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Robinhood is a US broker that revolutionized commission-free trading with its mobile-first investing platform.
Robinhood is a US broker that revolutionized commission-free trading with its mobile-first investing platform. Founded back in 2013 by Vladimir Tenev and Baiju Bhatt, it became famous for allowing everyone to purchase and sell stocks, ETFs, and options without paying a fee per each transaction, when such fees were common in the industry. However, today Robinhood is more than just an easy way to buy stocks – it now offers a wide portfolio of financial products including cryptocurrency trading, retirement accounts with a match, banking, and credit cards.
Opening an account with Robinhood is possible right from within the app or website, where you should provide your name, email, and phone number, along with setting a password. You will also be asked some questions regarding your income, investing experience, and goals, which will allow the platform to customize it accordingly. The whole registration procedure is designed to be completed in a matter of minutes using your smartphone.
As any other US broker, Robinhood requires you to verify your identity in order to ensure that it really belongs to you and to comply with "know your customer" federal regulations. You will be required to provide your Social Security number, date of birth, and one form of identification, as well as linking a bank account with your name.
After you are verified, you can make a bank transfer to your account in order to fund it. The only type of deposit that Robinhood allows is a standard ACH transfer, which is free, but may take several days to fully complete. Instant availability of a portion of qualified deposits is available to all users, with Robinhood Gold members getting higher limits. Wire transfer service is also available for large transactions for a price of approximately $25.
To purchase a stock, ETF, or any other security that you find on the platform, you need to enter its ticker and the dollar amount or number of shares you want to trade, after which you just need to confirm the order. With Robinhood, you can purchase fractional shares, starting from as low as $1 per share. Commission on all stocks and ETF trades is zero, although a small regulatory fee will be automatically charged for each sell transaction.
Besides stock trading, Robinhood also allows trading in options contracts if you want to hedge or speculate your position with defined risks, as well as commission-free cryptocurrency trading. Additionally, it recently introduced event-based prediction markets, where users can trade on the results of some events or outcomes. All of these products are associated with much higher risks and greater complexity compared to regular stock trading.
Robinhood Gold is an optional tier of the platform, which costs $5 a month. With it, you get zero fee on each options contract, higher interest rate on uninvested funds in excess of the standard rate, and increased retirement account match to 3% of contributions. It also gives access to banking and credit card products of Robinhood, which makes it valuable mostly for those who keep significant balances and frequently trade.
Robinhood is famous for its trading: all stocks, ETFs, and options are traded commission-free. However, you will face regulatory fees on sells (which are very small), $0.65 per-contract fee for non-Gold options trades, spread of 1.5–2.5% on cryptocurrencies, and margin interest which is in the mid-single digit rate based on your balance. Additionally, wire transfer and other optional features have certain fees, but normal trading on Robinhood is always free.
Accounts with Robinhood are insured by SIPC protection, meaning that your funds in your brokerage account will be compensated to maximum standard limits if Robinhood fails, although it won't help to avoid normal market losses. Setting up 2FA is the easiest way to secure your login credentials. Robinhood banking products send deposits to a partner bank, providing FDIC coverage. Nevertheless, the value of stocks, options, and cryptocurrency you own on the platform may rise or fall, so only use money you can afford to lose.