Robinhood Review: Is It the Best Free Trading App?

Chris Dios - February 02, 2021

robinhood review
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Over the past few years, Robinhood made a name for itself as a leading trading platform. The mobile trading app introduced thousands of young adults to the stock market, and it’s quickly become a major player in the financial markets. In this review, we’ll tell you if Robinhood lives up to its lofty reputation. 

Robinhood Mobile App Review: Overview

Robinhood is a mobile app for securities trading with no fees or commissions. Account-holders can trade stocks, exchange-traded funds (ETFs), options, and cryptocurrency. The platform pioneered the concept of free stock trading.  

The company launched with a mission to “provide everyone with access to the financial markets, not just the wealthy.” Robinhood’s success was so effective it had a ripple effect. Now, most major brokerages also offer zero commission trading. However, Robinhood has maintained its market leadership in spite of the increasing competition.

In 2021, Robinhood still offers zero commission transactions on the app. Customers can sign up for an account for free! Some of the newer features in the Robinhood app include fractional shares trading, recurrent investment scheduling, a high-yield savings cash management account, and more.

robinhood review

Is Robinhood Legit?

Yes, the Robinhood mobile app does exactly what it advertises. That is, you can make commission-free trades of exchange-listed stocks. The firm falls under the purview of the Financial Industry Regulatory Authority (FINRA). FINRA enforces all U.S. regulations and ensures investors are protected. If you’re asking, “Is Robinhood a scam?” that should tell you all you need to know.

>> Start trading with Robinhood for free today <<

Is Robinhood Really Free?

The core Robinhood app — trading stocks, ETFs, options, and cryptocurrency — is free. Users of course have to open an account first but this can be done for free. Once you open an account, you can trade stocks and securities as often as you like for no additional charge while depositing at little as one dollar.

Robinhood Review: Features

Robinhood is especially geared toward inexperienced investors who are dipping their toes into the securities market for the first time. A lot of their features are designed with making new investors comfortable so that they can better understand the financial markets. 

Some of the Robinhood mobile app’s main features include the following:

Free trades of Exchange-Traded Stocks

You can trade stocks and ETFs with no transaction fees on Robinhood. There are no service charges and commission fees. For the most part, such fees are in the past for most online brokerages, including long-time, major brokerage firms like Schwab and Fidelity. 

Options Trades

Robinhood also offers options trading. There are no fees for trading options, and you can access this feature with a basic account. You can utilize more sophisticated trading strategies by incorporated options into your portfolio.

robinhood ceo
Robinhood CEO Vlad Tenev at an event. (Image Credit: CNN)

Cryptocurrency Trades

You can also trade cryptocurrency with Robinhood. Currently, you can trade several major cryptocurrencies on the platform, including Bitcoin, Litecoin, Ethereum, Dogecoin, and a few more. 

Additionally, you can track market data for these coins in real-time directly through the app. As always, Robinhood offers cryptocurrency trading with zero commissions.

>> Start building a crypto portfolio with Robinhood today <<

User-friendly Trading

Robinhood’s trading platform is extremely user-friendly. You can easily enter your orders through the app, and the dashboard clearly displays your portfolio information. Robinhood makes it easy to quickly see where your portfolio stands so you can react swiftly to changing market conditions.

Extensive research tools

Robinhood offers a basic line of research tools to customers of their free service. They include analyst ratings, news, earnings summaries, algorithmic recommendations, some company profiles, and a series of lists that effectively serve as stock screeners. The Robinhood Gold tier offers access to third-party reports as well.

Robinhood Cash Management

You also have the option to use the Robinhood Cash Management service when you open an account. This feature allows you to freely spend the cash in your account with a free debit card. Plus, your unspent cash will also collect interest as “swept cash.” 

Swept cash earns a variable annual percentage yield that is currently at .030%. It’s not much, but interest rates are historically low, so a good yield is hard to find. 

Fractional Shares

Robinhood recently introduced fractional trading. Now, you can buy stocks with as little as $1. For more information, check out this infographic:

Robinhood cash management

>> Sign up for fractional share trading and start buying big-boy stocks today <<

Robinhood Review: What is Robinhood Gold?

Robinhood also offers a premium service, Robinhood Gold, for $5 per month. This subscription gives you access to better data and research tools, plus margin trading. However, you must have a balance greater than $2,000 per FINRA requirements to qualify for Robinhood Gold.

Robinhood Gold Review: Features

  • Margin Line of Credit
  • Level II Market Data
  • Professional-Grade Research

Margin Account

Gold members also get access to a margin account through Robinhood. You can use your margin account to add additional funds to your trades without depositing additional funds. This allows you to reap additional rewards when your trades go the right way. However, use margin with caution because you will lose money at a much faster rate if the trade goes the wrong way.

Margin trading: What is it?

Margin trading is a special line of credit that gives you additional buying power. For example, a 4x margin line of credit allows you to invest $4,000 for every $1,000 you have in your account.

How Does Robinhood Margin Work?

Federal regulations require that account holders deposit a minimum of $2,000 to launch a margin trading account. Robinhood Gold members receive $1,000 of “free” margin when they sign up for a margin account. If you borrow more than $1,000, Robinhood charges interest fees, due at the end of each billing cycle.

How do you get a Robinhood margin account?

After upgrading to the Gold tier, a Robinhood user must apply to obtain a margin account. Once they do, the user can start trading on margin.

>> Get started with Robinhood Gold now <<

Rh features

Level II Market Data

If you sign up for Robinhood Gold, you also get access to NASDAQ TotalView called Level II Market Data. This is a metric-rich stat package that shows best bids and asks for given securities on the market, as well as order volume and “aggregated quantities of individual bids and asks.” Investors use Level II Market Data to make more informed decisions about their investments with a rich reservoir of data, in conjunction with other sources.

Professional research

Robinhood Gold also gives you access to world-class research from Morningstar. Morningstar covers more than 1,700 stocks with regular research reports and analysis. It also covers market sectors and other assets using fundamental techniques to analyze and predict the outlook. Morningstar looks at corporations’ business strategies, economic sturdiness, fair market value, risk factors, operations, and leadership, resulting in near-complete profiles for almost every commodity in the business.

Trading Platform Review

The Robinhood interface is streamlined and simple to allow for easy customer activity. Individual securities pages show value growth over a choice of ranges, with a simple pair of “buy” and “sell” buttons at the bottom. It’s easy to search and navigate through all security options in a way that’s nearly foolproof for investors who are just starting.

Robinhood Review: Customer Support

Robinhood’s customer support functionality is all online. The main support page allows you to search for topics you’re having trouble with, with a few of the most pertinent questions highlighted on the page. More personalized, one-on-one support is only available through email, which can be sent through their online Help Center.

>> Get a free stock when you signup for Robinhood now <<

How does Robinhood make money?

According to their website, Robinhood makes the majority of their revenue in a few ways:

  • Robinhood Gold subscription fees
  • Rebates from the “market makers” and crypto trading venues they use
  • Interest from issuing stock loans (margin securities)
  • Proceeds from interest-bearing bank account deposits
  • Interchange fees from Robinhood debit card users

Additionally, Robinhood says they make money from “a range of other, smaller revenue streams, including proxy service revenue and fees.”

Robinhood review get started
Swept cash is protected with FDIC insurance through in-program banks.

How much does Robinhood Gold cost?

The Robinhood Gold tier is available for a $5 monthly subscription fee. The first month of service is free, but the regular fee kicks in at the beginning of the second month. If you borrow more than $1,000 to margin-trade with the Gold service, you’ll pay interest on the overage at the end of the next billing cycle.

Does Robinhood have an account minimum?

Beyond your initial deposit to start trading, which can be as little as $1, Robinhood does not have a minimum required account balance.

Robinhood Review: Pros and Cons

Here are the best and worst things we found about this app in our Robinhood review:

Robinhood Pros

Trade on margin

At the Robinhood Gold level, users can “borrow” cash to trade on margin, a service that many other online brokerages don’t offer. While margin trading involves increased risk, with proper management it can prove to be lucrative.

Ease of use

Robinhood was created to give non-professional investors better access to the securities market. As such, its interface and action executions are very simple.

Cash management

Your cash balance accrues interest with Robinhood’s cash management program. Plus, you get a debit card and 24/7 access to your cash.

Buy and sell stocks, ETFs, options

Retail traders can buy and sell into most of the kinds of commodities they’ll ever need. Notably, the main exceptions are mutual funds.

>> Get instant access to Robinhood trading now <<

Commission-free trades

Basic buying and selling transactions on Robinhood are unlimited and free of all charges.

Fractional shares

If you want to buy into a highly profitable company with high-priced shares, Robinhood allows you to purchase fractions of a single share.

Free stock for new users

When you sign up with Robinhood, you’ll get one free stock share valued as a bonus. Robinhood picks the stock at random and says there’s a “98% chance” its value will be between $2.50 and $10 per share.

Instant deposits

Once your bank account has been linked to Robinhood, you can start buying securities right away with no waiting period.

robinhood mobile app

Robinhood Cons

No mutual funds

Investing in mutual funds is a little different than other transactions you can conduct on the stock exchange. Robinhood doesn’t offer them, although they do allow ETF’s.

Limited customer support options

If you run into issues with your account, you’re limited to help forums. You need to send an email to talk to support. Unfortunately, response times can be slow, and it’s your only contact option.

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Who is Robinhood best for?

Beginners

Robinhood’s overall mission is to open up the stock market to more common people and to make retail trading a mainstream reality. To that end, they’ve made their interface very easy to operate, removing a lot of the mystery about the stock market that some new investors may find a little intimidating.

Active traders

Aggressive investors will no doubt enjoy making multiple transactions over a short time without having to pay commissions or transaction fees. Quick turnarounds on buy and sell orders make Robinhood especially appealing for day traders.

Options and cryptocurrency traders

Robinhood stands out among its competitors for its embrace of alternative investment strategies, like options trading and cryptocurrency exchanges. While other brokerages are slowly adapting to these new economic mechanisms — especially crypto — Robinhood offers them almost as easily as they offer more traditional services.

Small budget traders

With no minimum balance requirements or trading fees, Robinhood is perfect for those who are more tentative about investing and only wish to invest in small portions.

Don’t fit into these categories? Don’t be discouraged. Robinhood has a wide appeal so you’re sure to find something you like. Start exploring the app now to see if it’s right for you.

Robinhood Review: Is It Best Free Trading App?

The Robinhood app is a great foundation for getting started in an investment career, as it makes transactions simple to execute. A free service is a fantastic tool for navigating the securities landscape without having to spend too much. The Robinhood Gold paid tier adds vital research and management tools, as well as optional margin trading for investors comfortable with higher risks.

That’s it for our Robinhood review. All things considered, we think Robinhood is an excellent service. Robinhood may be a great place to start for beginners, however, this mobile app offers appealing features for traders of all skill levels.

Sign up for Robinhood and claim your free stock now

Chris Dios is an American writer and entrepreneur based in the Greater NYC area. He studied accounting at Drexel University, and he first started investing back in 2018. Chris's trading style favors a combination of fundamental and technical analysis, and he primarily targets swing trades and longer-term investments.