Robinhood Review: Lower Costs and Simplified Investing in One

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.

However, there's a lot more to Robinhood than just commission-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.

Robinhood Gold

Robinhood is well known for its abundant fee-free services, such as commission-free options and cryptocurrency trading that most other brokers charge for. However, it does offer an optional premium platform known as Robinhood Gold.

Robinhood Gold offers some benefits that can make the $5 monthly cost well worth it. Robinhood Gold customers get a significantly higher interest rate on uninvested cash (5% versus 1.5%, as of February 2024), which can justify the cost all by itself for investors who keep lots of cash on the sidelines. Robinhood Gold customers also get higher instant deposit limits, lower margin interest rates, access to Morningstar stock research and Level II market data, a 1% match on taxable brokerage deposits, and a 3% match on IRA contributions (1% for non-members).

Gold members can apply (and possibly be approved) for the Robinhood Gold Card, a credit card exclusive to Robinhood Gold members. Users get 3% back on everything. It's worth considering if you're a Robinhood user, especially if you find value in Robinhood Gold independent of the card.

This stock broker is a fit for: Investors seeking a mobile app to invest in stocks, ETFs, options, fractional shares, and (through Robinhood Crypto, a separate but related entity) cryptocurrencies, or to open an IRA. Investors needing to buy mutual funds will want to look elsewhere.

For current promotions, check out our list: Robinhood Promotions

Top perks

Robinhood is one of our favorite brokerages. It ranks among the best brokers we've seen in these categories:

Zero commission fees

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.

High-quality mobile app

Robinhood's mobile interface is sleek, and its desktop interface is likewise easy to use. As of March 2024, Robinhood has begun rolling out updates that let users further customize their mobile app dashboard. Users can add widgets to easily track specific stocks, for example.

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 lets you put 100% of your money to work and helps create a diversified portfolio without a ton of investment capital.

IRA match

Robinhood now offers IRA investing for its account holders, and it doesn't stop there. Robinhood matches 1% of every dollar on all IRA contributions for all members, and 3% for Robinhood Gold users. The match will be available around the same time as your deposit, according to Robinhood, and the match doesn't count toward your annual contribution limits.

Robinhood Crypto

If you're interested in cryptocurrencies, Robinhood could be a great choice for you, as Robinhood offers cryptocurrency trading through its Robinhood Crypto service. Customers can buy and sell Bitcoin, Ethereum, Litecoin, and other cryptocurrencies any hour of the day. As of March 2024, there are 15 different cryptocurrencies available on Robinhood. Robinhood is one of the few brokers that allows users to invest in stocks and cryptocurrencies on the same platform and one of the few to offer no-commission crypto trading.

Once you verify your identity and activate two-factor authentication on your Robinhood account, you can withdraw and deposit cryptocurrency assets, with a limit of $5,000 or 10 total transfers within a 24-hour period.

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.

Robinhood Gold

While Robinhood is known for being the "no fee" brokerage, the company does have a premium product known as Robinhood Gold. Gold members get the following benefits for a monthly cost:

• Higher interest on uninvested cash
• Higher instant deposit limits
• 1% match on taxable deposits
• 3% match on IRA contributions
• Morningstar research access
• Level II market data
• Lower margin rates
• Robinhood Gold Card access

Users who anticipate sticking with Robinhood for years might find value in the paid subscription. This is especially true if you max out your annual IRA contribution limit or hold big dollar balances in your Robinhood brokerage account.

What could be improved

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, and many mutual funds have ETF alternatives, but you can't buy individual bonds or mutual funds.

Tools and research

Robinhood's platform was designed to be a simple, no-frills investment experience. However, if you want access to stock research or an advanced trading platform, you may want to look elsewhere. Robinhood Gold members get access to professional research reports from Morningstar, but this is a paid feature, while many competitors offer stock research to everyone.

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

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. Commission-free cryptocurrency trading is also rare among brokers, as well as pure cryptocurrency exchanges.

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 ($25 for IRA rollovers)
• Incoming/outgoing wire transfers: $0/$25
• Domestic overnight check delivery: $20
• Paper statements: $2 monthly
• Paper trade confirmations: $2

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

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

Robinhood Crypto offers 15 cryptocurrencies on its platform, which is not on par with some of the major cryptocurrency exchanges but would work well for new crypto investors who want some exposure to digital assets. After all, most brokers don't facilitate cryptocurrency trading at all. 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.

Robinhood offers the ability to trade on margin, and has some competitive interest rates. Unlike many other brokers, Robinhood's margin rates aren't dependent on the amount of money borrowed. Standard accounts pay a 12% margin interest rate as of March 2024, while customers who pay for Robinhood Gold get a better 8% rate, in addition to several other perks. Plus, Robinhood Gold members get the first $1,000 of margin balances interest free.

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.

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.

Robinhood offers many free educational articles on the Robinhood Learn website, but advanced research is gated behind the Robinhood Gold subscription, and it may not be as thorough as what many full-service brokers offer.

Beginners: Robinhood offers a significant amount of how-to articles on Robinhood Learn. It's a great place to search unfamiliar investing terms in plain English. New investors may find it useful for picking up the basics, and there's plenty of content that breaks down advanced concepts like options trading.

Advanced users: The standard (free) Robinhood platform is light on several features, and equity 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 or crypto research from several different firms, Robinhood likely isn't the best choice for you.

Robinhood has significantly improved its customer service since we first reviewed it. You can email customer service or get help via 24/7 live phone or chat support.

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 through its Robinhood Crypto 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. As of 2023, more than 10 million people use Robinhood as their primary brokerage.

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 and executing trades at inferior prices.
• In December 2020, the Commonwealth of Massachusetts accused 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, angering many of its customers.
• 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.

To be fair, Robinhood has done an excellent job of learning from these incidents. For example, it has done a good job of building its educational library and adding features for long-term investors, such as the availability of IRA investing.

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

• You want a broker with fewer fees: 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. What it lacks in features, it makes up for in user-friendliness.
• You want to trade cryptocurrencies or invest in fractional shares.
• You're a newer investor with limited capital: Robinhood lets users buy fractional shares of stock for as little as $1, so it's a good choice for investors who are just getting started.
• You want a savings and brokerage account in one: Robinhood treats clients' uninvested cash as a high-yield savings account, especially Robinhood Gold members, who receive an APY on cash balances 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 want a standard brokerage account or IRA: Robinhood offers IRA accounts for retirement. But you can't open a trust, partnership, Coverdell, 529, custodial, SEP IRA, Simple IRA, Individual 401(k), or any other type of brokerage account through Robinhood.

LEARN MORE: How to Open a Robinhood Account

Compare Robinhood to other brokerages

Wondering how Robinhood stacks up to the competition? Check out our reviews:

At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and account types; however, we also take into account features like research, education, tax-loss harvesting, and highly rated mobile apps. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.

See our full methodology here: Ratings Methodology