Robinhood Review: Is It The Right Platform for You?

Robinhood is seemingly perfect for those looking to delve into stock trades, exchange-traded funds (ETFs), and crypto trading, all on one platform. It has an easy-to-use mobile app and fee-free service, and is frequently ranked as one of the best online brokers.

In this review, we’ll be weighing the facts to help you determine if Robinhood is a good fit for you.

TIME’s Take

Robinhood has grown steadily in popularity in recent years, but it’s not the right platform for everyone. Though it markets itself primarily toward new investors, the features offered—in combination with the limitations of the app—make Robinhood more suitable for seasoned, active traders who are more confident in their investing skills and less dependent on customer service and investor resources.

What is Robinhood?

Robinhood is an investment platform offering commission-free trading of stocks, ETFs, cryptocurrency, and options—all through a mobile app or website. The company is known for its easy-to-use, streamlined platform and appeal to investors new to the investment game. Its Robinhood Retirement offers IRAs, both traditional and Roth.

Robinhood pros & cons

Pros

• Doesn’t require a monthly fee or account minimum to open or maintain a brokerage account (except for Gold account).
• Easy to use.
• No foreign transaction, inactive account, transfer or card replacement fees.
• Offers commission-free crypto trading with no markups and markdowns.
• One of the few brokers offering access to Initial Public Offerings (IPOs).
• High-interest cash option.
• Allows fractional share trading.
• The Gold tier subscription offers a very competitive 5.00% APY on your uninvested brokerage cash (it’s 1.50% without Gold).
• ‌Robinhood Retirement offers a 1% match each time you deposit funds.
• ‌Robinhood Gold offers a 3% match each time you deposit funds into a Robinhood IRA (expires April 30, 2024, unless extended).

Cons

• Does not offer joint brokerage or custodial accounts.
• A Gold tier subscription, which provides research and data that is generally free at most brokerage firms, costs $5 per month.
• Does not offer bonds or mutual funds.
• The app encourages active trading and margin trading, which are high-risk activities for its target market of new investors.
• Allows payment for order flow, reducing some of the benefits of commission-free trading.
• Customer support is limited: Robinhood does not offer direct phone support or live chat unless requested through the app or its website.
• Limited tools for trading, research, and education.
• The Robinhood IRA match of 1% or 3% requires keeping your IRA account open for a minimum of five years, and maintaining the balance which received the match in the account during the entire term.
• The 3% Gold match requires maintaining a Gold membership for a minimum of one year.

Who should choose Robinhood?

Robinhood is best suited for intermediate or advanced investors. This will include experienced investors who are less reliant on customer support, broker investor tools and educational resources.

The platform is designed primarily for active trading, including day trading. It’s one of the top brokers for options trading since there is no per-contract fee, as is common with most brokers.The app also appears to encourage margin trading. This is not a practice recommended for new and small investors, since it magnifies the potential for investment losses.

Robinhood can also be a good choice for IRA accounts, since it offers a 1% match on IRA contributions or retirement account transfers from external accounts. Robinhood Gold members can take advantage of a 3% match through April 30, 2024.

Robinhood is not an optimal platform for the kind of long-term, buy-and-hold index investing strategy recommended by the majority of financial advisors and followed by most investors.

How did we review Robinhood?

When evaluating Robinhood we considered the following factors:

• Available accounts and investments.
• Commissions and fees.
• Ease of platform use.
• Features and tools offered.
• Customer service availability.
• The types of investors best served by this platform.
• Company reputation.
• Special or unusual features.

Robinhood in-depth

Commissions and fees

Robinhood offers commission-free trades of stocks, options, ETFs, and cryptocurrencies. When you purchase foreign stocks on U.S. stock markets, also known as American Depositary Receipts (ADRs), there may be a fee of $0.01 to $0.03 per share.

Like all brokers, Robinhood is subject to regulatory fees, which are passed on to investors. These include a regulatory transaction fee of $8 per $1 million of principal on sell orders, a trading activity fee of $0.000145 per share on equity sells, and $0.00244 per contract on options sells—the latter two are subject to a maximum of $7.27 per trade.

Robinhood, like many brokers, also uses a payment for order flow system. That may result in investors getting a less-than-optimal price on both the purchase and sale of securities within their accounts. It’s a fee structure in which the price of the security is marked up on purchase or discounted on sale, with the “spread” going to the broker.

Margin rates

Robinhood’s current margin interest rate is 12.00% per annum on standard accounts. However, if you are a Robinhood Gold member, the margin rate drops to 8.00%.

As is the case with all brokers, margin rates are variable and subject to change based on prevailing interest rates while the loan is in force.

Platform and technology

Robinhood ranks high on ease of use due to its simplicity. But part of that simplicity is due to its lack of investing tools compared with many competitors. Among the common tools that the platform lacks: trading simulators, security screeners, and alerts.

Robinhood does offer advanced charting, helping you to identify trends using technical indicators such as volume, moving averages, and the relative strength index (RSI). It also offers candlestick, line, and volume charting.

More advanced tools are available if you participate in Robinhood Gold. That plan offers professional research from Morningstar, as well as Level II market data from NASDAQ in real time.

Robinhood is quite well-regarded by users of the app. It has a rating of 4.2 out of five stars among 4.2 million iOS users on The App Store, and 4.1 out of five stars among 481,000 Android users on Google Play.

Range of offerings

Robinhood offers a limited number of account types and investments. It specializes in the following:

Options trading: Like most investment brokers, Robinhood charges no commission for options trades. But it also doesn’t levy a per-contract fee, which is typically $0.65 per contract. By waiving that fee, Robinhood makes options trading a little bit more profitable than the competition.

Cryptocurrency trading: Robinhood offers trading in numerous currencies, including Bitcoin and Ethereum. You can begin trading with as little as $1, and trades are commission-free.You can also take advantage of the Robinhood Wallet to hold your crypto assets free of network fees. You will hold and maintain the private key to the wallet, which is part of the Polygon and Ethereum networks.

Initial Public Offerings (IPOs): Robinhood is one of the few investment brokers to offer participation in IPOs. IPOs give you an opportunity to be among the first to buy shares in a private firm before they become available on the open market.

Get your first stock free: When you open a new Robinhood account, you’ll earn a specified dollar amount, giving you the ability to pick a gift stock from a list of 20 leading U.S. companies. The cash value can be used to purchase fractional shares in any of the companies offered.The reward is worth between $5 and $200, but Robinhood clarifies that approximately 98% of participants will receive between $5 and $10.

Research and education

While Robinhood is working to improve in this area, it’s still trailing the competition.

The site does provide a “Learn” section, which helps investors better understand how to use the platform and become more effective investors. Moreover, Robinhood Snacks provides a newsletter and podcasts to customers with updates on the financial markets that are “easily digestible.”

Robinhood Gold members have access to more advanced research, but it is a premium program that comes at a cost (see description below).

Customer service and security

While Robinhood doesn’t provide a direct phone number to contact, support is available through email at [email protected]. You can also use the app or website to chat or request a phone call. Robinhood provides a very detailed FAQ page that can generally answer most questions.

Account security is provided by two-factor authentication (2FA). That requires two sources of verification to sign into your account, making entry by unauthorized parties much less likely.

The company also uses multiple industry-standard measures to protect your account and your information. That includes hashing your account passwords using the industry standard BCrypt hashing algorithm and encrypting sensitive information before it is stored. Meanwhile, both mobile and web applications provide secure communication using the Transport Layer Security (TLS) protocol.

Finally, Robinhood is a member of the SIPC (Securities Investor Protection Corporation). This means you’re protected against broker failure for up to $500,000 in cash and securities, including $250,000 of cash. However, the coverage does not extend to investment market losses or cryptocurrency positions.

Mobile app

The Robinhood mobile app is available for iOS users on the App Store and for Android users on Google Play. It comes with all the features of the web version and receives high ratings from users.

Additional features

IRA accounts: Robinhood offers traditional and Roth IRA accounts. You’ll get a 1% match on every dollar you contribute, including transfers from other IRAs or 401(k) accounts. The IRA match does not count toward your annual IRA contribution. Meanwhile, Robinhood Gold members can receive a 3% retirement match—see Robinhood Gold description below.

Robinhood IRA accounts allow you to invest commission-free and take advantage of a custom-recommended portfolio. All investments, except cryptocurrencies, are available through an IRA account.

NOTE: You must keep your Robinhood IRA open for at least five years, with all funds matched retained in the account, otherwise you’ll be charged an early IRA match removal fee. The fee is equal to the match provided on the deposited or transferred amount. For example, if you deposited $7,000 into your IRA, received a $70 match, then withdrew $2,000 within five years of opening the account, the early IRA match removal fee will be $20 ($2,000 X 1%).

High-Yield Savings Account (HYSA): Robinhood offers an account paying interest on your uninvested cash. You can earn 1.5% APY (5.00% on Gold plan accounts) on balances up to $1.5 million through partner banks. All funds up to that limit are insured by the Federal Deposit Insurance Corporation (FDIC). See more of the best HYSA rates.

Robinhood Cash Card: Robinhood offers a debit card that provides cash back when you purchase participating brands. It also gives you the ability to automatically invest some of your paychecks in a preselected choice of stocks or cryptocurrencies. You can then earn a bonus of between 10% and 100% on your weekly roundups.

The Cash Card also comes with 24/7 phone support, access to 90,000 fee-free ATMs, the ability to send checks, and no overdraft or monthly fees.

Robinhood Gold: Robinhood offers this as a premium plan, for $5 per month, after a 30-day free trial. The minimum account balance is $2,000. The plan comes with the following upgrades:

• Professional research from Morningstar.
• Level II real-time market data from NASDAQ.
• 5.00% APY on uninvested cash (vs. 1.5% on standard accounts).
• Lower margin interest rates: 8.00% vs. 12.00% for standard accounts.
• Larger instant deposits (up to $50,000), based on your account status.

3% Retirement Boost. Now through April 30, 2024, Robinhood Gold Members can receive a 3% match on funds deposited into their IRA accounts. Those can be either in the form of deposits or transfers from external retirement accounts. Without the Gold membership, you will still be eligible for the 1% match, but not both.

Once the match is received, you must maintain your Gold membership for a minimum of one year, and the IRA account must be open for at least five years. If you fail to do either, the entire amount of the match will be withdrawn as an early IRA match withdrawal fee.

If at any time within five years you withdraw a portion of the amount that received the IRA match, the match will be reduced proportionately. For example, if you transferred $10,000 into the account, and earned a $300 match, but withdrew $2,000 six months later, $60 of the match ($2,000 X 3%) will be withdrawn to cover the fee.

Robinhood Gold is an optional plan, which you are free to downgrade out of at any time.

Alternatives to Robinhood

If you are considering Robinhood—or any other investment broker—you owe it to yourself to check out other platforms.

Robinhood is a good platform for active trading and provides commission-free trades on all investments. But it’s lacking in some areas, such as the number of accounts it offers and the fact it doesn’t let you invest in certain popular asset classes such as bonds and mutual funds.

Fortunately, there are plenty of other competitively-priced options out there to meet investors’ needs. Two examples are TradeStation and J.P. Morgan Self-Directed Investing*. Both of these platforms give users access to a greater variety of investment and account types, including retirement accounts.

Each broker excels in particular areas. For example, Robinhood is better for options and fractional share trading, whereas J.P. Morgan Self-Directed Investing* is great for investing in mutual funds and customers who seek phone support but doesn’t, for example, allow cryptocurrency investing. TradeStation, on the other hand, offers wider investment and account options, including the ability to invest in futures.

All three are good platforms but might not be right for all investors. The table below summarizes the major features of each of them:

Robinhood reputation

It’s not unusual for brokers to experience customer service issues and regulatory challenges. However, Robinhood seems to have encountered more than the typical amount, especially given the platform’s relative youth.

For starters, the Better Business Bureau gives Robinhood a “D” rating (on a scale of A+ to F). The nonprofit organization cites government regulatory action against the company, as well as a pattern of complaints from customers about a lack of response from customer support and an inability to access accounts.

Examples of regulatory actions include the following:

• SEC, December 17, 2020: The Securities and Exchange Commission (SEC) fined Robinhood $65 million for making misleading statements and omissions in customer communications and FAQ pages about how it earns its revenue. The fine was related to the payment for order flow referenced earlier in this review.
• FINRA, June 30, 2021: Robinhood was fined $57 million and ordered to pay $12.6 million in restitution, plus interest, to thousands of harmed customers for providing false or misleading information regarding its systematic outages in March 2020. It was the largest financial penalty ever ordered by the Financial Industry Regulatory Authority (FINRA).
• New York Department of Financial Services (DFS), August 2, 2022: NY DFS imposed a $30 million penalty on Robinhood Crypto for significant anti-money-laundering, cyber-security, and consumer-protection violations.
• Commissioner of Financial Protection and Innovation, April 4, 2023: The agency imposed penalties of up to $10.2 million for being “negligent in inaccurate information” in connection with various investment activities. The investigation was brought by state securities regulators from multiple states.

These fines represent actions against Robinhood by multiple regulatory bodies, each for a different infraction.

Frequently asked questions (FAQs)

Is Robinhood for beginners?

Robinhood can be a good fit for beginning investors. The company is arguably one of the best when it comes to making the market more accessible and is commission-free with most trades. But it does lack the customer support and investor resources of more traditional brokerages that a beginner may need.

What are good alternatives to Robinhood?

If you’re not certain Robinhood is the right investment app for you, there are plenty of alternatives.

For example, if you’re a new investor also looking to accumulate funds to invest, Acorns is an excellent choice. It allows you to connect to a spending account that will round up your purchases and transfer the change into your investment account.

If you’re looking for a higher level of customer support, platforms like Fidelity and TD Ameritrade are better choices. Alternatively, if your primary plan is to trade cryptocurrencies, crypto exchanges like Coinbase or Gemini may be a better choice.

Is Robinhood safe?

Robinhood is a member of SIPC (Securities Investor Protection Corporation). This means that, if it goes under, up to $500,000 of your funds held by the broker will be protected.

Note that this protection is for broker failure, not for losses due to investing activities.

Can you lose money with Robinhood?

Yes, you can lose money with any investment broker, especially if you engage in certain types of trading. The problem is magnified when you invest using borrowed money (margin trading).

How long until you trade after you open an account?

Standard ACH transfers take up to five days to process. However, with Robinhood Instant Deposits you’re given immediate access to up to $1,000 while your ACH transfer is processing.

Not everyone will qualify for Instant Deposits, especially upon opening a new account. If you don’t qualify, you’ll need to wait until your ACH transfer completes to begin making trades.

*INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE