Robinhood® review 2022
The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
Robinhood: Best for
- Free trading
- Options trading
- Customers who prefer trading from a mobile device
With an app offering free trades on stocks, options and even cryptocurrency, Robinhood has grown briskly over the past few years. It’s not just those features that appeal to newer and less well-heeled investors, and Robinhood offers an easy-to-use mobile interface, fractional shares (for purchases and dividend reinvestment), and low-cost margin loans as part of its Robinhood Gold program. Potential customers should balance those pros against limited free research, limited account types and a total lack of mutual funds. The value proposition is much less clear when other online brokers have moved to a no-commission model and yet offer better features.
Still, Robinhood is a solid option for those looking to execute a trade at the lowest possible cost.
If you’re looking for a comparable app, check out Webull, which offers similar and sometimes better features. Fidelity Investments and Charles Schwab are solid customer-friendly brokers that offer a ton of features as well as strong research and education.
Robinhood: In the details
Top feature you’ll love
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 app is stripped-down, making it 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’s 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 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.
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. That structure quickly piles 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 it’s 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.
Robinhood Gold is the company’s program to provide research and allow you to buy securities with borrowed money, or margin. Robinhood charges $5 a month for the program, which offers research on about 1,700 companies from Morningstar, Nasdaq Level II quotes and access to margin loans.
The subscription price includes the interest on your first $1,000 in borrowing, and subsequent amounts are charged at an annual rate of 5.75 percent (or 9.75 percent without Gold). 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.
Cons: Where Robinhood could improve
Limited free research components
You can’t have it all when you’re not paying anything for trades, and it really shows in the limited free research components being offered at Robinhood. This is not a killer for the right kind of investor – savvy and experienced – but may be a turnoff to newer investors who often need more direction from their broker. That said, Robinhood does funnel in lots of free educational content on investing and finance topics – as well as its Snacks newsletter – all of which can be helpful to newer investors starting their journey.
Of course, as part of its Gold program, the broker provides stock ratings from Morningstar, while offering a feed of news and analysis from popular websites for each stock. And the app does offer some basic charting functionality too. But it’s not nearly at the level of full-service brokers such as Charles Schwab or E-Trade. Both of these also offer solid free education for investors who want to power up their skills and knowledge.
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. In fact, expect just one account type, the individual taxable account. So no IRAs, no joint accounts, no 529 savings accounts, etc. The broker says that it hopes to expand in this area, but doesn’t seem to have done much so far. 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 (or 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.
Of course, you still have the options that existed before – the broker’s help page or the chatbot – if you have one of the many questions that’s 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.