Robinhood Review: Lower Costs and Simplified Investing in One

Robinhood was founded to help provide everyday people with easy access to the financial markets and pioneered the concept of zero-commission stock trading upon its 2015 launch. Of course, in the years since, most other brokers have shifted to a commission-free stock trading model as well.

However, there's a lot more to Robinhood than just commission-free trading. In this Robinhood review, we'll take a closer look at this investment platform, fee structure, and the pros and cons investors should know about before deciding to use Robinhood for their brokerage needs.

This stock broker is a fit for: Investors seeking a mobile app to invest in stocks, ETFs, options, fractional shares, and (through Robinhood Crypto, a separate but related entity) cryptocurrencies, or to open an IRA. Investors needing to buy mutual funds will want to look elsewhere.

Top perks

Zero commission fees

Robinhood is best known for pioneering the idea of zero-commission stock trading. While most other top brokers have followed suit, Robinhood still has a favorable fee structure. For example, in addition to not charging flat commissions on options trades, Robinhood doesn't impose a per-contract charge either. That's something that many of the best options platforms still do.

Fractional shares

Traditionally, if a stock was trading for $500 per share, you needed to have at least $500 to invest in it. Robinhood lets investors buy fractional shares of thousands of stocks, even if they have only $1 to invest. This can be an incredibly valuable tool -- it not only lets you put 100% of your money to work, but also helps create a diversified portfolio without a ton of investment capital.

Cryptocurrency investing through Robinhood Crypto

If you're interested in cryptocurrencies, Robinhood could be a great choice for you, as Robinhood offers cryptocurrency trading through its Robinhood Crypto service. Customers can buy and sell Bitcoin, Ethereum, Litecoin, and other cryptocurrencies any hour of the day. As of August 2023, there are 15 different cryptocurrencies available on Robinhood. Not only is Robinhood one of the few brokers that allows users to invest in stocks and cryptocurrencies on the same platform, but Robinhood is one of the few to offer no-commission crypto trading.

Once you verify your identity and activate two-factor authentication on your Robinhood account, you can withdraw and deposit cryptocurrency assets, with a limit of $5,000 or 10 total transfers within a 24-hour period.

Cryptocurrency limit orders

Some cryptocurrency platforms only allow you to make immediate trades, but with Robinhood Crypto, you can use a limit order to set the price at which you want to buy or sell.

Cash management

Robinhood also offers an appealing cash management account that allows clients to earn returns that fluctuate with prevailing interest rates on their uninvested cash. Robinhood Gold members get even more, as we'll discuss in the next section. What's more, the cash management account has no fees associated with it, including $0 ATM fees at more than 75,000 ATMs in its network.

Robinhood Gold

While Robinhood is known for being the "no fee" brokerage, that the company does have a premium product known as Robinhood Gold. This version of the platform costs $5 per month, but could be well worth it to active investors. Gold members get the following benefits:

• High APY on uninvested cash. Competitive with some of the best high yield savings accounts.
• Instant access to larger deposits. While standard accounts can deposit and immediately access up to $1,000, Gold accounts can deposit $50,000 instantly.
• Margin investing at 8% versus 12% through a standard account.
• Level II market data from Nasdaq.
• Access to Morningstar stock research reports.
• 3% match on IRA contributions and 401(k) rollovers, versus 1% for standard accounts.

IRA investing

Robinhood now offers IRA investing for its account holders, and it doesn't stop there. Robinhood matches 1% of every dollar on all IRA contributions for all members, and 3% for Robinhood Gold users. The match will be available around the same time as your deposit, according to Robinhood, and the match doesn't count toward your annual contribution limits.

What could be improved

Consumer perceptions

Robinhood has faced public scrutiny several times in the past. One example is a 2021 incident when the brokerage firm froze trading of GameStop shares amid a trading frenzy. The firm has also had some concerning outages. More on this later, but note that the company's issues are reflected in our rating. However, Robinhood's recent problems likely wouldn't be a major concern for long-term buy-and-hold investors, and those are the types of investors we primarily consider when determining our opinion of a stock broker. Plus, to be fair, Robinhood has done an excellent job of addressing some investor concerns, such as rolling out accounts and features intended for long-term investors.

Access to mutual funds and fixed-income investments

Robinhood's platform doesn't support mutual fund and fixed-income investing, a rarity among major brokers. You can certainly invest in bonds through exchange-traded funds (ETFs) with Robinhood's platform, and many mutual funds have ETF alternatives, but you can't buy individual bonds or mutual funds.

Tools and research

Robinhood's platform was designed to be a simple, no-frills investment experience. However, if you want access to stock research or an advanced trading platform, you may want to look elsewhere. Robinhood Gold members get access to professional research reports from Morningstar, but this is a paid feature, while many competitors offer stock research to everyone. The company has done a good job of increasing the educational resources on its website, but its resources for new investors aren't quite as extensive as many traditional brokers.

Robinhood is well known for its abundant fee-free services, such as commission-free options and cryptocurrency trading that most other brokers charge for. However, it does offer a premium platform known as Robinhood Gold, which costs $5 per month.

Robinhood Gold offers some benefits that can make the cost well worth it. Gold customers get a significantly higher interest rate on uninvested cash (5% versus 1.5%, as of November 2023), which can justify the cost all by itself for investors who keep lots of cash on the sidelines. Robinhood Gold customers also get higher instant deposit limits, lower margin interest rates, access to Morningstar stock research and Level II market data, and a 3% match on their IRA contributions (1% for non-members).

While Robinhood is best known for its platform and tools designed for stock trading, it does offer individual retirement accounts, also known as IRAs. Robinhood offers traditional and Roth IRAs, and also allows for IRA transfers from other institutions as well as rollovers of former employers' retirement plans like 401(k)s.

One unique feature of Robinhood IRAs is a 1% match on IRA contributions, including traditional and Roth, as well as rollover contributions. So, if you contribute $5,000 to an IRA, Robinhood will add $50. Robinhood Gold members get a 3% match on traditional and Roth contributions (but not on rollovers).

Robinhood was founded in April of 2013 by Vladimir Tenev and Baiju Bhatt, aiming to democratize investing and "provide everyone with access to the financial markets, not just the wealthy."

Its popular trading app launched in March of 2015, and it became one of the first firms to offer stock trading without commissions. More than 800,000 people were on the waitlist for the app when it launched, including many millennials attracted by the elimination of commission fees and the lack of a minimum balance requirement.

In 2018, Robinhood expanded its appeal by adding cryptocurrencies through its Robinhood Crypto platform, again leading the way among mainstream brokers to become one of the first to offer an easy way to buy virtual coins -- without transaction fees.

In 2021, Robinhood went public in one of the year's most anticipated IPOs and now trades under the ticker HOOD. As of 2023, more than 10 million people use Robinhood as their primary brokerage.

Robinhood has been the subject of controversy numerous times. While these issues are important for Robinhood to navigate and important for investors, we do believe Robinhood is a solid broker to consider, which is reflected in our overall rating.

Here are some of the serious issues that have arisen:

• In December 2020, the Securities and Exchange Commission charged Robinhood with misleading consumers in statements made between 2015 and 2018 and executing trades at inferior prices.
• In December 2020, the Commonwealth of Massachusetts accused the brokerage of gamifying trading, and steering inexperienced traders towards high-risk investments.
• On Jan. 8, 2021, Robinhood froze trading of GameStop and several other stocks that were the subject of intense trading interest, angering many of its customers.
• On June 30, 2021, Robinhood was fined $57 million and ordered to pay around $12.6 million to consumers who had experienced losses due to system outages during a period of market volatility in March of 2020.

To be fair, Robinhood has done an excellent job of learning from these incidents. For example, it has done a good job of building its educational library and adding features for long-term investors, such as the availability of IRA investing.

Robinhood's claim to fame is its no-commission approach to trading, so this section shouldn't be too much of a surprise. The platform charges zero commission fees for stock, exchange-traded fund (ETF), cryptocurrency, and option trades placed through its app or website.

While most of the brokers who have dropped their standard stock trading commission have also dropped the base commission on options trades, a lot of them still charge a small per-contract commission. Robinhood allows traders to buy and sell as many options contracts as they want with no commissions at all. Commission-free cryptocurrency trading is also rare among brokers, as well as pure cryptocurrency exchanges.

Since Robinhood offers zero-commission stock trades, this also means that you can trade ETFs commission free.

However, Robinhood doesn't currently offer mutual fund trading at all, which is a big negative differentiator from many of its competitors. While it may integrate mutual fund capabilities into its platform someday, for the time being, it's not possible to buy shares of your favorite mutual funds through Robinhood.

Learn more: How to invest in mutual funds

Robinhood Crypto offers 15 cryptocurrencies on its platform, which is not on par with some of the major cryptocurrency exchanges but would work well for new crypto investors who want some exposure to digital assets. After all, most brokers don't facilitate cryptocurrency trading at all. Crypto clients can place market or limit orders with zero commissions, and Robinhood's crypto security features are in line with other major cryptocurrency exchanges.

Learn more: How to invest in cryptocurrency

To be perfectly clear, Robinhood doesn't charge commissions for stock, ETF, and options trades placed through its online and mobile platforms. However, that doesn't mean that Robinhood is completely fee-free; there are some things you might still have to pay for. Here are a few of the more common charges you might face:

• Returned check or ACH fee: $0 ($25 for IRA rollovers)
• Domestic/International wire transfers: $0/$0
• Domestic overnight check delivery: $20
• Paper statements: $2 monthly
• Paper trade confirmations: $2

For much of its history, Robinhood was a trading app, and a leading one at that. Customers who value simplicity love Robinhood's trading platform. But beyond the app previously, there wasn't much of a functional web portal.

That's changed, as Robinhood has rolled out expanded capabilities through the web version of its platform. Both the web portal and mobile app versions are simple in design and are intended to be easy to learn and use.

Related: Best Free Stock Trading Apps

Robinhood offers the ability to trade on margin, and has some competitive interest rates. Unlike many other brokers, Robinhood's margin rates aren't dependent on the amount of money borrowed. Standard accounts pay a 12% margin interest rate as of August 2023, while customers who pay $5 per month for Robinhood Gold get a better 8% rate, in addition to several other perks. Plus, Gold members get the first $1,000 of margin balances interest free.

It's also worth mentioning that you'll need $2,000 in your account to use margin. This is a regulatory requirement that applies to all brokerages, not just to Robinhood.

The standard (free) Robinhood platform is light on several features, and research is one of them. In fact, the only research offered on the Robinhood app is available only to its premium Robinhood Gold customers who have access to stock research reports from Morningstar. If you want access to stock research from several different firms, Robinhood likely isn't the best choice for you. Similarly, if you're looking for extensive cryptocurrency research or resources for beginners, you'll need to look elsewhere.

RELATED: Want a trading platform with training for kids? Check out Stockpile, and also see The Ascent's Stockpile vs. Robinhood comparison.

Robinhood has significantly improved its customer service since we first reviewed it. You can email customer service or get help via 24/7 live phone or chat support.

In any combination of the below scenarios or for individual needs, Robinhood is a solid pick.

• You want a broker with fewer fees: Robinhood not only offers free web- and app-based stock trading, but it also offers free options and cryptocurrency trading.
• You like simplicity: Robinhood's trading platform was designed with simplicity in mind. It's not packed with features, but what it lacks in features, it makes up for in user-friendliness.
• You want to trade cryptocurrencies or invest in fractional shares: Few brokerages allow investors to trade in both fractional shares and cryptocurrencies, but Robinhood allows clients to invest in both.
• You're a newer investor with limited capital: With the ability to buy fractional shares of stock with as little as $1, Robinhood is a good choice for investors who are just getting started.
• You want a savings and brokerage account in one: Robinhood essentially treats clients' uninvested cash as a high-yield savings account, especially for Robinhood Gold members, who receive an APY on cash balances that rivals even the best online savings banks.
• You don't want to invest in mutual funds or bonds: Robinhood may be a good option for those interested in stocks, ETFs, options, and even cryptocurrencies, but if you want to hold mutual funds or individual bonds in your brokerage account, you're out of luck.
• You want a standard brokerage account or IRA: Robinhood does offer IRA accounts for retirement. But you can't open a trust, partnership, Coverdell, 529, custodial, SEP-IRA, Simple IRA, Individual 401(k), or any other type of brokerage account through Robinhood.

Learn More: How to Open a Robinhood Account