Item: Robinhood
Rating: 4.5
Author: Matt Frankel, CFP®

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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. But there's a lot more to Robinhood than just 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.

Ratings Methodology

Robinhood

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Our Rating:

Rating image, 4.5 out of 5 stars.

4.5 stars

Bottom Line

With no fees, access to trade fractional shares and cryptocurrency, among many other investment types, Robinhood's high-quality app trading platform is best suited for beginner investors wanting a solid place to invest on the go.

Fees:

$0 for stocks, ETFs, options, and cryptocurrencies

Account Minimum:

$0

Special Offer

Get a free stock with a new account

Open Account for Robinhood

On Robinhood's Secure Website.

Full Robinhood review

This stock broker is a fit for: Investors seeking a mobile app to invest in stocks, ETFs, options, fractional shares, and cryptocurrencies. Investors needing an IRA account or to buy mutual funds will want to look elsewhere.

Pros

$0 commissions
High-quality mobile investment app
Fractional shares investing
Cryptocurrency investing

Cons

Consumer perceptions around trading restrictions
No access to mutual funds and fixed income products
No IRA accounts

Top perks

$0 stocks, cryptocurrencies, ETFs, and options commissions

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 trading

If you're interested in cryptocurrencies, Robinhood could be a great choice for you, as cryptocurrency trading is integrated into the company's trading platform. Customers can buy and sell Bitcoin, Ethereum, Litecoin, and other cryptocurrencies any hour of the day.

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. At The Ascent, we'd encourage you to follow a buy-and-hold trading approach, which makes you less susceptible to short term price fluctuations. But if you want to set a point to take profits or try to buy the lows, limit orders can be very useful.

Cash management

Robinhood also offers an appealing cash management account that allows clients to earn returns that fluctuate with prevailing interest rates (currently 0.30% APY) on their uninvested cash. 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, it's important to mention 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 access to margin trading (including $1,000 of interest-free margin), instant access to larger deposits (standard accounts can have up to $1,000 instantly available), and access to Morningstar stock research reports.

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What could be improved

Consumer perceptions and recent trading restrictions

Robinhood has faced public scrutiny following 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.

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, but you can't buy individual bonds.

Tools and research

Robinhood's platform was designed to be a simple, no-frills investment experience. However, if you want access to educational tools, stock research, or an advanced trading platform, you may want to look elsewhere.

IRA accounts

Robinhood only offers standard (taxable) brokerage accounts. You cannot invest through an IRA through Robinhood, nor can you open a custodial account, trust, or Coverdell, just to name a few.

Cryptocurrency withdrawal and deposits

Robinhood has not yet launched withdrawal and deposit functionality for crypto assets, though it hopes to do so soon. This means existing crypto holders can't transfer their crypto assets into a Robinhood wallet. And crypto clients who want to trade or spend their digital coins elsewhere will not be able to do so. Robinhood only offers a custodial wallet, which does not give users direct control over their crypto.

Limited number of cryptocurrencies

With only seven cryptocurrencies, Robinhood's crypto list is disappointing, especially as several major tokens are not available. The selection is disproportionately weighted toward pure "payment" currencies (coins that focus on fast, cheap digital payments). But the world of cryptocurrency is much broader than that -- there are also cryptos that focus on decentralized finance, supply chains, entertainment, healthcare, and much more. Investors who want to access additional coins will have to look elsewhere.

Robinhood history

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 to its trading 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.

Robinhood in the news

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. The SEC claimed Robinhood executed trades at inferior prices, depriving consumers of $34.1 million, even after taking into account savings on commission.
In December 2020, the Commonwealth of Massachusetts issued a complaint against Robinhood, accusing 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 after users on Reddit began heavily investing in the companies. This raised the ire of its user base, and caused concern among lawmakers and regulators.
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, or who the brokerage firm had given misleading information or approved for risky trades despite red flags. That $70 million was the largest financial penalty ever ordered by FINRA.

Alternatives to consider

If you want a mobile investment app that offers IRAs: Webull receives high marks. Where it outshines Robinhood is that it's one of the few mobile-focused brokers that offers IRA accounts. Webull also matches Robinhood's feature set well, including cryptocurrency trading, competitive margin rates, and $0 commissions for stocks, options, and ETFs.

Read Webull Review

If you're seeking a full-featured broker: TD Ameritrade offers some of the most comprehensive investing and banking experiences among big brokers, including a high-quality trading platform, $0 commissions for stocks and ETFs, mutual fund access, and IRAs. One downside, compared to Robinhood, is that TD Ameritrade doesn't offer cryptocurrency trading.

Read TD Ameritrade Review

Commissions

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 $0 for stock, exchange-traded fund (ETF), cryptocurrency, and option trades placed through its app or website.

Stocks and ETFs	Stock options	Cryptocurrencies	Mutual funds
$0	$0 (no per-contract charge)	$0	Not offered

The $0 options trading commission is a rarity in the industry. 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.

Buying mutual funds and ETFs

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

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

Buying cryptocurrencies

Robinhood offers seven cryptocurrencies on its platform, which is not a huge range but would work well for new crypto investors who want some exposure to digital assets. 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

Fees you should know about

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
Domestic/International wire transfers: $0/$0
Domestic overnight check delivery: $20
Paper statements: $5
Paper trade confirmations: $2

Trading platform

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 margin rates

If you pay $5 per month for the Robinhood Gold premium version of the platform, one of the perks you get is the ability to invest with margin (aka borrowed money).

Not only that, but the first $1,000 of margin balances are absolutely free, meaning you won't pay any interest on smaller margin trades. Plus, Robinhood charges a flat margin interest rate on the portion of your balance in excess of $1,000, and it's quite a competitive rate. Robinhood's margin rate is just 2.5%, which is lower than most competitors.

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.

Research offerings

The standard (free) Robinhood platform is light on 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.

Customer support and service

This is another negative of Robinhood's "no frills" approach: Customer service is primarily handled through the help page on Robinhood's website, or through its automated chat system. You can email customer service, but it's tough to get a quick (and human) response to a question.

That said, Robinhood has invested heavily in customer support in the past year. It has expanded the available service options and now offers live phone support. It has also tripled the size of its support team in 2020 and plans to hire more people in 2021.

Robinhood is right for you if:

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

You want a low-cost broker: 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, with an APY 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 just want a standard brokerage account: In addition to not offering mutual fund investing, Robinhood doesn't offer retirement accounts such as IRAs. You also cannot open a trust, partnership, Coverdell, 529, custodial, or any other type of brokerage account through Robinhood.

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Robinhood Review: Low Cost and Simplified Investing In One