Robinhood at a glance
What it is
Robinhood offers a slick mobile interface and high-tech efficiencies to cut costs and pass the savings on to users. Costs for stocks, options and ETFs are all free to users.
For small accounts and cost-conscious newbies, this is a huge plus that really takes some of the pressure off investing. However, Robinhood's $0 commissions and easy-to-use mobile app are the key selling points and basically the entirety of what you'll ever get out of this broker.
The spare and uncluttered experience winds up feeling shallow and incomplete to any investor who wants to do serious research, sophisticated planning or most tasks other than simply booking a trade.
What it costs
With Robinhood, there is no account minimum, no fees for stocks or ETFs, no fees for options – and even a newly launched cryptocurrency marketplace for assets like bitcoin that allows no-cost trading.
But there are some fees to know about. Robinhood aims to make money in some ways – including charges associated with "leveraged" accounts.
A leveraged account effectively invests with borrowed money, and the Robinhood Gold platform allows customers to access buying power that is double their typical investment potential – for a price. The pricing is billed monthly at a flat rate, but typically is in the ballpark of a 5 to 6 percent annual rate. For instance, one of the lowest tiers of Robinhood Gold is $10 a month on an additional $2,000 in buying power, which annualizes to $120, or 6 percent.
That's not bad when compared with other brokers who charge similar or even higher amounts even for much larger accounts.
Robinhood also earns interest on the balance of the cash people have deposited, and aggregates user and trade data that it can then sell to third parties.
What it offers
Robinhood is a pared down trading app for your smartphone – and not much more.
This is no small thing, since mobile trading is increasingly in demand and low-cost execution is a major plus. But if you're serious about investing and require a modicum of depth beyond simply what a stock is trading at and a line graph of recent price movement, you're not going to find it on Robinhood.
Here's a look at some of the features beyond simply the cost structure:
What it lacks
Robinhood lacks the educational resources, screening tools and expert analysis that many other brokerages offer.
In addition, while bitcoin is present on the platform, you can't trade many basic things that other brokers offer and many serious investors desire. These include basic items like mutual funds and bonds as well forex and futures. While Robinhood finally added options capabilities this year and may roll out other assets in the future, the deficiencies are numerous at present.
Beyond assets, the basic structure necessary for a holistic approach to investing is also lacking on Robinhood. Accounts are only taxable trading venues, and retirement accounts like IRAs aren't an option. Traditional online banking services including savings accounts or credit cards, which often come with big perks if you tie them in with other brokers, aren't offered. You can also forget about strategies like automatic dividend reinvestment, which isn't supported but is a tried-and-true method of many investors.
What little Robinhood offers is also inflexible. You can add stocks to a watch list, for instance, but can't customize them in a way to surface even basic info you care about most. Nor can you customize chart ranges beyond default time frames.
These shortcomings are much more substantive than any lack of screeners or fancy tools. If you have even a moderate interest in investing, chances are Robinhood is going to fall short on keeping you informed or giving you the right structure to make the investments you want.
And there's not a phone number to call if you're confused or need help. There's a labyrinthine help section and the chance to send an email into the abyss, but Robinhood does not have a call center to support its customers.
This broker is best for...
Truly new investors who simply want to peek under the hood of the stock market can find a low-cost way to do so via Robinhood.
But if you're trying to get serious about investing, Robinhood is not the right brokerage for you, even if it is much more affordable.
Some companies succeed by offering premium products at premium prices. Others, like Robinhood, undercut the competition on cost but also cut their services to the bone.
With a lack of robust tools and customer service, you get what you pay for with Robinhood.