If you take a quick peek around the internet, you’ll see that there’s no lack of stock trading software. Online trading has become a huge industry – investors are drawn to it because it’s cheap, it’s fast and it’s easy.
One stock trading platform stands out among others for its cost, though. Robinhood is commission free for traders. Forgoing the standard commission structure, the company makes money through a premium program. We’ve researched Robinhood thoroughly, and even made a few trades within the platform in order to offer you a Robinhood stock trading review. Take a look at what we found.
Robinhood: An Overview
Robinhood was dreamed up by Stanford roommates Vladimir Tenev and Baiju Bhatt. After graduation from the University, they began work developing trading platforms for large brokerages. But while working for these huge Wall Street companies, they realized something: it cost the firms virtually nothing to trade stocks, yet investors were being robbed via high commissions.
Because trading shifted to an electronically automated process, the brokerages were completing transactions at a tiny fraction of the cost that they’d charge for commissions. So Tenev and Bhatt left for California, and Robinhood was launched.
Robinhood’s claim to fame is that it won’t charge commissions on stock purchases. This is huge in an industry where brokers regularly charge up to $10 per transaction. Costs can be even more if you’re investing through a private broker. We mentioned that Robinhood makes a profit through its premium accounts, and we’ll look at that later in this Robinhood stock trading review.
The average person makes 2 investment transactions each month, though day traders initiate many more than that. Even at $5 commission per transaction, that’s $240 each year lost just to fees. Robinhood does away with this expense.
There are a few costs that you’ll incur while using Robinhood, but these are fees charged by the Securities Exchange Commission and the Financial Industry Regulatory Authority. Robinhood doesn’t benefit from these charges, nor are they unique to the Robinhood platform.
How Robinhood Works
Robinhood is different from some other trading platforms in that you can only trade via your mobile phone. You’ll begin the signup process either on your phone or online, then download the Robinhood app. The app’s available on both the Google Play store and on the App Store if you have an iPhone.
You’ll need to enter information like your social security number and bank account information. We checked the company to make sure it was legit, then gave them the info. After you verify your identity, Robinhood will make a couple of small deposits into your bank account to verify it. Once you’ve linked your account, you’re ready to trade.
The app itself is very easy to use. Stocks you own are organized within your portfolio, as is your balance and a summary of your buying power. You can quickly buy stocks with just a few clicks. And if you see a stock you like but can’t afford with your available balance, it’s just a few taps of your phone to add money instantly from your linked bank account.
The app offers a nice, clean interface, uncluttered by unnecessary graphics. On iPhone, you can log in with fingerprint ID, and you’ll instantly view your own dashboard. There are no annoying news tickers or ads, and we like the colorful buttons on a dark background. Overall, it’s an attractive app and very easy to use.
Robinhood Account Types
Robinhood keeps trading simple, You already know that there are no commissions charged on stock trades within the platform. But the company also has chosen not to clutter the program with a dozen different account types.
There are two types of accounts on Robinhood. Most investors will choose the basic account. The basic account is a limited margin account which is cash only. It offers a three day settlement period in which profits from any stock sales will be credited. Leverage and short sell are not allowed with the basic account; you’re limited to the stocks you own and the money in your account balance.
The second account type is the Robinhood Gold. Robinhood Gold is a fully leveraged margin account, but still offers commission free trades. You’ll need a minimum account value of $2,000 for the Gold account, but you can downgrade your account at any time if this proves too steep. Robinhood Gold offers Gold Buying Power, which is money that Robinhood lends you to invest. The money is a loan, but you keep any profits from the trades you make.
Robinhood Customer Service
When we started writing this Robinhood stock trading review, we wanted to make sure you had everything you needed to make an informed decision. So we vetted the company, opened an account, and played with the app. Then we researched customer service.
Making calls to customer service is something we like to do from time to time. If a company has terrible customer service, we’re less likely to recommend them. Let’s say you’re on the verge of making a potentially profitable trade, but there’s an
error in funding your account. You’ll need prompt and helpful customer service so that you don’t miss out on the trade.
As far as we can tell, that’s not something Robinhood offers. We searched the site, but at the time this article was written, the only customer service contact offered by the company was an email address. Rather than waste valuable time emailing Robinhood about an imaginary problem, we simply decided to impart this information to you.
Robinhood Review: Pros and Cons
Overall, we really like Robinhood. It’s a user-friendly app with a clean interface. And, of course, we love the commission free trades. The Robinhood.com desktop site itself is fairly useless. You can sign up for your account and view FAQs, but even the blog is uninformative at best.
Customer service is sometimes a selling point for us, and since the company offers next to none, it was worth mentioning in the Robinhood stock trading review. But while it’s inconvenient, it definitely isn’t reason to steer clear of Robinhood. All in all, the app is a fast and convenient way to trade stock without giving your money away to brokers.