Investing

Robinhood Review: Pros, Cons, and Who Should Set up an Account

4,0 · Rezension von Rickie Houston, CEPF
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Bottom line: Robinhood is best for active traders, options traders, and margin traders who want to purchase and trade investments with no commission. The stock-trading brokerage may also be a good fit for you if you’re looking to invest in cryptocurrencies, but it isn’t a good choice for those in search of mutual funds or automated investing.

Overall rating

Is Robinhood right for you?

Robinhood is an online investing platform offering commission-free trading on several US-listed investment types, with high-yield cash management offerings, margin trading, and access to initial public offering (IPO) investments.

The brokerage also offers cryptocurrencies, so it could be a solid choice for those who want to trade assets like bitcoin and ethereum without commissions. Plus, Robinhood recently launched a cash card that lets you earn up to 8% back at places you shop, with the option to earn bonuses spanning from 10% to 100%.

Robinhood was established in 2013 and is headquartered in Menlo Park, California. The brokerage provides mobile access for both iOS and Android devices.

Robinhood vs. Fidelity

Robinhood and Fidelity both offer commission-free trading on multiple investment types. But you’ll have a wider range of investment options at Fidelity than you will with Robinhood.

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Both companies offer stocks, ETFs, and options, but, unlike Robinhood, Fidelity offers automated investing and advisor-managed portfolios for hands-off investors. The brokerage also has a more extensive account and investment selection.

However, Robinhood is the better choice for all-around commission-free trading and crypto trading.

Robinhood vs. SoFi

Robinhood and SoFi have similar investment offerings. But Robinhood is the cheaper option when it comes to trading fees. Though SoFi also offers DIY trading, it’s a better choice for those in search of IRAs and automated investing.

If you like the sound of active trading, though, and don’t mind doing a bit of your own research on your investments, Robinhood’s low fees and commission-free securities could be a good fit for you.

Ways to invest with Robinhood

Stocks and funds

Robinhood is best for active investors interested in placing commission-free trades in stocks, options, ETFs, and cryptocurrencies. The brokerage has no minimum account size requirements for most of its investments, but you’ll have to make minimum opening deposits for its fractional shares and margin trading offerings (you’ll also need at least $25,000 for pattern day trading).

Robinhood also offers fractional shares. This means that you can purchase portions of stock in companies without paying the full share price. You’ll only need $1 to get started. And its advanced charts — which were launched on August 17, 2022 — give all users access to more in-depth analysis of different investments.

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Plus, Robinhood’s web platform and mobile offerings are straightforward and easy to navigate. And you’ll get one share of free stock when you open an account. You’ll also get a free stock whenever you make successful referrals, and as of August 11, 2022, users get a 1.5% APY on uninvested cash in their brokerage accounts.

Options

Robinhood’s commission-free option trading comes with a notable perk: no per-contract fees. Many brokers charge under $1 per options contract, and some platforms use tiered pricing structures that charge lower fees for more active traders and higher fees for less active traders.

But with Robinhood, you’ll incur no such fees. It’s worth pointing out, though, that options investing carries more risk than stock and ETFs. Robinhood offers options risk disclosures on its website.

And while Robinhood formerly required its users to have a margin account for options trading, you can now trade options with its regular cash accounts.

Cryptocurrency

This platform’s commission-free rule applies to cryptocurrencies as well. The Robinhood Crypto service lets you trade an array of digital currencies such as bitcoin, dogecoin, and ethereum.

You can use any funds you’ve deposited into your brokerage account to purchase cryptocurrencies through Robinhood Crypto.

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Robinhood also rolled out crypto wallets earlier in 2022. Prior to its wallet launch, users couldn’t transfer crypto from or to external wallet addresses. But now, you can send any crypto assets to the wallet of your choosing. In addition, Robinhood is building a web3, non-custodial crypto wallet and DeFi platform.

The app will let users exchange crypto without network fees, store NFTs and access NFT marketplaces, utilize DeFi protocols, and connect to DeFi apps. You can join the waitlist here.

Robinhood Gold

Robinhood Gold allows you to trade on margin and access Morningstar professional research reports and NASDAQ market data. The account carries a $5 monthly fee, and you can make instant deposits of up to $50,000. You’ll need at least $2,000 to get started.

With margin trading, you’re essentially borrowing money from a brokerage to invest in securities or other financial assets you can’t afford. Your investments serve as collateral for the margin loan, and you’ll have to pay back your borrowed funds. (You can find more information here.)

IPOs

Robinhood also recently introduced IPO access. Unlike other popular brokerages that require a minimum household asset size (Fidelity requires $100,000 or $500,000, depending on which company is sponsoring the IPO) for investors who want to take advantage of the IPO offer price, Robinhood says it has no minimum balance or special status requirements.

This investment offering is best for traders who want to buy a company’s IPO shares before they’re listed on an exchange for the public. You can learn more here.

Robinhood — Frequently asked questions (FAQ)

  • Stocks: You can purchase stocks on exchanges like the NASDAQ and NYSE. These investments represent shares of ownership within public companies. You can typically exchange stocks through online brokerages, automated advisors, and other investment platforms.
  • ETFs: These investment funds are comprised of a blend of stocks, bonds, commodities, and other securities. Like stocks, you can easily exchange ETFs during the stock exchange’s regular trading hours. However, ETFs are generally less risky than stocks.
  • Options: Stock options are contracts that allow you to buy or sell a security at a certain price within a set amount of time. Some investment apps like Firstrade charge you $0 per options contract, but most online brokerages charge between $0.50 and $0.65 per options contract.
  • Cryptocurrencies: Cryptocurrencies are digital assets that rely on blockchain technology for decentralized transactions. This means cryptocurrency holders can exchange these assets without a centralized institution like a bank.

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