Q: There are a few platforms that allow investors to trade stocks commission-free. Why would anyone want to pay $6.99 or whatever their brokerage charges when there is a free option?
Commission-free platforms like Robinhood can be an excellent choice for many investors. For example, if you want to be able to buy say, one share of a stock for $40, it's not practical to do that if you have to pay a $6.99 commission.
However, I pay for stock trades and have no plans to make a switch. Here's why.
Robinhood only offers taxable brokerage accounts -- at least for now. My top investing priority is to max out my retirement accounts. The tax savings involved with maxing out my individual 401(k) outweigh the commissions I pay to trade. I maintain a comparatively small amount in a taxable account, and like having everything in one place.
Robinhood also doesn't offer mutual funds, which can be a major downside for investors who don't want all of their money in individual stocks.
Finally, compared to the leading (commission-based) online brokerages, Robinhood's platform is extremely light on features. You can't access analyst research reports or extensive financial data on the companies you're considering, nor does it offer an advanced trading platform like TD Ameritrade and E*Trade (among others) do.
In a nutshell, Robinhood has everything you need to start trading stocks. But it might not have everything you need to start investing in the best way for you.
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