Did the movie The Big Short go right over your head?
Does Nasdaq sound more like a foreign country than a stock market index?
But youd be missing out.
For a true high-yield savings account, switch to online banking. Here are The Penny Hoarder’s pick for this month’sbest high-yield savings accounts.
Thats where apps like Robinhood come in.
What Is Robinhood?
Robinhood offers a unique brokerage account with commission-free investing from your smartphone.
Robinhood has been around for the better part of a decade the company launched April 18, 2013.
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The resulting financial product, of course, was Robinhood.
The company today is headquartered in Menlo Park, California.
Robinhood has not been without its challenges.
Thats a product that, even with its flaws, we can get behind.
The Robinhood platform is a great solution for free(!)
The trading platform requires no minimum balance, offersfractional sharesand includes plenty of educational resources.
Robinhood doesnot, however, offer access tomutual fundsandbonds.
And in 2022, it introduced individual retirement accounts, or IRAs.
What Can You Trade on Robinhood?
What Cant You Trade on Robinhood?
Hot Tip:Robinhood is currently offering one free fractional share upon signup.
There are 20 fractional shares available to choose from.
The process of activating your account can take some time.
Youll start by submitting an utility.
Typically, Robinhood will take a few days to either approve your app or request more information.
If they request more information or documentation, be prepared to allow five to seven days for review.
How Much Does Robinhood Cost?
Trading with Robinhood is free.
Thats the whole reason its founders launched the company: free stock trading for regular people.
That means you wont pay commissions on equity trades or options trades.
It also allows you to make bigger deposits with faster fund access.
This fee for the margin account is $5 per month.
Robinhood Gold, Explained
Margin trading means trading with borrowed money.
If you invest in a bad stock and lose money on the investment, youll owe that money back.
For example, say you borrow $500 to invest in a stock worth $500.
But that stock plummets to $100.
You will still owe the remaining $400 back to Robinhood.
Thats what makes margin trading a little too risky for novice traders.
In fact, one of ourbiggest stock trading tipsfor beginners is to stay away from margin trading.
So How Else Does Robinhood Make Money?
If Robinhood is commission-free and not everyone uses Robinhood Gold, how does Robinhood make money off you?
Robinhood: At a Glance
Commission-Free
Robinhoods schtick has long been that it offers commission-free trading.
That means you will spend $0 for stock trading and $0 for options trading.
ETFs also are commission-free.
More on these below.
In keeping with the whole Robinhood is free theme, Robinhood charges 0% for crypto exchanges.
Some competitors charge up to 4%.
Robinhood Gold, as mentioned, currently costs $5 a month.
Its website, too, is streamlined.
It doesnt have a lot of extras, which is great if you are a novice trader.
A more senior investor may find the site lacking, however.
Customer review sites often are littered with complaints that customer service is virtually nonexistent, especially pre- and post-market.
This allows customers to request a call back, 24/7.
Robinhood promises an agent should call within 30 minutes.
As far as retirement accounts go, mutual funds are a key part of a retirement investment strategy.
Right now, Robinhood allows you to buy as small as one-millionth of a share.
Just like full shares, trading of fractional shares can be done in real time and is commission-free.
Within roughly eight weeks, you could own a full share.
No minimum account balances or special status requirements are necessary.
Cash Management Account
Another cool feature of Robinhood is the associated cash management account.
And the best part: It earns 1.5% APY (5% APY for Gold members).
For reference, the FDIC says the average interest rate for a savings account is 0.33% APY.
Educational Resources
A lot of now-outdated Robinhood reviews mention the lack of educational resources.
We couldnt find anything to be less true of Robinhood.
Robinhood makes it easy to access news from Reuters, Cheddar, WSJ Markets, etc.
Upgrading to Robinhood Gold gets you access to Morningstar, Nasdaq and Nasdaq Totalview Level 2 Market Data.
More experienced traders may prefer a different approach to trading, however.
Weigh these pros and cons before deciding on a Robinhood brokerage account.
Are There Alternatives to Robinhood?
Its most notable competitor is Webull.
Both Robinhood and Webull have their advantages; it truly comes down to your personal preferences.
But Robinhood and Webull arent your only options.
Frequently Asked Questions (FAQs) About Robinhood
Still have questions about opening a Robinhood account?
Weve provided answers to some of the questions our readers are most commonly asking.
Yes, Robinhood is a safe platform for investing.
Robinhood also is regulated by the Securities and Exchange Commission (SEC).
Robinhood processes your dividends automatically, crediting cash to your account by default.
Most investors will be fine with Robinhoods free investing accounts.
Timothy Moore covers banking and investing for The Penny Hoarder from his home base in Cincinnati.
Freelancer Lauren Richardson contributed to this post.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
