Robinhood Review

Our Take

After launching in 2013, Robinhood’s brand witnessed rapid growth due to its disruptive no-commission model and easy-to-use platform. In recent years, however, competitors have adjusted by offering free trading products and user-friendly platforms of their own. With its edge slashed, the company has made material improvements in key areas like retirement products and educational content. As a mobile-first platform that primarily caters to traders who are looking for basic features that are easy to navigate quickly, the company has also invested in its active trader capabilities.

On Oct. 16, 2024, at its inaugural HOOD Summit 2024, the company announced the release of a brand new web-based trading platform, Robinhood Legend. Built from the ground up, Legend is a sleek and beautiful platform that brings active traders some of the more advanced research capabilities they’ve been seeking. The company also used this opportunity to announce plans to introduce index options, as well as futures trading to its mobile app users over the coming months, adding to its existing lineup of stock, ETF, option, and cryptocurrency trading.

While there has been a clear focus on improving access to a growing library of educational content, offering more retirement account benefits, and enhancing active trading capabilities, more advanced traders and investors in need of the most sophisticated financial, research, and trading tools will find that they are not Robinhood’s target audience. We’ll explore Robinhood in more detail so you can determine if the platform makes sense for you.

Introduction

Robinhood was founded in 2013 by two former Stanford roommates, Vlad Tenev and Baiju Bhatt. Launched with a desire to expand access to the market by reducing barriers to entry, the platform quickly found a home with young, tech-friendly traders thanks to a simple design and intuitive trading experience. As of Oct. 16, 2024, the brokerage boasts 24.2 million funded customers, 11.8 monthly active users, and $139.7 billion in assets under custody.

No-commission and no-minimum trading makes it easy for beginners to get started with investing, and the ability to trade fractional shares gives users access to a greater range of assets than they might otherwise be able to afford. Robinhood already provides access to trading in stocks, options, ETFs, and direct cryptocurrencies, and on Oct. 16, 2024 the company announced plans to introduce futures trading to its mobile users in the coming months.

Despite recent enhancements, the platform still has some limitations that may drive sophisticated investors to seek alternative broker options that better align with their trading approach. For example, Robinhood offers no fixed income, mutual fund, or foreign exchange, thereby restricting trading and investing strategies that require a wide array of asset classes.

Robinhood now offers a 24-Hour Market product, allowing customers to trade select stocks and ETFs 24 hours a day, 5 days a week. The broker also continues to expand its Learn section with more material and has enhanced the onboarding questionnaire to help users understand investing basics while setting risk parameters that match their tolerance. 

Robinhood’s platform has received focus in other areas, as well. Cash management enhancements such as providing a higher interest rate on uninvested cash for its premium Gold members, as well as a cash card product, have helped to round out the platform and draw in more clients. As recently as Oct. 16, 2024, took a major step in enhancing its active trader capabilities with the launch of its new web-based platform, Robinhood Legend.

Pros & Cons

Pros Explained

• Clean, intuitive trading experience: Robinhood’s platform lets investors trade in the market seamlessly. The sleek mobile app design reflects Robinhood’s mobile-first disposition, although a new, more powerful web-based platform is available as well. 
• No trading commissions: This is the hallmark of Robinhood’s platform. Thanks to its innovative challenge to the industry, many brokers were forced to reduce or eliminate their trading commissions to remain competitive.
• Fractional share trading and direct cryptocurrency access: Fractional share purchases can be made with as little as $1, and the dividend reinvestment program (DRIP) automatically reinvests dividends from stocks or ETFs (provided the positions support fractional shares). Direct crypto access allows traders to buy and sell different coins with ease.
• Solid cash management features and recurring investment functionality: An innovative cash card lets users invest rewards earned from purchases. Interest on cash sweep accounts allows premium Robinhood Gold members to now earn 4.50% on uninvested cash.
• IRA match: Robinhood will actually give cash to its customers as a match on their IRA contributions. It matches 1% for regular customers and 3% for gold-level subscribers. The gold-level subscription costs $50 per year, so even a $2,000 contribution becomes worthwhile. However, to keep the match, the customer must keep the gold subscription for one year and maintain a balance greater than the contribution for five years.

Cons Explained

• Limited asset types: Robinhood has recently added retirement accounts but still doesn’t offer all of the assets some investors are looking for, including fixed income, mutual funds, foreign exchange, or futures trading. Moreover, because only brokerage, IRA, and Roth IRA accounts can be opened on Robinhood, investors are deprived of savings and other account types available elsewhere.
• Limited research: Although the charting functionality of its web-based trading platform has witnessed a material upgrade, screening capabilities and fundamental research tools at Robinhood don’t measure up to competitor standards.
• Lack of transparency: Robinhood’s lack of transparency on outages and trading restrictions with meme stocks in 2021 gave many traders pause before utilizing Robinhood as their preferred platform. During the aftermath of those account restrictions, investors were not confident that they would have access to their positions. Since then, Robinhood has become more transparent about payment for order flow (PFOF) and publishes its 606 report, but the typical customer’s understanding of how reliant Robinhood is on PFOF is not likely where it should be. Because the largest part of revenue comes from this income stream, traders should recognize that they are not Robinhood’s primary customers—the exchanges are.

Usability

Robinhood’s app is simple and user-friendly. Robinhood’s mobile-first approach to its trading experience makes it an easy choice for investors who prefer to trade from their phone. The company’s new web-based platform, Legend, is a significant upgrade to its predecessor, which largely mimicked the mobile platform. Available at no additional cost to anyone with a Robinhood account, the new Legend platform is a beautiful platform that brings fluid customizability to active traders.

Designed from the ground up, Legend allows for easy setup of a trader’s preferred layout by either using their own custom layout or choosing from a group of layout templates. Once set up, customers can initiate trades with ease by creating orders with one click directly from a watchlist, their positions, or an option chain. Users can also trade directly on a chart. 

The platform allows traders to view up to 8 charts in a single window, with dozens of chart settings and access to several chart types, including equivolume, candle, Heikin Ashi, line, and more. Legend also features a host of new technical indicators, provides many new drawing tools, and allows customers to view data in custom intervals down to the tick. 

In addition to improved charting, Robinhood designed Legend to deliver deeper analysis of assets on customers’ watchlists, as well as their open orders, positions, and prospective options contracts. Real-time pricing is updated on Legend at sub-second intervals. Available widgets can be linked to create synced groups, allowing for symbols to be updated instantly across layouts and tabs, even across multiple monitors. 

Mobile Trade Experience

​​Robinhood built its name as a mobile-first brokerage that aims to make trading simple without complicating the experience with more in-depth features. It makes sense, then, that more complex trading tools and research options are largely absent from the mobile trade experience. For instance, no chart drawing tools are available on mobile, and trades can’t be executed directly from charts. Order staging and simultaneous order entry options are also not available. 

Options traders will only find that the app allows for stop, stop limit, and stop market orders, while equity traders can use market, limit, stop, stop limit, and trailing stop orders. Advanced traders will notice that conditional orders aren’t supported. That said, quotes from the Robinhood app do at least stream in real time.

Range of Offerings

Despite the Oct. 16, 2024 announcement that futures trading is planned for mobile users in the coming months, Robinhood’s range of offerings is still limited in that it only offers stocks, ETFs, options, fractional shares, and cryptocurrency trading. Robinhood doesn’t support mutual funds or fixed-income products, and you can’t trade commodities, forex, or, as it currently stands, futures. If you choose Robinhood as your broker, you can invest in:

• Stocks: Long only; no short selling; American depository receipts (ADRs) available
• Fractional shares: Stocks worth over $1.00 per share with a market capitalization over $25,000,000 are eligible for fractional share orders; Robinhood offers both stocks and ETFs 
• Options: Up to 4 legs.
• Cryptocurrency: A range of coins is available to trade. 
• Non-custodial wallets: Robinhood offers a web3 wallet for iOS and Android which allows customers to control crypto in a seamless, decentralized web experience.
• Stock lending: Announced in May of 2022, Robinhood users can lend out fully paid stocks in their portfolio.

Order Types

Robinhood has a limited number of available order types. It offers a range of market and limit orders but no conditional orders. Order staging is also absent. These limitations affect all types of investors because they meaningfully restrict trading strategies. 

Support for more sophisticated order types, like order-triggers-other (OTO) is important because they help traders navigate risk, quickly enter and exit positions, and take gains off the table. As a result, traders using conditional orders can spend more time analyzing the market and planning their next move without having to watch current trades as closely. This is another sign that Robinhood isn’t built for advanced traders. 

As far as tax optimization, tax lots default to first-in, first-out (FIFO) for all equities. There is no option to change this and select which shares will be sold for tax optimization purposes.

Trading Technology

The way a broker routes your order determines whether you are likely to receive the best possible price at the time your trade is placed. This best price is known as price improvement. Robinhood states that its trading systems are set up to automatically route your order to the market maker most likely to give you the best price based on historical performance. Robinhood reports that 95.23% of orders are executed at National Best Bid and Offer (NBBO) or better. The average price improvement is $2.46 per 100 shares of stocks, but the company doesn’t report figures for options. 

In terms of other trading technology, Robinhood gives you the ability to make recurring investments, which is a helpful feature. In keeping with its simplified approach to investing, Robinhood doesn’t allow you to perform backtests or offer a demo account.

Costs

Similar to most of its competitors, Robinhood does not charge trading commissions. There are some other fees unrelated to trading that are listed below.

• All equity trades (stocks and ETFs) are commission-free.
• There are no commissions for options trades.
• The standard margin interest rate for non-Gold users is currently between 5.20% and 6.25% as of Oct. 10, 2024.
• Robinhood Gold members get $1,000 in interest free margin trading. The subscription costs $5 per month and comes with a number of other benefits.
• There is a $100 account transfer out fee.
• There are no domestic or international wire fees.
• There are no account opening, account maintenance, or account inactivity fees.
• To send a domestic check overnight, the fee is $20.

How This Broker Makes Money From You and for You

The fees and commissions listed above are visible to customers, but there are a few behind-the-scenes ways Robinhood makes money from you (and for you).

• Interest on cash: Like most brokers, Robinhood generates interest income from the difference between what you are paid on your idle cash and what it can earn on customer cash balances. Some brokers pass part of these earnings on to customers. At the time of this review, U.S. Robinhood clients earn 0.01% interest on cash balances. Gold members earn 4.50%.
• Payment for order flow: Many brokers generate income by accepting payment from market makers for directing orders to those trading venues. This is called payment for order flow (PFOF). For more details on Robinhood’s payment for order flow practices, SEC disclosures can be found online.
• Stock loan programs: Stock loan programs generate revenue for brokers when stocks held in customer accounts are loaned to other traders or hedge funds, usually to sell that stock short. Robinhood pays you 15% of the income it earns from lending the shares. The program is available to customers who have trading experience other than “none,” at least $25,000 of reported income, or at least $5,000 in account value.
• Price improvement: Robinhood’s smart order router seeks out price improvement, which benefits you as the customer, and attains an average of $2.46 per 100 shares.
• Margin Interest: Robinhood offers the ability to trade on margin, which is borrowing money to trade with. Like any other loan, interest is charged on the money borrowed, creating a source of revenue for Robinhood. The standard margin interest rate as of Oct. 10, 2024 ranges between 5.20% and 6.25%. Robinhood Gold members can borrow the first $1,000 interest free.
• Retirement account matches: New contributions from outside the platform to IRA or Roth IRA accounts (up to the IRA contribution limit) receive a 1% match from Robinhood. To retain the match, however, the contribution amount needs to stay on the platform for five years.

Account and Research Amenities

Although the company has been working toward improving its account and research amenities, with solid cash account offerings and drastically-enhanced charting capabilities, the platform still lags larger, more advanced competitors.

Stock Screener

Robinhood offers a stock screener with over 20 filters.

ETF and Mutual Fund Screener

Robinhood does not offer any ETF or mutual fund screeners. However, ETFs may be searchable with the stock screener.

Options Screener

Robinhood does not offer any options screeners.

Fixed-Income Screener

Robinhood does not offer any fixed-income screeners.

Tools and Calculators

Robinhood does not offer any tools or calculators.

Charting

Robinhood’s charting capabilities took a giant leap forward recently, with the Oct. 16, 2024 rollout of its brand new web-based platform, Robinhood Legend. When it comes to adjusting and customizing charts and other widget windows, the experience doesn’t get much better. In a major step forward for Robinhood’s desktop experience, traders can now view up to 8 charts in a single window. Traders will also find dozens of new chart settings and chart types. Legend also features a number of new technical indicators, provides popular drawing tool functionality, and allows customers to view data in custom intervals down to the tick. 

Trading Idea Generators

Robinhood does not offer trade idea generators. However, you can access trusted news sources for free through its newsfeed.

News

As a Robinhood customer, you can stay up to date with in-app Wall Street Journal market coverage, as well as news from Reuters and Barron’s, and video from CNBC Business, Reuters, and Cheddar. Additionally, Robinhood offers Robinhood Snacks, which is a daily three-minute newsletter that anyone can subscribe to. Robinhood also produces podcast and video content.

Third-Party Research

Robinhood Gold members are provided with unlimited access to Morningstar’s premium, in-depth stock research reports. These reports are available on about 1,700 stocks and are updated frequently to reflect important company events. As a Robinhood Gold member, you will have access to Nasdaq Level 2 market data powered by Nasdaq TotalView.

Cash Management

Robinhood does not support money market funds. However, its cash management brokerage feature offers 0.01% on uninvested cash balances to customers enrolled in its deposit sweep program. Robinhood Gold members can now earn 4.50% on uninvested cash. The auto-sweep feature is enabled by default, which is an added bonus.

Robinhood offers an innovative Cash Card. This new take on a debit card allows users to earn stock and crypto rewards with each purchase. The card allows you to round up purchases to invest in stocks and crypto. The rewards then come in the form of a weekly bonus as a percentage of your round-ups. Cash Card holders can also use 75,000 ATMs without paying a fee. The card builds on Robinhood’s mission of democratizing finance and investing in a new, enjoyable format.

Fractional Dividend Reinvestment Plan (DRIP)

As a Robinhood user, you can specify dividend reinvestment at the time you purchase a dividend-paying stock. If the stock is eligible for fractional shares, the DRIP will purchase them with any leftovers.

SRI/ESG Research Amenities

Although there are no socially responsible investing (SRI) or environmental, social, and governance (ESG) screeners per se, Robinhood Lists enables you to search and discover various sectors and themes within the market, including companies focusing on SRI and ESG.

Portfolio Analysis

The new Legend web platform offers much-needed portfolio analysis enhancements, like dozens of metrics that traders can use to monitor and analyze assets in their watchlist, open orders, and positions.

However, there’s is no asset allocation analysis, internal rate of return, or ability to estimate the tax impact of a planned trade. There is also no trading journal. To perform any kind of portfolio analysis, you’ll have to import your transactions into another program or website.

Education

Robinhood has made efforts to inform and enlighten its users through many avenues of market-based commentary. Through the platform’s enhanced e-mail newsletter offerings (published by a subsidiary, Sherwood Media), the platform informs investors on a variety of subjects including market dynamics and trade ideas.  

Now, through Sherwood Media, Robinhood also offers Snacks, a three-minute newsletter that delivers the day’s top financial news stories to its readers every weekday. Snacks boasted a robust following of 40 million subscribers as of April 2022. The format for Snacks content is intended to provide exciting and helpful visuals to make financial news less intimidating. 

Another content option from Robinhood is the Under The Hood podcast hosted by one of the co-founders. Additionally, the learning section contains more far-ranging articles on investing basics, market insights, and general knowledge-building material than previous versions. A new First Trade Recommendations feature was introduced in January 2022. The tool is designed to help new investors begin their financial journey. Content helping traders understand more advanced options trading strategies has also launched. The acquisition of Say Technologies lets traders take more ownership of the companies they invest in, empowering users to participate by asking questions to companies and leadership teams. All these features help to advance investor knowledge.

Customer Service

Robinhood’s main customer service contact point is through the website and app. The company offers 24/7 live chat support as well as a large library of support articles. To speak with a support agent, you must give your number for a call back. Robinhood says the phone number is for information only, not support. The company also has social media channels, but it’s better to contact support through the website or app. Robinhood offers extended-hours trading from 7 a.m. to 9 p.m. ET, Monday through Friday.

Security and Reliability

• Mobile app users can log in with a face or fingerprint scan.
• Robinhood encourages users to enable two-factor authentication.
• New logins from unrecognized devices also need to be verified with a six-digit code that is sent via text message or email in case two-factor authentication is not enabled.
• Robinhood is a member of the Securities Investor Protection Corporation (SIPC), which protects its members’ securities customers for up to $500,000 (including $250,000 for claims for cash). The company has purchased additional insurance with a $1 billion aggregate limit for securities and cash. The per-customer limit is $50 million total in securities and $1.90 million for cash. Both forms of insurance do not protect against a loss in the market value of securities.
• Robinhood has reported data breaches within the past four years. The most recent was in 2021. A customer list of around five million email addresses with other information along with another list of around two million names and other information was obtained. No financial loss occurred and no financial information was obtained by the hackers.

Transparency

Robinhood was once a disruptive fintech player in the brokerage industry, helping young investors get into the market. In recent years, the company’s motives have been questioned, with issues centered around data, transparency, and trust. In December 2020, the SEC fined Robinhood $65 million for “misleading customers about revenue sources and failing to satisfy duty of best execution.” Robinhood also falsely claimed on its website that its execution quality matched or beat that of its competitors. The SEC concluded that Robinhood’s inferior trading prices ultimately deprived investors on its platform of $34.1 million.

Robinhood was brought into the spotlight again in January 2021, after it decided to restrict access to certain securities such as GameStop, AMC Entertainment, Nokia, and others during the market frenzy surrounding the Reddit short squeeze on the stocks. One of Robinhood’s primary market makers, Citadel Clearing, has ownership in the hedge fund Melvin Capital, which was one of the largest short sellers of GameStop and others. The decision to restrict customer buy orders for these stocks led many to suspect a conflict of interest, spurring class-action lawsuits and the attention of some members of Congress.

What Type of Account Should I Open at Robinhood?

Robinhood only offers brokerage account options as either margin or cash accounts. It also made IRA and Roth IRA accounts available to eligible customers on Jan. 12, 2023, but the still limited options continue to restrict the ability of traders with more robust financial goals from using the platform.

The Bottom Line

Robinhood’s focus on delivering more access to the markets and reducing barriers to entry is clearly evident in its user-friendly, expertly-designed trading experience. The absence of trading commissions and account minimums helps empower investors to start their trading journey without financial commitments. Traders can seamlessly invest in stocks, ETFs, fractional shares, and cryptocurrencies, all while enjoying recent upgrades designed to enhance insights into the market and their positions. The newsfeeds and podcasts available through Sherwood Media are also lively and helpful for new users to follow.

Beyond this, though, Robinhood isn’t a place for advanced traders and investors. A lack of assets like fixed income, mutual funds, and foreign exchange, is a serious limitation. Order types, trading tools, and research amenities, though improving, are still limited, although Robinhood has recently added retirement accounts to its platform. Overall, Robinhood provides a platform that makes it easy and enjoyable to trade, but a relative shortage of features and functionality means the platform won’t be the primary broker for advanced traders.