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With the online trade market growing with each passing day, companies are trying to more innovative and different. They are searching for tools, updates, or variations in their apps that would make them the most favored among customers.

Earlier, investors had to lose a lot of money by paying individual charges to brokers for every transaction carried out. But now, with the swelling competition, there are a lot of companies like Robinhood. They have too eliminated charges to open and maintain an account.

Moreover, these platforms want to ensure that selling and buying of stocks are made more accessible for users. However, Robinhood is still one of the most preferred and used platforms. The only question new investors and traders might currently have in mind is: What makes Robinhood stand out from the crowd?

What is Robinhood?

Many traders and investors consider Robinhood to be the most user-friendly and profitable app when it comes to a commission-free investment platform. The app allows its investors to get a deep insight into the details of the stocks.

This way, they don’t have to spend anything more than the actual stock prices through a mediator. Unlike other platforms available in the market, Robinhood comes with a simplified design and pattern that allow beginners, intermediates, and advanced users to capitalize on its services equally.

Moreover, the primary aim of the trading platform is to reach out to more and more users through their commission-free trading opportunities and financial markets. The distinguishing characteristics of Robinhood are as follows:

  • Immediate verification- Robinhood has ruled out the hustle that users had to earlier go through because of the step-by-step verification procedure of the significant banks linked to it.

However, this factor only allows a limited transaction.  For example, if you are willing to make a bank transfer for up to $1,000, it would be made possible instantly, and similar is the case when withdrawing funds. But deposits higher than this value might take up to five business days or more.

  • Robinhood Gold- The updated version of the app, Robinhood Gold, comes with features like increasing the buying power. It also lends loans to purchase stocks that will be similar to the current account value.

All in all, Robinhood Gold allows investors with advanced skills and experience and at least $2000 in their accounts to extend their trade margin.

  • Beginner-friendly app usage
  • No commission
  • No hidden taxes

How Does Robinhood Work?
robinhood 2019 review screenshot

The Robinhood application is available for both your mobile phone and computer. Robinhood will permit you to access your account almost immediately after you have answered several fundamental questions. These questions concern your contact information and the ways you choose to fund your account.

Moreover, the company is regulated by the SEC and FINRA and protected by Securities Investor Protection Corporation. They will assist Robinhood to cover up to $250,000 in case of cash claims and $500,000 for securities. During the initial days in the market, Robinhood had imposed a lot of service taxes.

However, with the onset of recent times, the company performs the all-round functions of clearing the system and by breaking away a considerable part of the account fees for the services ensued.

Here, two factors influence and enhance the profit of the consumer.  Broker fees and the cost of opening and maintaining these accounts are zero. Moreover, the bank reversal fee was earlier $30. Currently, it is only $9.

According to the website’s assertion, it makes money from Robinhood Gold, its branch that permits margin trading services. The revenue starts from only 5 dollars a month and gradually increases through the interest added from the cash and stocks deposited with it.

Pricing And Fees

Like other companies that are regulated under the SEC and FINRA, Robinhood as well comes with a few fixed fees.

  • SEC fees- These fees amount to $20.70 per $1,000,000 of principal
  • FINRA fees- It is $0.000119 per share but not more than $5.95

Moreover, users can subscribe to Robinhood Gold for enhanced services of trade margin. However, this will cost them between $10 and $200 every month. This depends upon the credit drawn that ranges from $2,000 to $50,000.

Moreover, if you are willing to move your account to a different broker, the company will charge you with a liability fee of $75.

Further, if you are making a transaction over the phone with a live broker, you will be charged $10 during each of these sessions. Moreover, in the case of a foreign stock, the charge is between $35 to $50.

Advantages and Disadvantages of Robinhood

In the following segment, we will show you why trading through Robinhood seems like the brightest idea. We will also share with you the other parts where its performance is relatively dim.

Advantages

The account minimum: Robinhood doesn’t require investors to deposit any minimum amount in their accounts to get the ball rolling. You can have access to the services and privileges of the app without any restrictions.

However, if you are willing to make a purchase, inevitably you will have to add money to your account. Moreover, under the Financial Industry Regulatory Authority clauses, to open a margin account, the user must have a minimum of $2000.

Easy use and unadulterated interface: The process of signing up to the app and getting started with the funding is easy and effortless. Once you feed in your details and Social Security number, it will take less than an hour for the app to activate the procedures for banking services.

Furthermore, the app swiftly performs trades such as stop-limit orders, stop orders, market orders, and limit orders.

No commission- The most significant and useful characteristic of Robinhood is its role in the trade market as a commission-free platform.

For traders who engage in almost regular buying and selling of stocks can ensure bulk savings through free stocks, options ETF, and cryptocurrency trades. Their clearing propaganda formulated last year has aided in lessening the service’s account fee, thus proving beneficial for the traders. 

Another advantage of the Robinhood app is its policies of free-market and extended hour trading.

Disadvantages

Single account operations: The account operation of the Robinhood app, however, is incredibly narrow. It allows traders only to undertake individual taxable accounts that are known by the name of brokerage accounts.

This is a considerable disadvantage for all investors. The permission to initiate any further investment will be endowed when they have pulled in 10% to 15% of their income in the tax-advantaged account. This, on the other hand, is employed to secure the user’s future after retirement. 

Unlike Robinhood’s competitors in the market, the app doesn’t provide any incentives to the user for signing up, and there is no trading simulator as such. Also, the range of the target audience of the app starts with beginners. That’s why Robinhood lacks all the advanced research data and tools experienced investors might need.

Loose security: The Robinhood app doesn’t support areas of mutual funds and bonds. Additionally, the company doesn’t support any reinvestment programs.

With other platforms, traders have an opportunity to direct their dividends back into their accounts. Users can direct them in the form of cash rather than waiting to withdraw them after being issued. But, after receiving repeated requests to inculcate this feature, the company is looking deep into this matter for progress shortly. 

Poor customer support: Lastly, the company’s radar of customer support is extremely narrow. The only way to get in contact with a representative of Robinhood is through email. Getting a reply with a solution or return to their concerns on time can sometimes end up taking a lot of time.

Summary

To answer your question, whether or not Robinhood is a suitable online platform for traders, we would say yes. Many applications lure users at first. They claim that their investment services are free.

However, once you create an account, the hidden layers of service charges keep unveiling themselves one by one. Luckily, Robinhood has no fee indeed.

The platform is an excellent pick for small-scale and frequent investors.  It provides advanced trading tools, investment options, and education to suffice the requirements of new and inexperienced investors.

But in the case of traders who are willing to take risks and trade with hundreds and thousands of shares at a time, you can choose to explore more comprehensive options. 

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