Robinhood Review: How Does This Investing App?

robinhood review

By offering commission-free stock trades, Robinhood has revolutionized the brokerage world. In recent years, the competition among online brokerages had brought down commissions to only a few dollars a trade, but compared to Robinhood's price structure they look downright expensive. But before you make a snap decision to open an account, please read our full Robinhood review. We have gone through the important details of all the application's pros and cons. After reading our review, you may find that the app's pricing model may not be such a bargain compared to the many features missing from the Robinhood app.

What Is Robinhood?

Started in 2013, Palo Alto, California-based Robinhood is a brokerage startup with the unique feature of offering commission-free stock trades for American investors. The site's other well-known features are its user-friendly interface, mobile-only availability, and its lack of the premium features full-service discount brokers typically provide.

Although the company has more in common with a Silicon Valley startup than a traditional Wall Street broker, Robinhood is registered with FINRA and the SIPC, bringing them on par with your typical broker. The company complies with all SEC regulations.

Product Specs

An important takeaway from this Robinhood review is the tradeoffs that come from using a no-commission broker. When compared to your typical discount broker, Robinhood offers a no-frills service. While you can place stop-loss and limit orders, and trade on margin, there are many types of trades that are not available. These include stocks that trade over-the-counter (OTC), short selling, mutual funds, futures, forex, and options.

Tax-deferred accounts such as IRAs and self-directed 401(k)s are not available with the Robinhood app. You also cannot set up Dividend Reinvestment Plans (DRIPs).

Robinhood also does not provide other types of banking services. Most discount brokers such as Ally Invest, TD Ameritrade, and E*TRADE now offer traditional banking services, such as checking accounts, savings accounts, credit cards, auto loans, and mortgages.

Pricing

You can't write a Robinhood review without touting the site's free stock trades. But as the company matures from startup to profitable business, they need a sustainable revenue model.

Looking to generate substantial revenue, Robinhood has debuted a new premium tier called Robinhood Gold.

Robinhood Gold offers premium services not supported by the basic Robinhood app. These include margin trades, after-hours trades, and immediate ability to trade after making a deposit (instead of 3 day ACH processing).

Robinhood Gold's monthly cost varies based on the size of your account. For example, a $2,000 account has $1000 in margin buying power and costs $6/month for margin trading privileges. A $6,000 account has $3,000 in margin buying power and has a monthly fee of $15/month.

It is important to note in this Robinhood review that the monthly fee is charged whether you place a margin or after-hours trade.

This unconditional monthly fee may make the Robinhood Gold package not worthwhile for investors who like to trade on margin or make after-hours trades.

How It Compares

For our Robinhood review, we compared the app to several of the discount brokerage apps popular with retail investors:

Stock Companies

Company Logo

Overall Rating

Where To Invest

Robinhood

robinhood logo

2.5 Stars

Ally

Ally bank logo

3.75 Stars

E*Trade

etrade logo

4 Stars

Fidelity

fidelity logo

4.5 Stars


robinhood logo

Price: Commission-Free Stock Trades (Fees for Margin and After-Hours Trades)

Stock trades are free, but trading on margin or making a trade after market hours will require a subscription to the Robinhood Gold program.

Ease Of Use

Commisions And Fees

Range Of Offerings

Research And Data

Robinhood's mobile application has an ease-of-use is friendly to even novice investors.

The app's commission-free stock trades give Robinhood high marks, but it misses 5 out of 5 stars due to the monthly fee for margin and after-hours trades.

If you are looking to trade Apple, Amazon, or another big cap stock, Robinhood is a great choice for a  broker. If you want to buy or sell options, trade OTC stocks, or open an IRA, Robinhood cannot provide you with such services.

As a no-frills brokerage, Robinhood has limited charting options and lacks the free sell-side research reports other discount brokers typically provide.

Pros

  • Commission-Free Stock Trades
  • Easy to Use Mobile App
  • Great way for novice investors to trade

Cons

  • Limited investment options
  • Margin and after-hours trades only available with a monthly fee
  • No-frills means limited research and data

Ally bank logo

Financial powerhouse Ally has beefed up their brokerage presence by purchasing TradeKing and integrating it into their platform. Customers of Ally Bank can access any account they may have with Ally (banking, mortgage, brokerage) through the same login.

Price: $4.95/stock trade, $4.95 +$0.65/contract for options trades

After reading our Robinhood review, it may be hard to consider a broker that still charges commissions! Ally's stock commissions are lower than competitors such as TDAmeritrade. Ally also offers reasonably priced options trades, which are not even available with Robinhood.

Ease Of Use

Commisions And Fees

Range Of Offerings

Research And Data

If you are an existing customer of Ally Bank, the Ally investing app is easy to use. You can easily transfer funds from your Ally banking account to your Ally brokerage account. The site's use of the LIVE portal has vastly improved user-friendliness since the TradeKing days.

Unlike what we saw in our Robinhood review, you will pay commissions with Ally. However, compared to the other brokerages we reviewed, Ally's commissions and fees are reasonable.

Ally Invest offers a wide variety of investment options for investors. These include stocks, options, retirement accounts, and robo-advisor services. Through their separate MB Trading and Ally Invest Forex applications, you can trade futures and forex.

While charting is available, the fundamental research data provided by the old TradeKing platform is not available on the current Ally Invest website. This puts Ally in the same bucket of poor research options we saw in our Robinhood review.

Pros

  • Wider range of investment options
  • Reasonable Commissions
  • Other services are available from the Ally Bank (traditional banking services)

Cons

  • Lack of fundamental research
  • Mobile interface not as well integrated as PC site

etrade logo

E*TRADE was one of the first discount brokers, setting up their shop in 1982. Despite being an established player in the space, the discount broker is no longer one of the cheapest options out there ($6.95/stock trade). E*TRADE continues to offer premium level service to small and large investors alike. When compared to what we saw in our Robinhood review, E*TRADE is considered more of a full-service discount broker.

Price: $6.95/stock trade, $6.95+$0.75/contract for options trades

E*TRADE can offer premium features due to their higher-than-average commission structure. While these commissions are fair given the level of service, you may get more value with full-service competitors such as Fidelity.

Ease Of Use

Commisions And Fees

Range Of Offerings

Research And Data

Although the PC and mobile applications are chock full of sophisticated market data, E*TRADE has a streamlined, easy-to-navigate platform.

You get what you pay for with E*TRADE, but you pay plenty: the site has some of the highest brokerage fees compared to Ally, Fidelity, and Robinhood.

E*TRADE has a wide range of offerings. You can trade stocks, options, and futures through the site. The OptionsHouse platform is an industry leader in providing top-tier options trading for large and small investors.

While the research platform has an outdated interface, E*TRADE offers a full range of charting and fundamental research options.

Pros

  • Well designed mobile app
  • One of the best options platforms out there (OptionsHouse)
  • Plenty of educational tools to help novice investors

Cons

  • Many premium features only available with a high minimum account balance
  • Charting only includes 10 technical indicators
  • Commissions are higher than average

fidelity logo

Fidelity is one of the oldest brokers on the block, first founded in 1946. Despite being an established full-service brokerage house, Fidelity offers reasonable commissions and offers retail investors a suite of retirement planning education and investment options.

Price: $4.95/stock trade, $4.95+$0.65/contract for options trading

Considering the site's full suite of features, Fidelity's stock and options commissions are fair. It is important to weigh commission rates against service level, especially after the limited features we saw in our Robinhood review.

Ease Of Use

Commisions And Fees

Range Of Offerings

Research And Data

Compared to what we saw in our Robinhood Review, Fidelity blows it out of the water in this category. Fidelity is an industry leader in providing a user-friendly experience on both the PC and mobile versions of the platform.

Considering the full range of services and education offered by Fidelity, the broker's commissions structure is reasonable.

Fidelity has great offerings for both active traders and passive investors alike, and they outperform in their wide selection of retirement products. From in-house mutual funds to robo-advisor services, Fidelity is the industry leader in helping Americans save for their retirement.

While Fidelity has one of the deepest ranges of charting and third-party research available, they lack strong mutual fund research, costing them a five out of five-star rating. On the plus side, Fidelity offers extensive education tools for retirement planning.

Pros

  • An Industry-leading research platform
  • Strong features considering low commission structure
  • An extensive suite of retirement planning products

Cons

  • Mobile charting needs improvement
  • Advanced features do require 36 trades a year

Conclusion

As we come to an end in this Robinhood review, there are few takeaways you should consider before opening an account.

Robinhood Is A Great Place For Beginners To Invest

If you are a small investor looking to get acquainted with the world of trading, Robinhood is a great starting place. As a new investor, you are likely buying major stocks you have heard about. With commission-free stock trades, even if you learn a few hard lessons as you start your investment journey, at least you are not paying through the nose when you place a buy or sell order.

Robinhood's Free Trades Come At The Price Of Limited Service

Robinhood's free trades are a strong selling point, but they come at a price. Robinhood is a truly no-frills broker, offering limited investment options, basic charting, and no third-party research.

Robinhood Has Limited Retirement Planning Options

While you can seamlessly invest passively by buying ETFs through Robinhood, you are unable to open an IRA or self-directed 401(k) through the app.

Robinhood Is Mobile-Only

Robinhood is only available through a mobile app. There is no desktop version of the site. Unlike what we saw with Ally, E*TRADE, and Fidelity, you are not getting a full investing platform when you trade with Robinhood.

With Robinhood, You Get What You Pay For

Ally, E*TRADE, and Fidelity all offer commission structures that are average or slightly more expensive than average. With these services, you receive a fuller suite of investment features and options. Ally, E*TRADE, and Fidelity also offer traditional banking services such as savings accounts, checking accounts, credit cards, and mortgages. All Robinhood offers is commission-free stock trades and not much else.

Our Final Grade For Robinhood

If you are a novice investor looking to trade large-cap stocks like Amazon and Apple, Robinhood may be the app for you. If you are a more sophisticated investor or are just an average investor looking for educational tools and a wider variety of passive investment options, Ally, E*TRADE, and Fidelity may be a better fit for your investment objectives.

Our final assessment after conducting our Robinhood review? We give the Robinhood investing app three out of five stars. The commission-free trade feature of the app gives it high marks, but for even the most novice of investors, the other brokerages reviewed may offer more useful services.

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