Robinhood® review 2023
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Robinhood: Best for
- Free trading
- Options trading
- Mobile-first trading
Robinhood has taken meaningful strides in recent years, expanding its offerings and moving from just a mobile app to something much more. It continues with its bread-and-butter – no-cost trades on stocks, ETFs, options and cryptocurrency (although the latter has a built-in markup) using its slick mobile app. But it’s shored up some of its prior weak spots, including customer service, where it now offers 24/7 chat functionality in addition to phone and email options. It’s also introduced IRA accounts, as well as offering a special bonus for customers who contribute to them. And it offers a competitive rate on cash balances if you’re using its upgraded Gold plan. But Robinhood is not without its faults still, including a total lack of mutual funds, limited account types, a history of not always treating customers right and unclear markups on cryptocurrency.
If you’re looking to stick to a financial app, then Webull may also be for you, and it offers some visually appealing charting capabilities in addition to slick functionality. Fidelity Investments and Charles Schwab also get you in the no-cost stock and fund trading game and have strong investor-friendly cred, too. Plus, they offer stronger research and education, if that’s what you need.
Robinhood: In the details
Pros: Where Robinhood stands out
Stocks, ETFs, options, and cryptocurrency. Check, check, check, and check! You can trade them all for free on Robinhood, and that’s a huge boon to investors, especially options investors. While investors can find free stock and ETF trades at most brokerages these days, the real differentiator for Robinhood is its free options trading.
As options traders know, it’s easy to rack up a huge bill if you’re trading in and out of the market. That’s because brokers charge a fee for each contract, typically $0.65 a pop, quickly piling on the costs. But at Robinhood? Zilch. It’s a great choice for options investors looking to get into the market.
Of course, beyond all these freebies, Robinhood allows you to trade some cryptocurrencies commission-free, too. As of our last count, you can get access to some of the biggest, including Bitcoin and Ethereum, as well as the popular Dogecoin. And you’ll be able to do so 24 hours a day, seven days a week. You can buy cryptocurrencies directly and not via futures. However, you won’t be able to take custody of your coins, as you can at some crypto exchanges.
Account minimum and quick funding
With no account minimum, Robinhood adds to its investor-friendly cred, but its funding process is even better. If you’ve ever tried to fund a brokerage account before, you know it can take a while to get the funds into the account, even if you move the cash in right as you’re opening the account. That’s why Robinhood’s funding stands out.
Robinhood gets some money into your account immediately. By using instant verification with major banks, Robinhood allows you to avoid the hassle of traditional verification of reporting tiny deposits into your bank account. This means the app can move up to $1,000 of any deposit into the account immediately, with the rest following a few days later. It gets you in the game faster.
Intuitive mobile app
While investors can also use the web-based interface to trade, Robinhood is a mobile-first company, and so its most recognizable trading platform is the mobile app. The stripped-down app is simple to navigate, especially once you understand how the app’s icons function. You can quickly move from screen to screen, investigating stocks and placing orders.
From a convenient search bar at the top of the screen, you can pull up a stock chart. It functions smoothly and without delay, so you’re not hanging around waiting for it to load. You’ll get the stock’s vital statistics – its highs and lows, market cap and dividend yield. It also provides a news feed, a composite of analysts’ rankings, and a brief profile. If you’re ready to buy or sell, a trade button scrolls with you down the page, allowing you to submit an order at any moment.
A simple order entry allows you to type in the number of shares or options contracts you want and shows how much buying power you have. From there, just swipe up to place the trade. You can place market orders, limit orders and stop orders and a couple of other types.
Beyond placing trades, you can also quickly maneuver around the app to find your portfolio, account value and access a number of account management options.
Robinhood charges $5 a month for its Gold program, which offers research on about 1,700 companies from Morningstar, Nasdaq Level II quotes, higher interest on your cash balance and margin loans at a lower cost than its standard rate.
The subscription price includes the interest on your first $1,000 in borrowing, and subsequent amounts are charged at an annual rate that depends on the fed funds rate. So as that rate rises and falls, the cost of margin interest will, too. The broker charges loan interest to your account every 30 days. If you don’t have cash in the account to pay the monthly fee, it’s rolled into your margin balance. Potential borrowers should note that any margin account must have at least $2,000 in it, per industry rules.
With Gold, you’ll have access to a higher level of instant transfers, up to the value of your portfolio, starting at $5,000 up to a maximum of $50,000. So you can quickly move funds into your account, beyond even the basic $1,000 available to everyone.
Robinhood is great for fractional shares, whether you want to buy or reinvest your dividends. You’ll be able to place a trade with as little as $1, and you can buy as little as one-millionth of a share. Robinhood also extends this program to stocks that may not be featured in partial-share programs at other brokers. Most stocks trading above $1 per share and with a capitalization of $25 million are included in the program. Robinhood’s program helps you get all your money into the market rather than having to save up enough to buy that high-priced tech stock.
Now that interest rates have risen again, Robinhood has upped its game when it comes to paying interest on unused balances in your account. Any customer can get the standard rate on their account, but those who up their account to Robinhood Gold can get a much better rate.
With interest rates moving around so quickly, we haven’t included Robinhood’s rates here, but be sure that the rate offered by Robinhood Gold is among the highest being paid by financial firms. But because the interest rate here depends on the fed funds rate, it will also move down when the nation’s central bank lowers rates.
Robinhood recently introduced what it calls IRA matching to go with its also recently introduced IRA. The move was a new foray for Robinhood, which offered only an individual taxable account up until now. Now with access to a traditional IRA or Roth IRA, customers can invest for their golden years at Robinhood, too. And the company is offering a match as a bonus incentive.
Here’s how the matching works. Robinhood will give you an additional one percent for every dollar you contribute to your IRA. This amount is available to invest immediately and it doesn’t count toward your annual contribution limit, either. However, to avoid an early IRA match removal fee, you’ll have to keep the money in the IRA for at least five from when you add it.
A little gimmicky? Sure, but what other broker is offering free money for IRA contributions?
Cons: Where Robinhood could improve
No mutual funds available
Mutual funds are one of the most popular ways for individual investors to take part in the market, but in the case of Robinhood, investors don’t have that choice. It’s another area where traditional online brokers fare well against this disruptor because they’ll offer thousands of no-transaction-fee funds and thousands of other funds, too.
Extremely limited account types
Robinhood is not a full-service brokerage, so don’t expect the same level of account types that you’d find at rivals. Only recently has the broker expanded from its lone offering — the individual taxable account — to IRAs. So no joint accounts, no 529 savings accounts, etc. That’s a real knock for investors who would like to expand their relationship but must use another broker for their other account types.
You could pick almost any other broker and find more account types than you’ll find here.
Potential customers should be aware of some of Robinhood’s legal missteps in the recent past.
So here’s one of the secrets to how Robinhood can offer you free trades – the company is selling your order flow to high-frequency traders so that they can anticipate the market and get better prices on their trades from people like you. That is, Robinhood’s practice allows these traders to front-run you and other clients to squeeze out pennies or fractions of pennies on each trade, buying from you at a lower price and selling to you at a higher price.
The broker’s subterfuge around this issue from 2015 to 2018 led the Securities and Exchange Commission to fine it $65 million in late 2020, with the broker not admitting any wrongdoing and now saying that it has cleaned up its act.
For long-term investors, a few pennies on a trade is not a substantial issue. For those playing the short-term trading game, it does make it more difficult to scalp extra dollars off each trade.
It’s worth noting that other major brokers also rely on selling order flow, even more so now that the industry has moved to a “no commissions” model of trading. So it’s not as if Robinhood is the only broker doing this (legal) practice, though the SEC is reconsidering whether it will allow the practice to continue.
In addition, Robinhood was hit with a $70 million penalty in 2021 related to misleading customers, approving risky trades for some traders and a series of service outages.
Unclear markups on cryptocurrency trades
Robinhood advertises free cryptocurrency trades, and that’s true to the extent that you don’t pay out-of-pocket commissions for your trades. In contrast, other crypto brokers will hit you for fees that typically range from 0.1 to 0.5 percent of your trade value. But the devil is in the details.
Unlike many other brokers or crypto exchanges, Robinhood builds in a spread markup on its crypto pricing. Compared to other exchanges – which show you the actual bid and ask prices on an exchange – Robinhood effectively shows you a wider bid-ask spread. So the pricing you’ll get at Robinhood is less attractive than you’ll find at other brokers who don’t do this. How much worse is it? It’s not clear, because Robinhood doesn’t disclose the markup. But when other rivals offer a commission of just 0.1 percent, that’s going to be hard to beat.
This subterfuge allows Robinhood to still claim that it offers free trades, though in a real sense clients are paying for trades via that higher markup. Sometimes free may be more expensive.
Robinhood has done a fair bit to clean up its (deserved) reputation for poor customer service. Before, it was next to impossible to get someone on the phone to discuss your account. Now, the company has instituted a 24/7 system that calls you back with a human response. The good news is that it might ultimately be more efficient, even if it takes you more time to receive your answer. It’s also opened 24/7 chat to help get you the answers you need.
Of course, you still have the options that existed before – the broker’s help page – if you have one of the many questions that are easily answered. Move only a bit farther afield, however, and you may be hard-pressed to find a solution without contacting customer service.
In an age where Fidelity or Schwab can answer your questions via phone or chat in seconds while providing a helpful and friendly response, Robinhood is still behind but has moved up.
Firstrade4.0 Bankrate Score
Firstrade is a solid brokerage offering that may particularly appeal to options traders because of its commission-free options trades. You’ll also get access to quality research and its mobile app, but mutual fund investors may be disappointed by the small number of no-transaction fee funds available.
TD Ameritrade4.5 Bankrate Score
TD Ameritrade still offers strong platforms and a range of research for its clients, making it a very solid pick for more advanced traders, even as it is about to merge with Charles Schwab. A wide range of tradable securities and plenty of commission-free mutual funds make this broker interesting for both new and advanced traders, as do the competitive commissions.
WellsTrade2.5 Bankrate Score
WellsTrade handles most of the basics well and could be a good fit for existing Wells Fargo customers looking to consolidate accounts in one place. However, active traders should likely look elsewhere for their brokerage needs due to high options costs and a barebones trading platform.
J.P. Morgan Self-Directed Investing3.0 Bankrate Score
J.P Morgan’s Self-Directed Investing platform is a good fit for existing Chase customers who are looking for a low-cost way to trade stocks, ETFs and mutual funds while getting access to the bank’s easy-to-use mobile app. However, only a few account types are offered and If you’re looking to trade forex, futures or crypto, you’ll need to look elsewhere.
Interactive Brokers5.0 Bankrate Score
Interactive Brokers keeps adding new features and improving its offerings year after year, and now has new mobile apps to pair with long-time strengths such as its wide number of tradable securities and access to global markets. Low margin rates, high interest rates on cash balances, and a leading number of no-transaction-fee mutual funds serve to make this broker a top pick.
E*Trade4.5 Bankrate Score
E-Trade is likely to be a suitable broker choice for many investors who will appreciate its low trading costs, high-quality research and education, and 24/7 access to customer service. However, if you’re starting small and looking to trade fractional shares, you’ll need to find a different option.
Ally Invest4.0 Bankrate Score
Ally Invest offers a solid brokerage with many of the features that investors have come to love, especially no-commission trades on stocks and ETFs, but it ups the game with low-cost options trades, too. All-hours customer support and an all-encompassing mobile app will make sure you get business done on your terms, though mutual fund investors may be a bit disappointed.
Merrill Edge4.5 Bankrate Score
Merrill Edge brings strong research and education to the investing space, offering a solid trading platform for stocks, bonds, options and funds. You’ll likely find some extra things to love here if you’re already a customer of parent Bank of America, with 24/7 phone support and in-branch service potentially making that relationship even more meaningful to clients.
Fidelity5.0 Bankrate Score
Fidelity Investments is back again with another blowout performance in Bankrate’s reviews. This broker seems to do it all right, from low costs to plenty of research to mutual funds to prompt and courteous customer service. And with so much under the Fidelity roof – banking, credit cards and more – you could capably run your financial life here.
Charles Schwab5.0 Bankrate Score
Charles Schwab is a great all-around broker, whether you’re just getting started investing or are more advanced, and it can bring the heat on almost anything you’re likely to need. Add on strong customer support, a wide investment selection, no-commission mutual funds, and tons of research, and you have the makings of a five-star broker.
Webull4.0 Bankrate Score
Webull offers a lot that investors will like such as commission-free trading, fractional shares and a slick mobile app that allows you to trade on the go or keep tabs on your favorite stocks. But only a few account types are offered and you won’t find the level of research that is available through other brokers.
Vanguard3.0 Bankrate Score
Vanguard’s brokerage offering can handle the basics well and may be a good fit for long-term fund investors. But more active traders will be disappointed by the basic trading platform and high commissions for options trading.
TradeStation3.5 Bankrate Score
TradeStation’s brokerage offering is likely to suit active traders better than it does new investors or those just looking to save for retirement. Customers will get an advanced trading platform with low commissions, but you won’t find fractional shares and the mutual fund offering is limited.
SoFi Active Investing3.0 Bankrate Score
SoFi Active Investing is a low-cost broker that should meet the needs of new investors looking to only trade stocks and ETFs. More experienced investors may be disappointed by the lack of options or mutual fund trading and a limited research offering.
moomoo3.0 Bankrate Score
Moomoo joins a crowded field of discount brokerages with an appeal to individual traders, offering some atypical features, including access to U.S., Hong Kong and Chinese markets. Competitive pricing on stocks, ETFs and options will prove welcome with traders, though others may find the lack of account types, limited available securities and high transfer fees off-putting.
Zacks Trade3.5 Bankrate Score
Zacks Trade is a broker that should appeal to active traders with its advanced trading platform and ample research offering. New investors may be turned off by the high account minimum and fees for mutual fund trades.
Lightspeed3.0 Bankrate Score
Lightspeed is all about active traders who can deliver volume to the broker, and so everything is optimized around making the experience the best for them. That means discounted prices for high-volume trades and multiple high-power trading platforms, but it also means no concern for eliminating the nickel-and-dime costs that other brokers routinely slash.
tastytrade3.5 Bankrate Score
Tastytrade offers some of the lowest commissions around, whether you’re trading stocks, options or even cryptocurrency – and it actually caps your commissions on the latter two. Traders should find a lot to like here, among the commissions, trading platform and the variety of trading securities on offer, though long-term investors may bemoan the lack of mutual funds.