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Author: Kaitlyn Short

LAST UPDATED: September 21st, 2023

Robinhood opened its doors to investors in 2014, making it a fairly new brokerage firm. The company was started by two Stanford graduates, Vladimir Tenev, and Baiju Bhatt, who began their careers building trading platforms for large financial institutions. This experience led them to a major realization that brokerage firms pay little to nothing to place trades for their investors but still charge up to $10 as commission fees. Thus, Robinhood was created to shake up the industry and democratize access to financial markets. Today, Robinhood offers its traders U.S. securities and charges no commission fees. It mainly caters to millennial investors looking to dip their feet into the market without having to pay high commission fees to their brokerage firms. The company's mission is to empower this new generation of investors and shrink the gap between the "haves" and "have-nots."

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The Good

  • Pricing and fees
  • Mobile capabilities
  • Scheduling feature
Those that decide to use Robinhood for their trading and investing needs can expect a number of quality services and features upon getting started. Prospective clients who use Robinhood will be able to take advantage of the following items:

Pricing and Fees

Robinhood charges $0 commission fees for its securities. In an industry known for charging up to $10 for securities and requiring $500 to $2,000 account minimums, Robinhood's pricing structure is fairly shocking. The firm's creators believe that there are millions of investors out there who use brokerage firms, place more than 10 trades per month, and yet end up paying thousands in fees each year. Unlike these firms, Robinhood doesn't charge steep fees for placing trades, doesn't have a mandatory account minimum to start a trading account, and doesn't have the same operational costs as other big name brokerage firms. So, they can afford to keep costs low and increase their clients' savings. Existing brokerage firms claim their services, like research and educational tools, are worth the fees they charge their clients. Robinhood disagrees. It believes that millennial investors-its target audience-don't care for paying money for services they may not use or may find inadequate. Instead, young investors tend to look elsewhere for free resources that'll help them make informed decisions.

Mobile Capabilities

The firm's trading platform is a mobile app available on android and iOS smartphones and tablets. On the platform, users have access to any of the 5,000+ stocks and ETFs listed on the US stock exchange, meaning the firm doesn't put a limit on the number of stocks users can access at the $0 commission rate. The app's sign up process is fairly straightforward and takes a little time to complete. Users have hailed the app for being easy to use and easy to link their bank accounts to. The app doesn't require a routing number nor does it take days to verify users' bank information. Instead, it uses micro-deposits to validate users' accounts.

Scheduling Feature

In addition to its commission-free stocks and ETFs, Robinhood offers scheduled deposits. This is a new feature where users can automatically schedule transfers on a weekly, biweekly, monthly, or quarterly basis. Another one of its new features is its advanced order support tool. Investors can use this feature to enter specific orders as good for the day or good until canceled (GTC). All of these aforementioned perks make Robinhood ideal for investors, especially millennial investors.
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The Bad

  • Limited trading tools
  • Looking ahead
The Robinhood service, while convenient and accessible, also comes with a number of limitations. Prospective users should consider the following drawbacks before creating an account and getting started on the platform:

Limited Trading Tools

The firm only offers a mobile app trading platform. While great for millennial investors who are always on their smartphones or tablets, this means the brokerage firm doesn't offer advanced trading tools. Usually, only desktop platforms have these advanced features like charting mechanisms and volatility indicators. Without these tools, the firm lacks critical features to help better inform its investors. Speaking of informing users, the firm also doesn't offer additional resources like education materials or research tools. While its creators believe that millennial investors tend to not use these features, we're pretty sure that investors would enjoy the added benefit of having their educational and research resources under one roof since it will save them time and energy from looking elsewhere.

Looking Ahead

Robinhood doesn't charge its investors any hidden fees, so for now, its users can rest easy knowing they're truly executing commission free trades. However, in the future, Robinhood may need to change its pricing structure to make money and keep its doors open. Eventually, the firm will charge for premium services if their traders decide to use them. The firm will also begin offering margin trading, which will allow its users to borrow money from the brokerage firm to cover a certain percentage of the securities' costs. The firm will then make money off of the interest rates they'll charge on the loans. Potential clients looking to join Robinhood should be aware of these impending fees. Furthermore, the company only offers stock and ETFs trades. Investors currently cannot trade options, bonds, mutual funds, and other securities. For investors who are interested in investing in a variety of securities to diversify their portfolios and mitigate financial risks, this detail is fairly disappointing. Additionally, the firm doesn't offer ACAT transfers, which means traders cannot transfer their existing brokerage assets into Robinhood. Another major downside to the firm is the fact that it's not the first brokerage firm to try out commission free trades. Zecco was a brokerage firm that implemented this model and had to frequently change its pricing structure because of how difficult it was for the company to stay afloat. Eventually, Zecco gave up, determined the model wasn't successful and instead, merged with TradeKing. This story could dissuade users from joining Robinhood since the firm's business model could be unfeasible in the long run.
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The Bottom Line

Robinhood is a great brokerage firm with the commendable goal of democratizing access to financial markets. It's especially ideal for novice and millennial investors looking to dip their feet into the industry without paying high commission rates. The brokerage firm offers thousands of individual stocks and ETFs to invest in, all at the touch of a button. Its mobile app is easy to use and boasts a quick and simple application process. However, the brokerage firm doesn't offer a variety of investment choices so individuals looking to trade the likes of options and bonds will have to look elsewhere. Furthermore, traders currently with another brokerage firm won't be able to transfer their existing account to Robinhood. This detail severely undermines the firm's ability to steal clients away from the big name firms. At the end of the day, our main concern is whether the firm's commission free rates are feasible in the long run, especially since similar firms have had to close their doors. Only time will tell whether Robinhood's business model is, in fact, sustainable.
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4.2

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78 Reviews

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Luke Swierczynski Troy, MI

They were great before the whole meme stock area. They really destroyed a lot of traders financials with broad company decisions. Aside from that they are nice if you're not managing a large portfolio and more so toss a few dollars at it every once in a while.

3 years ago

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RONALD WHITE Show Low, AZ

I have used my monopoly money with RH and I am glad it was a small donation to their cause. I cannot recommend them as they do or did not have a customer service department except via email. The platform has been very slow in using to make trades especially for Limit orders and they took forever to get to fractional shares trading. Not a happy camper

3 years ago Edited January 3, 2022

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Cam Hall Palmyra, VA

I learned a lot from Robinhood. Robinhood made it incredibly transparent to understand concepts like options trading, stock value, company earnings, and other incredibly complex ideas. But I also learned about clearinghouses and the rights you sign away during a few events in 2021 where they limited the ability to buy/sell stocks and cryptocurrency. It’s a difficult line to walk where you want your user to be informed and in control only to wrestle it away without communicating well why. I didn’t personally lose money, but they lost my faith during these events.

3 years ago

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Mandi Colorado Springs, CO

Robinhood started out as an exciting opportunity since I had never tried investing before. They have wonderful advice and insights on stocks and such when you are looking into your options for investing. However, the company fell out of favor for me when the company actively began limiting and restricting the user's ability to invest in certain companies when they were being rallied. This led me to trust the company less and stop investing in new stocks through them.

3 years ago

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Abril Hunter Tallahassee, FL

I really enjoy the idea of the Robin Hood app however in my experience with its use I’ve had many difficulties. I still haven’t gotten to using all of the aspects of the application because it’s so hard to get a bank statement to upload as one of the first steps. Bank statements are no longer paper for many people so it makes it difficult to continue using the app. however I do really appreciate the work that Robin Hood does when it comes to investing mobile and easily.

3 years ago

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The Bean Spiller Provo, UT

This is a pretty good way to get into stock trading, but it should not be your be-all, end-all method of trading. They are pretty limiting with your stocks in terms of buying and selling, so if you're serious about trading, go with someone else. But like I said, if you're new to trading and interested in starting, Robinhood is a safe choice

3 years ago

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Sathvik Aithala Portland, OR

UI is good, but everything else about the app is not great for trading. Would recommend sticking to the more established companies in this regard.

2 years ago

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Jordan Bell Orem, UT

Robinhood is kind of a confusing app. They aren't very clear about how to start trading stocks. It might be best to make it a little better for beginners

3 years ago

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Tony's Babygirl Staton MO

Interesting...I've signed up and got a card, a little confusing at first but then it's ok to know the knows of it.

2 years ago