What is Robinhood.com? What makes it different from traditional brokerage firms? What financial services does it offer? Let’s dig into the details.
Are you new to investing? Looking for a simple way to get started? Robinhood might be the solution for you. Founded in 2013, the American financial services company offers the ability to invest in stocks, ETFs, and options through a website and mobile app. Operating entirely online, the company operates without fees.
Highly rated because of its ease of use and no brokerage account minimums, Robinhood was one of the first brokers to offer free trades. However, this is no longer the case as larger firms such as JP Morgan Chase have jumped on the free trades bandwagon in recent years. Despite this, there are still plenty of reasons to consider Robinhood for your investing needs.
Key Information About Robinhood
- Account minimum: $0 for brokerage account; $2,000 for a margin account.
- Stock trading costs: Zero, nada.
- Options trading costs: $0.
- Tradable securities include stocks, ETFs, options, and cryptocurrency.
- Cash accounts: Yes.
- Mutual funds: None.
- Retirement planning: None.
- Research availability: Free information is limited; Robinhood Gold costs $5 month and includes access to Morningstar Research Reports and NASDAQ Level II Market Data (see below).
Different Buying/Selling Opportunities
Here’s a look at the type of products currently being offered by Robinhood.
Stocks, EFTs, and Options
At the heart of Robinhood is the ability to invest commission-free in individual companies or bundles of investments, or ETFs. Stocks are bought and sold in markets such as the New York Stock Exchange and NASDAQ and bring buyers and sellers together to buy shares of publicly traded companies.
For example, you can use Robinhood to purchase individual shares of Disney, Apple, or other companies, or buy shares of groups of companies through an ETF. Among the more popular are the SPDR Dow Jones Industrial Averages EFT, which features a price-weighted index of 20 large-cap US stocks, and the PowerShares QQQ that includes a modified market-cap-weighted index of 100 NASDAQ listed stocks.
The price you pay for stocks and EFTs is entirely market-based, and what you pay right now might be different than what your funds are worth tomorrow and at any other point in the future.
In strictly general terms, options trading gives a buyer the right, but not the obligation, to buy or sell an asset at an agreed-upon price and date. Further, call options and put options form the basis for a range of option strategies designed for hedging, income, or speculation. Robinhood offers commission-free options trading with no per-contract fees.
Robinhood recently introduced fractional shares, which lets you choose how much you want to invest in a company, even if it doesn’t add up to a whole share. For example, you may want to invest in Amazon but can’t afford individual shares at the current price. Instead, you can buy fractional shares, which lets you customize your portfolio with pieces of different companies and funds to help reduce risk.
You can also use Robinhood to purchase cryptocurrency and to open a cash account. As we recently noted, cryptocurrency is a form of digital currency that grows in popularity in recent years. There are different types of cryptocurrency out there, with some being more legitimate than others. Bitcoin is the most popular and secure. The latter allows you to deposit money and earn interest and receive access to a debit card. You can fund this account with direct deposit and pay bills directly through the Robinhood app.
Robinhood also provides two unique freebies for anyone who wants to learn more about investing, not just members. Robinhood Snacks is a three-minute newsletter that offers fresh takes on the financial news you need to start your day.
Information is Key
Getting involved with stocks trading or similar ventures isn’t for the faint of heart. More often than not, however, it’s a great way to make money and grow a nest egg. And yet, before getting started, you should spend some time learning about the companies you wish to invest in.
With a free Robinhood account, you instantly unlock a running list of public information about companies, the economy, and anything else that influences the broader financial market. There’s also Robinhood Snacks, a daily three-minute newsletter that offers fresh takes on the latest financial news. The Daily Podcast provides timely information on three business stories in 15-minute segments. The free podcast is available through Apple, Spotify, and Google.
Both Robinhood Snacks and The Daily Podcast are available for free, regardless of whether you have a Robinhood account.
What About Robinhood Gold?
A Robinhood Gold account unlocks additional investment and market information plus other perks like bigger instant deposits and the ability to trade on margin. New subscribers can use Robinhood Gold free for 30 days, and you can cancel your subscription at any time.
Margin trading allows you to use borrowed funds from a broker to trade a financial asset. That access serves as the collateral for the loan.
It doesn’t cost anything to get started with Robinhood. In fact, when you sign up and link your bank account, a surprise stock will appear in your new Robinhood account. Better still, you don’t need any money in your account to get your free stock. At the time of this writing, you have a one in 200 chance at receiving a free share in Apple, Microsoft, and Visa, and a one in 150 chance of getting GE, Ford Motor, or Kinder Morgan. You can also receive free stock when you refer others to the service.
For more information on Robinhood, visit the official website to create a free account.