Features: No Commissions, App Based (mobile phone only), Market Order Buys/Sells only, Robinhood Instant, Automatic Deposit, Direct Deposit/Withdrawal with Bank Account, and Monthly Account Statements
Target Group: Robinhood provides an easy-to-use platform for millennial investors to buy and sell stocks. The mobile app allows users to buy/sell any quantity of stocks without commissions. Users are able to become investors without having a large amount of capital to offset the cost of transaction fees. In general, the service is great for people that are looking to slowly build a portfolio buying shares here and there. It also allows investors to dollar cost average without having to worry about fees eating into their returns.
Is my money safe?
Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
How does Robinhood make money?
Of course you’re wondering… How is the company able to offer no commission trading? Well in order to offset overhead costs, Robinhood is able to collect interest on money that people have not allocated in their accounts to stocks (uninvested cash balances). They earn a very small percentage, but with enough people using their platform they have scale. It is important to note the users are not charged in any way.
Main Benefit: Free trading! I don’t think most people realize the impact of those $8 transaction fees. Let’s say for example you have $1000 to invest. Just by investing that money into a stock of your choice, you have lost .8%. That is for initiating the trade, a full trade (buy/sell) costs 1.6%. If you’re an active trader, this application can end up saving you hundreds of dollars in commission fees. That is pretty awesome!
Practical Details: In order to get Robinhood, you have to go to your app store on your phone and download the Robinhood app. Once downloaded, you sign up and can link a bank account then or at a later time. Once the user has funded their account, they are able to start trading right away with up to $1000 (Robinhood Instant). Happy trading from there on out.
Pros: Depositing money is simple, all you have to do is link up a bank account. With Robinhood instant, the app allows you to start trading as soon as the money is deposited into your account. Once again, buying and selling stocks through Robinhood is free.
Cons: The fact that the services of Robinhood are only offered via mobile app is a downside. If you don’t have access to your phone, you cannot access your account. Another downside is without a website API, the company cannot be linked to sites like mint.com for personal finance and budgeting. Lastly, the app only uses market orders to buy/sell stock at the current trading price of a stock.
Alternatives: The alternative to Robinhood is any other traditional online brokers. With the other providers there are more services (option trading, margin accounts, limit orders, stock analysis, websites, and research tools). With all these added services, fees for trading transaction vary from $4 to $10. So if you are looking to do more than just buy/sell stocks, then Robinhood is probably not the best platform.
Final Opinion: The app is simple, easy to use, and free. With those things going for Robinhood, we at Tradezy recommend people to check it out. The less you pay in transaction fees, the greater your returns. To see more information of the product, check out the Robinhood site.