With the New Year comes a new updates and new policy, basically on most platforms. So a brief review on Robinhood for the year 2020 and all you have to benefit from them is what you get to see in this article.
Robinhood offers commission-free stock, ETF and options trades. But now that the company’s competitors also offer free trades, this investment app stands out most for offering a streamlined trading platform and free cryptocurrency trading. The question now is “what is Robinhood”
Robinhood is a US financial services company founded in 2013 that offers commission-free stock investing and cryptocurrency investing. It currently lets customers invest in over 3,500 US stocks and another 1,000 global stocks, and has recently launched with early access in the UK.
It has been a smartphone-first brokerage, with Android and iPhone apps as the primary methods to log into your account and place trades. However, there is now a fully functional web version available to all users.
Currently, the platform boasts more than 5 million users. That surpasses the number of people who use popular brokerage E*TRADE. As of May 2018, Robinhood’s platform has hosted more than $150 billion in transactions. And the company has been recently valued at $5.6 billion.
Intuitive and easy-to-use app
£1 account minimum
No commission or foreign exchange fees
Investing may offer better returns than savings account
Can buy US stocks and ETFs, as well as some global stocks
Your capital is at risk
Mainly limited to US exchange stocks
Trading based on US market hours
Your money must be converted into US dollars in order to trade
Some products not currently available in the UK
No ISA or pension option
Stock Trade Fee (per trade)
ETF Trade Fee
Options Base Fee
Options Per Contract Fee
Mutual Fund Trade Fee
Broker Assisted Trades Fee
Their features include;
1. The Robinhood App: Invest. Save. Earn.
Robinhood’s apps are impeccably designed. They’re smooth, sleek, intuitive, and easy to use. You don’t have to take my word for it either; the apps have high ratings in both the App Store (4.8 stars out of 5, with over 800,000 reviews) and Google Play (4.4 out of 5, with over 96,000 reviews).
Believe it or not, Robinhood is the 10th most financial popular app in the App Store. Wow! You can use Robinhood’s apps to access all of their features, which we will explore below.
2. Stocks & Funds
Robinhood’s claim to fame is that they allow customers to make an unlimited number of commission-free trades on stocks, ETFs and options.
This might save you big money over the long haul. The money you would typically spend on fees gets reinvested into your account—adding to your compounding returns.
Thanks to companies like Robinhood, commission-free trades are becoming the norm. Recently, financial juggernauts Charles Schwab and Fidelity both announced they would no longer charge fees on trades.
3. Options Trading
Robinhood Options enables advanced investors to try their luck on options trading. A huge benefit to the Robinhood options platform is that there are no fees for options trading.
Savvy traders can also use complex options trading techniques such as iron condors, straddles, and strangles using Robinhood. I haven’t seen these offered on other platforms.
Now is as good a time as any to say that I’m by no means an expert on complex options strategies. Unless you’re a financial wunderkind, you probably should stick to more straightforward investments.
4. Robinhood Gold
Serious investors might consider upgrading to a Robinhood Gold account, which includes round-the-clock access to over 1,700 Morningstar reports and access to Level 2 market data.
What’s more, Robinhood Gold supports margin trading. This is quite different than a traditional investment account, so make sure to do your homework here. For more information about the differences between a margin account and a traditional cash account, check out this article from the Securities and Exchange Commission.
If you opt for a Robinhood Gold account, the first 30 days are free. After the free trial expires, you’re looking at a flat fee of $5 each month, which gives you access to $1,000 in margin. If you use over $1,000 in margin, you’ll pay a 5% annual interest rate on every dollar above that amount.
Keep in mind that you don’t have to trade on margin with Robinhood Gold. Account-holders can simply turn off margin trading and still have access to the premium features that Robinhood Gold offers. For more details on that, check out the fine print.
5. Cash Management
At the time of this writing, Robinhood’s Cash Management service appears to be on hold, possibly due to some regulatory issues. But you can sign up for the waitlist. Once the product is live, they promise an impressive 1.8% APY—which is right on par with leading high-yield savings accounts (HYSAs).
Cash management account holders will also get the benefit of having unrestricted access to funds with a Robinhood ATM card, which can be used for purchases anywhere that Mastercard is accepted. You’ll also be able to withdraw funds at their network of over 75,000 ATMs.
6. Robinhood Crypto
Robinhood Crypto is the newest division of the company. This service enables you to trade the most popular cryptocurrencies—like Bitcoin and Ethereum—without paying any commissions.
Due to the various licensing and legal complexities behind digital currency trading, Robinhood Crypto is a separate entity from Robinhood Financial.
But you can easily move your funds from one account to the other if you’re so inclined.
Signing Up for Robinhood
It’s super easy to register a Robinhood account. Simply visit their website and fill out some forms with some basic information. Next, you’ll have to confirm your identity and link your external bank account so that you can deposit and remove funds. Once that’s done, it’s time to submit your application, and you’re good to go.
One cool thing about Robinhood is that they give you a free share of stock when you successfully open an account. At the time of this writing, the company was advertising shares of Apple, Ford, or Sprint.
For you to be eligible you at must be 18 years old and most have a valid national insurance number.
Robinhood Security Benefits
Here are some of the main security benefits that the company offers:
Robinhood is a member of the Financial Industry Regulatory Authority (FINRA).
Robinhood is licensed to transact stocks by the Securities and Exchange Commission.
It is a member of the Securities Investor Protection Corporation (SIPC). As such, stocks and options accounts up to $500,000 are protected.
Account passwords are encrypted using the latest encryption technology.
A two-factor authentication is an option for those seeking added security.
You can easily transfer funds from your Robinhood account to your linked bank account. This process can be initiated on the Robinhood website or right in the mobile app. Per federal regulations, you’ll have to wait a few days to withdraw cash after making a trade. Read more about that here.
Yes, Robinhood is safe to use. They are a well-established financial services company. At the same time, it bears repeating that all forms of financial investing come with some risk. Still, Robinhood’s platform is no riskier than its competitors.
No. You cannot trade penny stocks on Robinhood. Over-the-counter (OTC) securities are not supported. However, Robinhood customers can trade company shares listed on the NASDAQ and NYSE whose stock price is currently below $1.00.
5. How do I get my money out of Robinhood without paying any fees?
First, sell all your stocks and any other positions. Next, transfer all your cash via ACH to your bank account (ACH transfers are free). Finally, contact Robinhood to close your account. If you transfer stock holdings to another broker, Robinhood will charge you a $75 ACAT fee.
Robinhood is a great way to get your feet wet with investing with no fees. The platform is regularly adding new features, including the web-based platform, options trading, and Robinhood Crypto.
While it is not powerful enough to be your only investment platform, it does work well for your individual stock trading account. It’s far from perfect, but it is a great value. After all, you can’t beat free.
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