What is it?
Robinhood is an app only stock brokerage that offers FREE trades and NO account minimums. Did you read that last sentence? FREE TRADES AND NO ACCOUNT MINIMUMS. What else could you ask for? Robinhood is able to do this by keeping itself simple with very low overhead. Currently, they only have the option to buy and sell at market price, place limit orders, stop limit orders and stop loss orders. Other features such as margin trading are not currently available. Though they have minimum account features they have everything you need to successfully trade.
In the past, if you transfered money into your Robinhood account you had to wait 3-5 business days before your funds were available to trade. Also, if you sold shares you would also have to wait 3-5 days for a processing period before you were able to use your funds. In my opinion, this was the ONLY issue with Robinhood. Then, the announcement of Robinhood Instant. It was almost too good to be true. They were going to make sold shares instantly available for trading and transfer of up to $1,000 instantly available as well. I used Robinhood before this announcement, now I’ll never go back. I was roughly 70,000/270,000 in a waiting line and I just received my invite to Robinhood Instant two weeks ago. As far as I can tell they are really rolling out the invites now.
How do they make money?
How can they offer these services for free? All the other brokers charge at least $5 per trade don’t they? You’re right, they do. And that $5 is anytime you buy OR sell. Robinhood makes money from uninvested cash in customers accounts. This means that the money that you don’t have invested accrues interest for Robinhood. You are NOT charged and are basically unaffected. This doesn’t affect your balance or ability to use your funds. Robinhood is currently working on creating margin accounts. They say they are in beta stage currently and will offer them later this year. They will accrue interest in that way as well.
“Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).” Your personal information is also fully encrypted.
USE ROBINHOOD! I truly love Robinhood and will never go back to using another brokerage again. But aside from that, ALWAYS place limit orders. Market price is constantly changing and you buy whatever is available so you may pay an unexpectedly high price for shares or receive less than you anticipated for selling. Simple fix: always place limit orders. It doesn’t take any more time and you always pay and receive the amount you want.
How many of you use Robinhood Instant as well?
Disclosure: I am in no way affiliated with Robinhood. I do not receive compensation for promoting Robinhood. Use a broker that you feel comfortable with. I am not a financial advisor this website is purely informational.