Robinhood Review: Is It the Best Stock Trading App?

Robinhood free stock trading opens mobile trading to all.

Robinhood is one of the best investment apps for beginners or anyone else looking to eliminate costly commissions and fees. The Robinhood app just might be the most exciting — and cheapest — among a new crop of stock market app upstarts that are luring young investors by reducing fees and simplifying the once-complicated and expensive process of self-directed investing. Here’s how Robinhood trading differs from traditional investing and a glance at what separates the platform from full-service brokerages and other discount mobile trading platforms.

Is Robinhood the Best Stock Trading App?

According to Forbes, “Robinhood seems too good to be true.” To back up that statement, the publication pointed out that the basic Robinhood platform is completely free with no fees or commissions, although elective extras like margin trading and Robinhood Gold cost more. In addition, there are no minimum balance requirements, and the company started a referral program that gives a free share of stock to both the member and the person who the member referred.

What Forbes didn’t mention is that Robinhood recently added the ability to trade cryptocurrency like bitcoin free of charge, as well as the ability to trade options for free. Each trader’s needs are different, so no one app is best. But if you’re not turned off by Robinhood’s bare-bones platform and intentional lack of sophisticated research tools found in more expensive services, flaws are hard to find — especially if you’re a beginning investor.

Robinhood Investing App Overview

Robinhood is targeted at people who don’t typically invest due to the expense of fees, commissions and account minimums but are eager to try their hand. With no physical locations, no management teams and no analytical tools besides basic watch lists and a news feed, Robinhood can offer its platform for free. Several competitors, according to a Business Insider Acorns app review, adopt a similar philosophy — but they charge small fees.

The mobile-only platform — a desktop version of Robinhood with a 1 million-plus waiting list is in the works — requires investors to download the app, sign up, get Robinhood login permission and link their bank accounts to their Robinhood accounts. Once they finance their accounts, investors can buy and sell whole shares of publicly traded securities in real time during trading hours.

Find Out: How to Invest on a Budget

Robinhood vs. Stash

Like Robinhood, Stash is a trading platform that was built on the idea that traditional brokerages make investing too complicated and too expensive for the average person. But there are plenty of differences between the two platforms:

  • Robinhood has no account minimums; Stash requires a $5 deposit to get started.
  • Robinhood requires users to buy whole shares; Stash lets its investors purchase fractional shares, which means they can invest without saving up for a full share.
  • Robinhood restricts purchases to individual stocks or ETFs sold on the open market with no guidance; Stash offers purchases of 40 exchange-traded funds developed just for Stash, as well as guidance on which of those ETFs to choose based on factors like the investor’s risk tolerance.

Learn: The First Step in Investing Your Money

How Does Robinhood Make Money?

Although its basic platform is free, Robinhood does offer a premium service called Robinhood Gold, which allows users to choose from various investing tiers that incur a specified monthly flat fee. As an example, for a flat fee of $10 a month, Gold investors can engage in Robinhood day trading through a margin account, take advantage of extended-hours trading and have their deposits clear right away. It’s the only pay service that Robinhood offers, there’s no obligation to opt-in and those who choose the basic service don’t lose anything and always get to trade for free.

Another way Robinhood pays its bills is by collecting interest on both the securities and cash that sits in Robinhood accounts — the same strategy banks use to make money when they collect interest on cash deposits.

Many new investing apps, especially those that target younger savers, are attempting to disrupt the financial industry’s long-standing brokerage model by stripping down services to make investing simple and cheap enough for the common person. Robinhood, however, stands out among all of them for one main reason: It’s completely free.

Unless you upgrade to a Gold account, Robinhood allows users to execute trades in real time with no hidden fees or charges. It’s a bare-bones platform that is nearly void of tools and resources, but for self-directed investors seeking a simple, functional, no-frills app to build and maintain a stock portfolio, Robinhood is tough to beat.

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