties to access your account.

The company also uses industry-standard measures to protect your account and information, including hashing your account passwords using the BCrypt hashing algorithm.

Sensitive information is encrypted before it's stored, and both mobile and web applications provide secure communication using the Transport Layer Security (TLS) protocol.

As a member of the SIPC (Securities Investor Protection Corporation), you're protected against broker failure for up to $500,000 in cash and securities, including $250,000 of cash.

However, the coverage doesn't extend to investment market losses or cryptocurrency positions.

If you need to contact Robinhood, you can enter your own phone number for a callback, which is available 24/7.

Robinhood also has a chatbot, but it hasn't earned a good reputation for its customer service.

In contrast, Fidelity has a 24/7 phone line, a chatbot, and you can also talk with a live broker or online chat with a live agent.

Fidelity branch offices are also available within most major cities across the U.S.

Robinhood's security team encrypts sensitive details, such as Social Security numbers, ensuring they're safe from hackers.

Both Robinhood and Fidelity offer two-factor authentication, biometric recognition, and additional security for unknown devices.

They also offer FDIC insurance for cash accounts and SIPC insurance for investment accounts.

Robinhood's SIPC insurance includes the basic limits of $500,000 protection, including $250,000 for cash.

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Robinhood offers a limited range of account types, but they're expanding their options. As of January 2023, you can open a taxable cash or margin account, an IRA, or a Roth IRA with Robinhood.

Robinhood's IRA and Roth IRA accounts are a great option for eligible customers, offering a 1% match up to the annual federal limit if funds are electronically deposited and held in the account for five years.

Here's a comparison of account types offered by Fidelity and Robinhood:

Custodial accounts are a flexible way to invest with some tax benefits and legal protections for the minor. They operate similar to an adult brokerage account, allowing you to invest in various assets like stocks, ETFs, mutual funds, and even real estate.

Robinhood is known for its commission-free trades of stocks, options, ETFs, and cryptocurrencies, making it an attractive option for investors.

The platform charges a fee of $0.01 to $0.03 per share when purchasing foreign stocks on U.S. stock markets, also known as American Depositary Receipts (ADRs).

Regulatory fees are also passed on to investors, which include a regulatory transaction fee of $8 per $1 million of principal on sell orders, a trading activity fee of $0.000145 per share on equity sells, and $0.00244 per contract on options sells.

Robinhood also uses a payment for order flow system, which may result in investors getting a less-than-optimal price on both the purchase and sale of securities within their accounts.

One notable fee is the $100 charge to transfer your account off of the platform, which is not a feature offered by Fidelity.

Fidelity, on the other hand, charges a spread of 1% for cryptocurrency trading, while Robinhood offers free trading.

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Here's a comparison of costs between Fidelity and Robinhood:

Robinhood requires a $5 per month Robinhood Gold account to receive some perks, while Fidelity offers access to all its products and services for free.

Fidelity's margin interest rates are higher than Robinhood's, with a 12.575% rate for a $10,000 balance and 11.075% at $100,000.

Overall, while Robinhood is known for its commission-free trades, it's essential to consider the fees and charges associated with using the platform.

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Robinhood's platform is known for its simplicity, which contributes to its ease of use. It's a great choice for those who want to get started with investing quickly.

The platform lacks some common investing tools, such as trading simulators and security screeners, which might be a drawback for more experienced investors.

However, Robinhood does offer advanced charting features that allow you to identify trends using technical indicators like volume, moving averages, and the relative strength index (RSI).

Robinhood's platform is known for its ease of use, largely due to its simplicity. This simplicity does come at a cost, however, as the platform lacks some common investing tools found on other platforms.

One notable absence is trading simulators, which can be helpful for testing investment strategies without risking real money. Security screeners and alerts are also not available on the standard platform.

Robinhood does offer advanced charting, which can be useful for identifying trends using technical indicators like volume, moving averages, and the relative strength index (RSI).

Candlestick, line, and volume charting are also available, giving users a range of tools to analyze market data.

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Fidelity offers a superior desktop experience for intermediate and advanced investors, making it a top choice for those with more complex trading needs.

Its user-friendly interface allows for efficient navigation and execution of trades, even for those with limited experience.

Fidelity's platform is designed to cater to the needs of both new and experienced investors, providing a seamless trading experience.

A key advantage of Fidelity's desktop experience is its ability to support more advanced trading features, making it a better fit for investors who require more sophisticated tools.

Overall, Fidelity's desktop experience is a major factor in its appeal to intermediate and advanced investors.

Robinhood is good for simple trades, but Fidelity's mobile offering is more comprehensive.

Fidelity's mobile platform is a better choice for a complete mobile trade experience.

Both Robinhood and Fidelity's mobile apps are easier to use on the web than on the mobile device, which is surprising in Robinhood's case.

In this review, we found that both Robinhood and Fidelity offer mobile trade experiences that have their strengths and weaknesses.

Robinhood is good for simple trades, but its mobile app lacks in-depth tools, such as the ability to trade directly from the chart or place conditional orders.

Fidelity's mobile offering is more comprehensive, with much of the same functionality as its desktop trading platform, but fundamental analysis and research are limited in the app.

Both platforms were easier to use on the web than with the mobile app, with Robinhood making significant improvements to its web platform.

This suggests that users may want to consider using their web platforms for more complex trades or research, rather than relying on the mobile app.

Ultimately, the choice between Robinhood and Fidelity's mobile trade experience comes down to your individual needs and preferences.

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To give you a fair and comprehensive review, we considered eight key factors when evaluating a platform. We looked at the types of investors that would be best served by the platform, as well as the company's reputation.

We also took into account the ease of use of the platform, including how user-friendly the interface is and how easy it is to navigate. This is crucial for beginners who may not be familiar with investing.

Commissions and fees were another major consideration, as these can add up quickly and eat into your returns. We looked at the different types of accounts and investments available on the platform.

We also evaluated the features and tools offered by the platform, such as research tools and real-time data. Additionally, we assessed the customer service availability, including how easy it is to get help when you need it.

Here's a breakdown of the key factors we considered:

For the vast majority of investors, Fidelity wins in a competition between these two brokers. Its extensive range of products and support specialists make it a good choice for all investors.

Fidelity offers full-featured platforms like Active Trader Pro, which is a major advantage over Robinhood. Despite recent improvements in the Learn portal, new investors should still look beyond Robinhood for comprehensive learning resources.

Robinhood's simplicity and no-cost approach will continue to appeal to newer investors, but they may outgrow it as they develop their investing skills. Fidelity's capabilities and tools will eventually win them over.

Robinhood's Instant Deposits can give you immediate access to up to $1,000 while your ACH transfer is processing, but not everyone qualifies.

The platform is more suitable for seasoned, active traders who are confident in their investing skills and less dependent on customer service and investor resources.

Robinhood's reputation has taken a hit due to regulatory challenges and customer service issues. The Better Business Bureau gives the company a "D" rating, citing government regulatory action and complaints from customers about a lack of response from customer support.

Multiple regulatory bodies have taken action against Robinhood, resulting in significant fines. The Securities and Exchange Commission fined the company $65 million for making misleading statements in customer communications. This was related to the payment for order flow, which is a significant aspect of Robinhood's revenue.

A $57 million fine was imposed by FINRA, along with $12.6 million in restitution, for providing false or misleading information about systematic outages in March 2020. This was the largest financial penalty ever ordered by FINRA.

The New York Department of Financial Services also took action, imposing a $30 million penalty on Robinhood Crypto for significant anti-money-laundering, cyber-security, and consumer-protection violations.

Another regulatory body, the Commissioner of Financial Protection and Innovation, imposed penalties of up to $10.2 million for being "negligent in inaccurate information" in connection with various investment activities. This investigation was brought by state securities regulators from multiple states.

Here are the details of the regulatory actions against Robinhood:

If you're considering Robinhood, it's worth exploring other investment platforms. Robinhood is good for active trading and commission-free trades, but it's lacking in certain areas, such as bond and mutual fund investments.

TradeStation and J.P. Morgan Self-Directed Investing are two alternatives that offer a wider variety of investment and account types, including retirement accounts. They each excel in different areas, with TradeStation offering wider investment and account options, and J.P. Morgan Self-Directed Investing providing phone support and mutual fund investing.

Acorns is a great choice for new investors who want to accumulate funds to invest, allowing you to connect a spending account that rounds up purchases and transfers the change into your investment account.

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Robinhood has its downsides, and it's essential to consider them before opening an account. One of the notable cons is that it doesn't offer joint brokerage or custodial accounts.

The app also lacks bonds and mutual funds, which might be a limitation for some investors. I've noticed that some users might be disappointed by this omission.

Another con is the cost of the Gold tier subscription, which can add up to $5 per month. This might not seem like a lot, but it's an extra expense to consider.

Robinhood's focus on active trading and margin trading might be a concern for new investors, as these activities come with high risks. I've seen some users get caught up in the excitement of trading and forget to think about the potential consequences.

The app also allows payment for order flow, which can reduce some of the benefits of commission-free trading. This might be a trade-off for some users, but it's essential to understand the implications.

Customer support is limited, and you won't find direct phone support or live chat unless you request it through the app or website. I've heard some users complain about the lack of support, especially when they need help quickly.

In terms of tools, Robinhood's offerings are limited for trading, research, and education. This might make it harder for users to make informed decisions or learn about investing.

Finally, the IRA match requirements can be a bit tricky. To get the 1% or 3% match, you'll need to keep your IRA account open for at least five years and maintain the balance that received the match during that time.

If you're looking for alternatives to Robinhood, you have plenty of options. Two examples are TradeStation and J.P. Morgan Self-Directed Investing, which offer a greater variety of investment and account types.

Each broker excels in particular areas, so it's worth considering what you need from an investment platform. For example, if you're looking for options and fractional share trading, Robinhood might be a good choice.

However, if you're a new investor looking to accumulate funds to invest, Acorns is an excellent choice. It allows you to connect to a spending account that will round up your purchases and transfer the change into your investment account.

If you're looking for a higher level of customer support, platforms like Fidelity and TD Ameritrade are better choices. They offer phone support, which can be a big plus if you need help with your investments.

If your primary plan is to trade cryptocurrencies, crypto exchanges like Coinbase or Gemini may be a better choice. Just keep in mind that they don't offer the same level of investment options as some other platforms.

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