Robinhood Review: A Comprehensive Guide for Beginners

If you're looking to invest in the stock market, you've probably heard of Robinhood. With its user-friendly app and commission-free trading, Robinhood has become a popular choice for first-time investors. But is it really the right platform for you? In this article, we'll provide a comprehensive Robinhood review, answering common questions and comparing it to other investment options.

Robinhood Basics

What is Robinhood?

Robinhood is a mobile app that allows users to buy and sell stocks, options, and cryptocurrency without paying commission fees. It was founded in 2013 and has since become a popular choice among young, first-time investors.

Is Robinhood for beginners?

Yes, in my opinion, Robinhood is a great option for beginner investors who are just getting started with the stock market. The app is user-friendly and easy to navigate, and the commission-free trading makes it an affordable option for those who are just starting out.

As with any investment, it is critical to research what you want to invest in and prepare to lose everything because that is always a possibility.

Robinhood Minimum Deposit

There is no minimum deposit required to open a Robinhood account. However, you will need to deposit funds in order to start trading.

Who founded Robinhood?

Robinhood was founded in 2013 by two entrepreneurs, Baiju Bhatt and Vladimir Tenev. They had both previously worked in finance and were frustrated with the high fees and complicated processes associated with traditional investing platforms. They wanted to create a user-friendly platform that would make investing more accessible to everyone, regardless of their financial situation.

One of the keys to Robinhood's success, and the reason I originally signed up, has been its focus on providing commission-free trading. This was a groundbreaking move in the investment industry, where high fees had been the norm for decades. In my first 3 years of investing, I spent more money on the fees associated with trading than on the actual trades I made. By eliminating these fees, Robinhood was able to attract a large user base of young, tech-savvy investors who were looking for a more affordable and streamlined way to invest.

In addition to its low fees, Robinhood has also been successful because of its user-friendly interface and mobile app. The platform is easy to use, even for beginners and allows users to trade stocks, options, ETFs, and cryptocurrencies all in one place. Robinhood has also added unique features like cash management and fractional shares (I take advantage of both), which have helped to differentiate it from other investment platforms.

Overall, Robinhood's success can be attributed to its innovative business model, its focus on user experience, and its ability to appeal to a new generation of investors who are looking for a more accessible and affordable way to invest.

Pros and Cons of Robinhood

Pros

Commission-free trading: Robinhood's biggest selling point is that it doesn't charge commission fees for trading.
User-friendly app: The app is easy to navigate, even for beginners.
Fractional shares: Robinhood allows users to buy and sell fractional shares, making it more affordable to invest in expensive stocks.
Savings account: Robinhood also offers a high-yield savings account with a competitive interest rate.

Cons

Limited research tools: Robinhood's research tools are fairly basic compared to other investment platforms.
No mutual funds or bonds: Robinhood only allows users to trade stocks, options, and cryptocurrency. It doesn't offer mutual funds or bonds.
Customer service: Robinhood has faced criticism for its customer service, which can be slow and unresponsive at times.
No dividend reinvestment: Robinhood doesn't currently offer dividend reinvestment, which means that investors will need to manually reinvest their dividends.

Does Robinhood have hidden fees?

No, Robinhood doesn't have any hidden fees. However, there are some fees that you should be aware of, such as margin trading fees and options contract fees. These fees are clearly outlined on the Robinhood website.

Robinhood Features

Robinhood has expanded its feature set dramatically over the course of its 10 year history. What started as a simple platform for buying and selling stocks without paying a commission has turned into a full fledge investing platform. Check out their key features below:

Commission-Free Trading - Robinhood allows users to trade stocks, options, ETFs, and cryptocurrencies without paying any commission fees, making it one of the most affordable investment platforms available.
User-Friendly Interface - Robinhood's app and website are designed with the user in mind, making it easy for even beginners to navigate and use.
Cash Management - Robinhood's Cash Management feature allows users to earn interest on their uninvested cash, with no account minimums or fees.
Fractional Shares - Robinhood allows users to buy and sell fractional shares of stocks and ETFs, making it possible to invest in companies that may otherwise be too expensive to buy full shares of.
Watchlists - Robinhood's Watchlist feature allows users to track the stocks and ETFs they're interested in, making it easy to monitor market trends and stay up-to-date on their investments.
Robinhood Gold - Robinhood Gold is a premium subscription service that offers additional features and benefits, such as access to extended trading hours and margin trading.
Investment Education - Robinhood provides a range of educational resources, including articles and videos, to help users learn about investing and make informed decisions.

By offering commission-free trading, a user-friendly interface, cash management, fractional shares, watchlists, Robinhood Gold, and investment education, Robinhood has become a popular investment platform for users looking for an affordable, accessible, and innovative way to invest.

Robinhood vs Acorns

Acorns is another popular investment app that uses a different approach to investing. While Robinhood allows users to buy and sell individual stocks, Acorns invests users' money in exchange-traded funds (ETFs). Here are some of the key differences between the two apps:

Investment approach: Robinhood allows users to buy and sell individual stocks, while Acorns invests users' money in ETFs.
Fees: Robinhood doesn't charge commission fees for trading, while Acorns charges a monthly fee based on the size of the user's portfolio.
Minimum deposit: Robinhood doesn't have a minimum deposit, while Acorns requires a minimum investment of $5.

Robinhood vs Traditional Investment Companies

Robinhood's commission-free trading and user-friendly app have made it a popular choice for young, first-time investors. However, it's important to note that Robinhood is not a traditional investment company like Fidelity or Vanguard. Here are some of the key differences:

Investment options: Traditional investment companies typically offer a wider range of investment options, including mutual funds and bonds.
Fees: While Robinhood doesn't charge commission fees for trading, traditional investment companies may charge fees for trades or account maintenance.
Customer service: Traditional investment companies generally offer more robust customer service options than Robinhood.

How does Robinhood make money?

Commission-Free Trading - Robinhood allows users to trade stocks, options, ETFs, and cryptocurrencies without paying any commission fees, making it one of the most affordable investment platforms available.
User-Friendly Interface - Robinhood's app and website are designed with the user in mind, making it easy for even beginners to navigate and use.
Cash Management - Robinhood's Cash Management feature allows users to earn interest on their uninvested cash, with no account minimums or fees.
Fractional Shares - Robinhood allows users to buy and sell fractional shares of stocks and ETFs, making it possible to invest in companies that may otherwise be too expensive to buy full shares of.
Watchlists - Robinhood's Watchlist feature allows users to track the stocks and ETFs they're interested in, making it easy to monitor market trends and stay up-to-date on their investments.
Robinhood Gold - Robinhood Gold is a premium subscription service that offers additional features and benefits, such as access to extended trading hours and margin trading.
Investment Education - Robinhood provides a range of educational resources, including articles and videos, to help users learn about investing and make informed decisions.

Conclusion

Robinhood is a commission-free investment platform that offers a user-friendly interface and a range of investment options, including stocks, ETFs, options, and cryptocurrencies. While it has its pros and cons, it is an excellent option for beginners or those looking to invest small amounts of money without having to pay hefty fees.