Robinhood Review: Is it a Good Option for Beginners?

Abstract: As a beginner, it's important to evaluate yourself to understand what your needs and goals are. Then you can assess brokerages based on their features to determine whether or not they are a good fit for you. With the right broker, you can grow your portfolio as well as your trading skills. A broker that blends a trustworthy reputation, a streamlined platform, popular investment options, low-cost trading conditions, and unparalleled customer support is vital for beginners. Robinhood, obviously, is an ideal option for beginners.

Overview of Robinhood

Broker Name	Robinhood
Founded in	2013
Registered Country	USA
Regulation	FINRA
Account Minimum	$0
Tradable Instruments	Stocks, ETFs, Options, Cryptocurrencies
Trading Platform	Mobile app (iOS and Android), Web platform
Account Fees	No annual fee
Commissions	Commission-free for stocks, ETFs, options, and cryptocurrencies
Account Types	Individual brokerage accounts, retirement accounts (Traditional IRAs, Roth IRAs), margin accounts, cash accounts, Robinhood Gold subscription service
Payment Methods	Bank transfers, Debit card transfers

Robinhood was one of the earliest brokerages to offer commission-free stocks and ETFs trades through a streamlined platform. Founded in 2013 and based in the United States, the company has quickly become one of the most innovative and talked-about players in the fintech industry, attracting millions of customers with its easy-to-navigate way to invest. It continues to grow, although at a less frenetic pace in recent years. As of September 4, 2024, the brokerage boasts 24.2 million funded customers, 13.7 monthly active users, and $145.0 billion in assets under custody.

It removes a major barrier that stops many people from putting money in the stock market. That model continues to this day, with free trading for stocks, options, ETFs, and crypto. In terms of user experience and accessibility, Robinhood keeps things simple. You can open and fund your account via the mobile app in minutes or get started online.

Robinhood Pros & Cons

Where Robinhood shines:

✅Free trades: Robinhood has some of the lowest costs in the industry. This includes options trades, which don't carry a contract fee.

✅Streamlined platform: Its easy-to-navigate platform is no accident and they're constantly tweaking it to improve its performance and accessibility.

✅Fractional share trading available: Fractional share purchases can be made with as little as $1.

✅Direct cryptocurrency access: Direct crypto access allows traders to buy and sell different coins with ease.

✅Solid cash management features: An innovative cash card lets users invest rewards earned from purchases. Robinhood Gold members can now earn 5.00% on uninvested cash.

✅24/7 customer support: Customer support is available via online chat 24/7 and from 7 AM to 9 PM ET by phone.

Where Robinhood falls short:

❌Limited asset types: The lack of mutual funds and bonds may make it difficult to build a truly diversified portfolio. Customers can only access bonds via bond ETFs.

❌Advanced trading tools limitation: Research tools and information at Robinhood dont measure up to competitor standards, making it difficult for traders to get the most out of the platform.

❌Lack of transparency: Robinhood's lack of transparency on outages and trading restrictions with meme stocks in 2021 gave many traders pause before utilizing Robinhood as their preferred platform.

Is Robinhood Safe?

Security and reliability should be a beginning investor's priority.

Robinhood Financial LLC is authorized and regulated by the Financial Industry RegulatoryAuthority (FINRA) in the United States, with registration number CRD#:165998/SEC#:8-69188. Robinhood's adherence to FINRA regulations is vital for safeguarding the interests of its users and maintaining trust within the financial industry.

Robinhood is also a member of the Securities Investor Protection Corporation (SIPC), which protects up to $500,000 in securities and cash for each customer in case of a brokerage firm's failure.

However, Robinhood has been the subject of serious complaints and lawsuits over the years, which potential clients shouldnt ignore:

• In December 2020, Robinhood was charged by the Securities and Exchange Commission for misleading customers about revenue sources and failing to satisfy the duty of best execution. The SEC found that “Robinhood customers' orders were executed at prices that were inferior to other brokers' prices,” and those inferior prices deprived customers of $34.1 million. Robinhood agreed to pay $65 million to reconcile the charges.

Robinhood is devoid of any known major security incidents since 2021. But given the broker's checkered past, investors must determine for themselves whether Robinhood is safe enough to use.

Is Robinhood a Good Option for Beginners?

As a beginner, there's a lot of information to take in. Not only is there a long list of securities you can invest in, but there are also many brokerages that can help you do it. Some companies are great at marketing, but it's rarely a good idea to go with the first offer you see. As you choose an easy way to enter the sea of investing, a good online broker can help you ride the wave as well as weather the storm. A broker that blends a trustworthy reputation, a streamlined platform, popular investment options, low-cost trading conditions, and unparalleled customer support is vital for beginners.

Robinhood, obviously, is an ideal option for beginners, and the reasons behind this conclusion are listed below:

Popular Investment Options

When you open a brokerage account with Robinhood, you've got four choices for investing: stocks, ETFs, options, and cryptocurrencies. Compared to other online brokerages, Robinhood doesn't offer as many ways to invest. However, the product that any broker has to sell is not the investment itself, but what investors are looking for. Stock and exchange-traded funds could be great if you're a beginning investor. Various ETFs are available here, including Bond ETFs, Commodities ETFs, Indices ETFs, Real Estate ETFs, etc.

Like some other brokers, including Fidelity, SoFi, Interactive Brokers, and Charles Schwab, Robinhood also offers fractional share trading. If you're a beginner without a lot of money to get started, you can buy shares of some of the best-known stocks for as little as $1.

If you want to try your luck with cryptocurrencies, Robinhood currently offers trading of BTC, ETH, SOL, AND DOGE. You can also get real-time market data for a longer list of other cryptocurrencies. And Robinhood has plans to support trading for more cryptocurrencies in the future.

Besides that, Robinhood launched individual retirement accounts (IRAs) in December of 2022. This account allows you to invest for retirement. Any earnings have tax-deferred or tax-free growth potential, so you will keep more of your money.

Furthermore, its cash management brokerage feature offers 1.00% on uninvested cash balances to customers enrolled in its deposit sweep program. Robinhood Gold members can now earn 5.00% on uninvested cash. The auto-sweep feature is enabled by default, which is a bonus.

Beginner-friendly Interface

Robinhood's mobile and web platforms are known for their smooth sign-up, funding, and trading processes.

Beginners can be easily familiar with its mobile app. The main menu is easy to navigate, with intuitive screens that let investors easily see their portfolio value and positions. The search functionality gives traders a good overview of a stock‘s details, such as highs and lows, P/E ratio, and market capitalization. A news feed and composite of analysts’ rankings gives traders even more insight into a company profile.

Besides, Beginners can start by setting up their trading dashboard through its screener and watchlist to display only the most relevant information, such as their most-traded stocks or ETFs. Its screener can give beginners a starting point for investing, such as daily price jump, upcoming earnings, analyst picks, highest implied volatility, highest dividend yield, etc.

Its platform doesn't offer all the bells and whistles of a typical online broker. The secret of this platform is to strip every function to its cleanest components. It could be a good fit if you're a beginning investor because you will not be overwhelmed by excessive information and could concentrate on what's important to your trading strategy.

Commission-free Trades

Keeping an eye on investment fees matters. The more fees you pay, the more they eat into your returns. Robinhood does a good job of keeping investment fees low. It's one of the few online brokerages that use a $0 trading fee model for stocks, ETFs, options, and cryptocurrencies.

There's no amount needed to open an account. The exception is if you want to trade on margin, in which case you'll need at least $2000 to get started. Furthermore, there are no annual fees or inactivity fees to have a Robinhood brokerage account.

Other types of account or service fees do apply:

For these other fees, youre not likely to incur them on a regular basis. Besides, Robinhood Gold costs $5 a month.

Overall, Robinhood doesn't have a lot of fees at all. Saving money on fees means your investment returns go further. And that's important if you only have a limited amount of money to start investing.

Compare to Similar Brokerages:

Broker
Product Offering	Stocks, ETFs, Options, Cryptocurrencies	ETFs, Stocks, Mutual Funds, Options, Cryptocurrency, and Fixed-Income Products	Stocks, ETFs, Options, Futures/FOPs.Event Contracts, Spot Currencies, US Spot Gold, Bonds, Mutual Funds	Annuities, Bonds & Fixed Income, Futures, Options, Stocks, Mutual Funds
Account Minimum	$0	$0	$0	$0
Stock Trades	$0	$0	$0	$0
Options Fees	$0	$0.65	$0.65	$0.65

Robinhood's Dedicated Customer Support

You can talk to a live support agent by phone (650-761-7789) 7 AM - 9 PM ET or online chat 24/7. Administrative phone support for brokerage accounts will only be available on weekdays, Monday-Friday (excluding holidays). Get answers to anything from how to transfer your assets into Robinhood to questions about crypto trades, debit card transactions, and more.

Furthermore, Robinhood leverages various social media platforms (Twitter, Instagram, YouTube, Tiktok, etc) to connect with its clients, share market insights, provide updates, and offer educational content.

Should You Invest With Robinhood?

Investors are looking for whatever it is that makes a broker unique. For Robinhood, the essence of it is intuitiveness and cost-efficiency. These are the main attractions for you if you're a beginning investor. On the other hand, you might want to look elsewhere if you need a broader range of investment options. Overall, it's important to compare individual brokerage with your investment goals and style to make sure they're a good match.

FAQs

How does Robinhood support beginner traders?

Robinhood supports beginners with easy-to-navigate trading platforms, mainstream investment options, affordable trading conditions, and responsive customer support.

Can I set up automatic transfers with Robinhood?

Yes, you can set up a recurring schedule to help invest daily, weekly, bi-weekly, or monthly.

Is Robinhood safe to use?

Yes, Robinhood is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). It has run afoul of regulators in the past. However, it has not had any known major security incidents since 2021.