Robinhood Stock Trading App Review: Investing for the Do-It-Yourself Investor
Updated: Oct 4, 2019
From our retirement and money-making series at Military Shout-Out. I give Robinhood Trading 4 out of 5 Shout-Outs for the Do-It-Yourself Investor.
As a Do-It-Yourself investor like myself, the zero-trading commission service that is offered by Robinhood has taking the investing world by storm, at least in the United States, to some degree now in Australia and soon to be coming to other countries such as the UK. Robinhood Trading which is based out of California came out with its, at the time (2013) innovating approach to zero commission trades on U.S. stock exchanges that has brought equities trading and saving/making money to a new plateau for small to large investors that do their own research.
Robinhood is an FINRA (Financial Industry Regulatory Authority) approved dealer that is registered with the U.S. Securities and Exchange Commission. The founders (Vladimir Tenev and Baiju Bhatt) of Robinhood seen that the Wall Street firms pay almost nothing to trade stocks, while charging the buyer commissions on each trade. With commissions starting at about six dollars and up, depending on the broker and services provided. They wanted to set it up so that anyone could have access to the financial markets, not just those with money. So, they started up Robinhood trading so we all could have that access without paying already rich firms your hard-earned money. I don’t know about you, but for me they picked a great name for their service “Robinhood”. If you like that whole taking from the rich aspect of the name, then you may just have to try their services out.
Robinhood gives investors the opportunity to make trades such as stocks, ETFs (Exchange Traded Funds) and options as well as cryptocurrencies, all with zero commissions, in other words “free.” Robinhood makes money by accepting payment for order flow, if you sign up for their gold plan after having deposited 2000 dollars and up as well as through their margin plan. Robinhood is ideal for young investors to the seasoned investor that is looking for more control over their trading all the while saving themselves money. Robinhood has come a long way in the last 6 years from an idea, to getting backing investments and then getting investors interested in their new approach to investing. Robinhood today has millions of investors like you and me and is worth over 6 billion dollars. You can trade on Robinhood through its website and or with their mobile app, both of which are straight forward to use, or dare I say easy to use?
Robinhood is a basic, no thrills service. Robinhood offers little to no phone service and little to no investing advice, although they do have a decent news feed for investors as well as a daily newsletter called Robinhood Snacks of which I do like. If you're looking for investing guidance or you’re not sure about what you want to invest in, then you may well be better served by using a full-service broker to start with and gain some investing knowledge first before using Robinhood. Now, if you don’t mind putting in the leg work with your own research into what to invest in or you already have a hefty amount of investing experience, then Robinhood may be the best vehicle for you, your investing goals and saving you/making you money. Retirement comes to us all, so invest and be ready. Before I started with Robinhood, I was using other investing services that were costing me almost $70.00 dollars for every 10 trades. Now I trade without those commission charges, thus letting me invest that money into stocks and not going into the pockets of the Wall Streeters.
I may not be a professional financial advisor as I have stated before, but I do have investing experience and I can do math. Saving myself $70.00 dollars gets my attention for sure. As much as I trade, that can add up to hundreds of dollars a year, with anywhere from 5 to 10 trades a month, or sometimes more. I can take that money and buy dividend paying stocks and get a solid return of 15% or more on my money versus putting my money into the pockets of someone who already makes a lot of money off others. I have some stocks paying over 19% per year. If you are saving and investing for your retirement/golden years, then please do so wisely and think about how you invest and how much your investing is really costing you. Get yourself educated when it comes to investing!
With that said, investing is a gamble at best, because no one knows the future, but the stock market does have a proven history of returning more on your money over time, then just sitting in a bank making less than 1%. Invest wisely, do your homework, have an emergency fund of 3 to 6 months and beware of the get rich schemes that are all over the internet. If getting rich was so easy, then we all would be rich. Also, remember that day trading may sound intriguing, but it is highly risky. There are other low-cost brokers or low cost trading apps out there, but as with anything, you need to do your own research before investing in any one of them are for that matter into any one stock. There are other low-cost trading apps out there right now. M1 Finance, eToro and Webull are three fairly popular ones. I decided to try Robinhood out a few months back on the recommendation of a friend, thus letting me give you my perspective on Robinhood as someone who is an actual user. So, let’s dive into it now.
Robinhood Pros and Cons:
Robinhood Pros: I started using Robinhood back in late July with just a few initial deposits to test that is was truly a free trading service. So far over the last 60+ days, I have not been surprised with any hidden fees, I have never had any issues with depositing money, taking money out or reinvesting my dividend payments as they come in. The service has never been interrupted or had any delays, either on my cell phone or computer. I can access my account any time of day or night. I like the fact that I can make a deposit today and trade that money instantly, even before the money has had time to clear the bank. This is available to investors as long as their deposits clear each their banks each time, you will always be afforded that treatment up to a certain level of deposit and depending on your level of investor status. There is no minimum deposit level to open an account, which is great. You can also get free a free stock every time someone funds a new account that you have recommended. You can purchase stocks or cryptocurrencies at any volume level, from just a few shares to large blocks of shares. So, no minimum levels. You can re-invest dividend payments easily. Robinhood also has a margin investing plan as well as they also offer a gold plan that you can access for $5.00 dollars per month or $60.00 dollars per year. I will leave the last two for you to decide on.
Robinhood Cons: Robinhood offers very little research data on stocks other then the price history of the stock. No information on company’s financial history other than limited dividend payment information. No retirement accounts offered. Little to no phone options for contacting. Robinhood is a basic investing platform unlike other investing services that you can chose from. With Robinhood there is no mutual fund or bond investing. Real time stock price data has a short delay versus other platforms.
Remember, most rich people are risk takers and investing in the stock market carries a certain amount of risk in the short run, but over time, your money will grow at a by far better rate than any bank out there. Robinhood is a good vehicle to help you grow your money. Do so with both eyes wide open. Do your homework and get your money in the game.
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