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Robinhood Review 2020: Pros, Cons And Comparison

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Robinhood Review 2020: Pros, Cons & How It Compares

I’ve been trading stocks with the Robinhood app for over seven months now so I just thought that I could do an honest review for you. With this Robinhood review , you can decide for yourself whether it is something that you want to use or not.
I’ll cover everything on the stock trading side of the app and then I’ll provide you all the pros and the cons of Robinhood so it is totally an honest review as the information provided are actual facts.
Now let’s just start talking about the Robinhood app if you’re not too familiar with Robinhood they’re not just another brokerage account.

Now Robinhood captures a lot of attention because it is completely free: $0 commission, $0 minimum account balance, so you could literally open up an account, fund it with $10 and start investing in stocks. However, currently, also the Robinhood competition such as Merrill and Ameritrade are offering free trading operations, this broker still has a powerful advantage because you can trade cryptocurrency without commissions and their trading dashboard is smooth and streamlined. The latter is an advantage for investors that want to close operations quick and ambitious beginners.

So there’s a lot of appeal to this, but what I really want to make sure you guys understand in this Robinhood review, is that it is a very limited platform and that’s kind of what we’re gonna get into here are the pros and the cons of this platform, why I like this platform, and also why I’m not such a fan of this platform at the same time.

Robinhood Review: The Bottom Line

First of all let’s talk about what Robinhood actually is. Robinhood is a free trading app out there that has really ballooned in popularity.

It allows you to invest in stocks, ETFs, as well as cryptocurrencies and options. Now the cryptocurrency piece is still limited to certain states in the United States, so if you are looking to invest in cryptocurrency through Robinhood, you’re going to want to make sure
it is currently available in your state.

Beyond that, Robinhood is a very basic investment platform. It is a 100% online platform,
meaning there are no physical storefront locations. So I’m sure you guys have seen the Charles Schwab or Fidelity locations around where you can go to a branch office
or you can call someone up on the phone.

With Robinhood it is completely electronic and online and so this right here might be a con for some people, the fact that you can’t call someone up on the phone or you can’t stop into a branch location to talk to someone but really, the difference here is the fact
that you’re not paying anything either as commission or as a maintenance of the account.

With the traditional online discount brokers you’re paying a fee for commission and they have a minimum account balance that is more or less what Robinhood eliminated. However by eliminating that fee structure they are not able to offer the personal attention that you might get through your other brokerage account where you can call someone on the phone
or stop into a branch location and enjoy a personalized customer service

So what can you invest in using the Robinhood app? First of all you can invest in publicly traded stocks or ETFs on the New York Stock Exchange or the Nasdaq. Therefore, right off the bat, that tells you that you cannot invest in penny stocks, you cannot invest in foreign stocks unless they trade through ADRs, and you cannot invest in stocks on the over-the-counter exchanges.

You can also invest in cryptocurrency, without commissions, through the Robinhood app if it is available in your state and currently this includes Bitcoin, Bitcoin Cash, Dogecoin, Ethereum, Ethereum Classic, and Litecoin. Robinhood plans to have this deployed all over the US. Check your state and see if it is available there.

Robinhood also now allows you to buy and sell options free of charge. So what this means is that there are no mutual funds available on Robinhood and there are no penny stocks or over-the-counter stocks.

Requirements To Open An Account In Robinhood

What are the fees associated with a Robinhood account, and what are the requirements?

Well the only requirements is that you do have to be a US investor, 18 and up, but beyond that, there are no fees associated with Robinhood.

It is completely free, no minimum account balance, and no commission cost for trading.

Robinhood Review: Pros And Cons

Pros

Okay, so what are the pros of this platform? There are pretty much two of them that I see.

Completely free: No Barriers To Entry In Investing

100% free:  First of all it’s 100% free, which really lowers the barriers to entry to get started with investing. Traditionally if you wanted to open an investing account, it might be a $500 or $1000 minimum balance but with Robinhood, it is $0, you can get started with pretty much nothing.

In the comments, one user of Alabama with 19 years old could start operating with twenty dollars. It is easier and provides a faster ROI than other brokers where you already are paying commissions for the operations.

The big reason that they’re so popular is because they do not charge any trading fees which is a big deal because with most brokerages you’ve got to pay at least about six to ten dollars every time you buy or sell stocks. This looks just like a waste of money.
Therefore, so if you bought just one share of a company for a hundred bucks then you’d have to pay the commission right now and then you would have to pay the commission
again when you sell the stock.
I mean, paying a commission isn’t that big of a deal when you’re buying a thousand shares at once because you’re only going to be charged the commission based on the transaction and not on a per share basis.
But because Robinhood doesn’t charge any fees it’s a lot easier for a beginner to start investing because he can just buy one share for about ten bucks and then he doesn’t have to pay a commission, which is a lot better for him to actually get started they don’t require a minimum balance to get started investing so technically you could start investing with RobinHood with any amount of money.

Streamlined Dashboard And Interface Application

Simple interface: The second pro for them is the fact that it has a very simple interface
pretty much anybody can jump on there, get started, and understand what it is they are doing but that in and of itself is also a con because the platform is extremely basic. And for any investor out there that’s really doing a lot of research. You are going to be extremely limited by this platform.

Tradable Securities

Regarding the offer of products, as of now they offer all the major stocks ETFs REITs and they have free cryptocurrency trading and free options trading as well.

you can invest in publicly traded stocks or ETFs on the New York Stock Exchange or the Nasdaq.

Portfolio Diversification Through Fractional Shares Acquisitions

In the past, you could only purchase whole shares of stock, so there are no fractional or partial shares available. And one platform that does offer both of these things, they offer a DRIP and they also offer fractional shares is M1 Finance, this is also a completely free platform and have reviewed it thoroughly in this link with a good result in my evaluation.

However, now Robinhood offers to possibility to acquire fractional shares. You would be paying, so to say, just one dollar for a small portion of a share, even if the price of that share is of a couple of thousands dollars. This feature is also included with Charles Schwab and Interactive Brokers. 

We like to have this ability. You may position yourself with a quite diversified stock of shares in your portfolio, allowing you to purchase a plethora of other fractional shares even if you are not in position to perform a huge investment of money.

Promotions Offered: One free share

Now if you’re new to Robinhood using this link, it will provide me and you a free stock just for signing up. If that’s something you’re interested in it’s a cool incentive because once your account signed up you can use the referral link as well and you can get
free shares from all the people that you refer it to. Let me be honest, I’ve
never gotten a free share that’s worth more than ten dollars bucks but maybe you’ll be
one of the few people that actually get lucky and get a good one. Some people in the comments received shares for more than ten dollars after they have signed up.

Very versatile: Accessible Through Desktop And Mobile Application

Now as far as the platform goes, and I cannot ignore it in this Robinhood review, is that it started out as an app only, but now in 2020 it is offered on desktop. Therefore if you like to do your investments on your desktop computer, then you can definitely do that.

Robinhood Cons

Limited Platform: But Streamlined Enough For Smart Investors Who Perform Quick Operations

So that right there is the first con I see for Robinhood. That platform is extremely basic
and I have used Robinhood before. I still have some investments with Robinhood but what I would find is I was doing all of my investment research on other platforms
and in this website.

It is fine if you come to this website or somewhere else to do your research and then you move to Robinhood dashboard to perform the actual operations as Robinhood does not have all the bells and whistles of other brokers.

I was only using Robinhood to buy and sell my shares and I really, would rather have the ability to do that all in one place where I’m on an app that allows me to do research and learn about investments and then do my transactions as well.

Limited Securities: No mutual funds or bonds

Another con for some is the fact that Robinhood does not offer mutual funds so if you are looking to invest in mutual funds you are not going to be able to do that through Robinhood.

No retirement accounts

Now a big con is the fact that they do not offer retirement accounts and this right here is a huge problem in my opinion because you cannot open any type of retirement accounts.
You can’t do the self-directed Roth IRA or a traditional IRA through Robinhood and I think a lot of people don’t understand the difference here between investing through a retirement account where you can be tax sheltered or investing through a traditional brokerage account where you’re paying taxes and you’re paying at the maximum rate in some cases.
So really educate yourself on investing through retirement accounts if you are a long-term investor,  especially as a young person and understand the advantage of investing and being able to do so through a retirement account.

This means that if you are looking to open up any retirement accounts like Roth IRAs or IRAs then definitely you cannot do it with Robinhood. This is because as of now, they do not have any tax sheltered accounts so just don’t even bother with that kind of accounts so just plan on using Robinhood for all the different types of investments that don’t involve a retirement account.

No pre-built portfolios or social trading options

Another con is that there are no pre-built portfolios with Robinhood, so you can’t really go on there and start investing in a portfolio that was built by somebody else. They’re putting all of that power in your hands to decide what you’re going to be investing in and you also really can’t build a portfolio or automate that process at all.

No Dividend Reinvestment Plans

Another con is that Robinhood does not offer a DRIP or dividend reinvestment plan. A lot of other brokerage accounts out there allow you to reinvest your dividends automatically and Robinhood does not do this.

No Automation Of Investments: Very manual

You can’t automate deposits into your account, you can’t automate investments. Really, it’s as basic as it gets here with this Robinhood platform, and that is the advantages that some
of these other platforms offer out there, it’s the fact that you can automate your contributions or automate your investments, or automatically reinvest those dividends
that are paid out by the stocks you’re investing in.

If you plan on doing any type of automated investing where you don’t have to do much at all don’t use Robinhood for this kind of stuff because as of now everything is fully manual with them and that’s just how it is.

Robinhood only offers the very basic order types. If you are somebody who’s looking for the more complex order types, you’re gonna wanna look somewhere else but for the most part these order types are all you would need as a beginner.

Not Many Research Options Without The Gold Package

If you are also interested in researching individual companies Robinhood gives you a tiny bit of information but not very much. For more information you would have to move to Robinhood Gold.
They do at least give you a one to five year history the p/e ratio and then dividend yields but as far as financials go you’re gonna have to go elsewhere to find that type of information but if you do end up leaving Robinhood to find out more about a company I’d recommend checking our website or Yahoo Finance because they have really good information on dividend history company’s financials and a whole bunch of other stuff that Robinhood does not have.
robinhood review

How Does Robinhood Compares With Other Brokers?

If you guys are on the fence between Robinhood and maybe something else, I would highly recommend taking a look at M1 Finance because in my opinion that is a superior platform and M1 Finance is my favorite investing platform out there for beginners who are not looking to pay for commissions when they are trading. So that review is linked up here.

For Whom Is Robinhood A Good Platform?

Moving on for whom is Robinhood a good broker and who is it not for, let´s see.

Robinhood is a good platform for beginners who are looking for a very basic investment platform but like I said, I would recommend doing your due diligence looking around at a couple of different platforms, particularly M1 finance.

Also it is good for investors that already arranged a portfolio and have a strategy under execution, they just want a streamlined platform as they do research elsewhere

Who is Robinhood not for?

It is really not good for the research-oriented investor. If you’re looking for candlestick charts, if you’re looking for more information about companies, if you’re looking to do fundamental analysis, you really can’t do any of that here with the Robinhood app.

You’re going to have to do that on different platforms and you’re probably going to be disappointed with that very basic platform.

But understand that is what Robinhood was built for, it was meant to be the most basic
and simple investing platform out there. So I’m really not saying it’s a bad platform, it was just built to be very basic for beginners and if you’re a little bit more advanced as far as investing goes, then you’re probably not going to be happy with Robinhood.

How Does Robinhood Make Money?

You might be asking yourself, well how does Robinhood make money?

What they do is they offer a feature called Robinhood Gold, where you are offered margin, you can buy stocks on margin, and you can also have after hours or extended hours trading and you also have the availability to have instant settlement with your funds
rather than waiting for funds settlement when you are selling your position.

Typically you would have to wait for those funds to settle to withdraw them or to reinvest them, but Robinhood can offer that instant settlement with their Gold Package.
So that is how Robinhood is actually making money.

Now let´s study below their Gold package. For only five dollars, it offers you much more options.

Robinhood Gold

Robinhood also has a premium subscription service called Robinhood gold that cost five dollars a month but they do give you quite a few features which I’ll list right here.
From my understanding this is really good offer. These features are brand new to Robinhood gold and you will obtain access to premium research articles level to market data higher instant deposits and margin trading for only five dollars a month.
If you’re subscribed to Robinhood gold and you want to use margin trading they will let you borrow up to $1,000 interest free, but anything after that is gonna be at 5% interest as of right now trading with margin is something that I don’t recommend that most investors mess around with but if you are gonna go down that route then Robinhood does have some pretty competitive rates.
I mean there’s already plenty of risk when it comes to investing so if you’re planning on doing margin trading and something goes bad in the market then it’s only gonna compound your problems because of the borrowed money.
Robinhood has also been working on what they call a cash management account which is basically just a savings account but so far they’re advertising that it’s looking to be
about 3 percent interest which is really good
Another really cool feature about Robinhood is that you’ll actually have instant access to your deposits as long as it’s less than a thousand bucks and this is really handy because if the market crashed today and you wanted to quickly move on some stocks then you couldn’t do that unless you actually have the cash waiting but with this feature you can do it up to a hundred dollars.
Actually that’s retrieving the money instantly as long as it’s less than a thousand bucks and the reason that you generally don’t have access to your money instantly is because banks take three days to transfer that money. So, if you wanted to buy a share right now you generally can’t do that because you are required to wait the three days. But because of the instant deposit feature from Robin Hood you can get those funds instantly as long as you’re in good standing with your bank getting the money to Robinhood. Understand that it’s not like you can just deposit seven hundred bucks to Robinhood when you don’t even have the money in your bank account to begin with.
Likewise, you have access to the same feature if you sell shares with Robinhood because generally you have to wait three trading days to get your money but with Robinhood you’re gonna have instant access to those funds so that you can invest in something else as
quick as you want now.
Just keep in mind though, that if you want to withdraw money from Robinhood you are gonna have to wait three trading days because legally that’s the way that it works and you can’t do anything about it. This means that overall, the instant deposit features pretty cool if you’re working with money that’s less than a thousand dollars.
Nevertheless, if you are a Robinhood gold member you can up that all the way to fifty thousand dollars as long as your account has that same amount in it Robinhood.
Also has a few different order types that you can choose from when you’re trading stocks so just be aware that you don’t have to buy everything at market value and that’s a good thing and then if you’re ever browsing around Robinhood they also have a ton of different articles that you can read based on the stocks that you’re following.

Conclusions

At the end of the day my overall experience with Robinhood has been really good because it’s a really simple platform to understand and it’s really good for beginner investors they’re definitely not for everybody but in my experience Robinhood has changed the industry with their free trades and they only keep getting better now.

If you guys are curious about different investing platforms out there and you’re doing your research, I’ve linked up to all the different reviews that we have done so far.

As far as this review goes,  I would say that RobinHood is definitely a good platform to use if you’re a beginner or an intermediate investor. I say this because it’s a great place to buy individual shares but if you’re looking for fancy features like a drip on your dividends or fractional share trading, then Robinhood is not the place to be.
However, if you just want to make easy and simple trades that are commissioned free then I would definitely consider using them.

So I do encourage you to shop around, look at the different options out there, and really consider the features and benefits of each investing platform and then figuring out which one really best suits your needs.

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