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Is the RobinHood App Giving to the Poor?

investment stocks trade Oct 25, 2019

 

There are many trading apps available online for investors, along with online brokerages and exchanges.

There are endless options to trade everything from ETFs (exchange-traded funds) to stocks, penny stock trading and even trade in cryptocurrencies.

One of the fastest-growing apps is the RobinHood app, which has grown tremendously since its launch in 2013.

  • The most significant selling point of this App is its commission-free structure in which you don’t have to pay a fee to execute trades.

 

What is the Robinhood app?

 It is a free trading app which is ideal for investors who want to trade options, stocks, exchange-traded funds as well as for cryptocurrencies, without paying any form of commission or fees.

  • This is a new and innovative service that cuts out almost all types of costs associated with investing.

However, there is a tradeoff for it being a free service.

  • Even though it offers both mobile and web trading, the platforms are almost bare-bones and many investors may find the range of the tradeable securities and account options very basic, without much choice.

Some features of the RobinHood app include:

Frequent stock, ETF and option trading

Margin accounts

Individual taxable accounts

Provides a unique platform for mobile users

Useful for those who want to trade in cryptocurrencies

 

 

Why Use the RobinHood App?

Commissions

This point is pretty obvious.

Most people would be tempted to use this service because it is free.

The app gives a commitment to providing 100% commission-free stocks, options, ETFs and cryptocurrency trading which means there can be considerable savings for the investors who don’t want to pay additional cost in the form of fees or commissions.

  • This is the right choice for those who trade frequently.

This means every dollar that you save can be added to your returns.

 
Low Costs

The RobinHood app also provides a commitment to keeping other investor costs as low as possible.

To that end, they recently took a big step when they launched Clearing by RobinHood.

  • This allows the RobinHood App service to operate on its clearing system, which ends up reducing many of the account fees of the service.

For example, broker-assisted phone trades, which were previously available for $15 could be free now, and the bank reversal charges can be reduced to $10 from $30.

 
No Account Minimum

The RobinHood app does not require any minimum account for the investors to keep, which means the investors can get started right away with whatever they have.

But you do need to have enough to purchase the stock you have your eyes on (there is a regulation by the Financial Industry Regulatory Authority that you need to know about which requires a minimum of $2,000 portfolio balance to open a margin account).

 
Easy to Use

One of the best parts of the RobinHood app is that it is very user-friendly.

If you are used to smartphones, you would surely find the process of their sign up and account funding quite straightforward and simple.

  • It all takes place inside the app, only in a matter of minutes.
  • It requires the user to answer a few questions through which it can gather your personal information along with your contact details, social security number, and your means of funding the account.

According to the company, the users who are approved are informed in less than one hour, after which they can initiate their bank transfers.

  • The app also uses instant verification with some of the major banks, which relives users the hassle of reporting their micro-deposits to another account to verify the information.

There is a limit of $1,000 of bank transfers that are available instantly for investing, as well as proceeds worth $1,000 from the sale of stock.

Deposits more than this amount, however, may take at least 4-5 working days for processing.

The users may set up automatic deposits as per their need or convenience, which can be weekly, fortnightly, monthly, or even quarterly.

 
Streamlined Interface

This service does not offer a large variety of options, but for investors who know what they want, this platform is more than enough for their needs to execute their trades quickly.

  • It supports limit orders, market orders, stop-limit orders as well as stop orders.

There is also a feature called "collections" available both on mobile and the web.

  • These are the stocks that are organized as per the sector or category, for example, companies with female CEOs or entertainment companies, etc.

On the web, the collections can be sorted, and it allows the users to make a comparison of stocks side by side.

The RobinHood app has recently introduced a new tab bar at the bottom of the app which offers quick access to portfolio values, transaction history, watch lists, and account statements.

 

 

Where Does RobinHood Fall Short?

 Limited Options in Securities

There are no bonds or mutual funds.

There are also no automatic dividend reinvestment options, which means that the dividends are credited to the accounts as cash, rather than having an option for reinvestment.

The company does plan to offer this in the future.

 
One Account Option

For the purpose of investment, RobinHood only supports individual taxable accounts, also known as brokerage accounts.

For many investors, investing through these accounts come only after they have invested at least 10-15% of their taxable income for retirement in a tax-advantaged account such as the IRA or 401(k).

 
Customer Support

One of the essential features lacking at RobinHood is that there is absolutely no phone support, and all customer support is done exclusively through email.

  • The company does not have any phone numbers either.

However, their online help center is quite helpful and useful and the website is also entirely transparent and easy to navigate.

 

 Is RobinHood Right for You?

Many people are suspicious when it comes to any online service that is free.

Quite often, there are hidden fees or costs that creep up into your accounts at a later date.

  • This app service, however, is genuinely free, and the investors can trade all they want without spending a dime in commissions or fees.

So, RobinHood can be a solid choice for you if you are ready to give up on notable research, advanced trading tools and a full range of investment options for limiting your costs. 

If you are new to investing in penny stocks RobinHood is a great and free resource to utilize as an investor. 

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