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Pros and Cons of Robinhood Investing App


Robinhood investing pros and cons, benefits and downsides. Is Robinhood trading app good or bad for 2020?



Robinhood Pros


Robinhood’s commission-free trading model is the single largest draw to the platform. Trades that used to cost upwards of $5-10 each can now be executed for free. This decreases costs for both those looking to profit from frequent trades and those looking to build wealth long term. There is also no minimum deposit requirement to open an account, making stock investing accessible to even the newest and most cautious investors.

Robinhood Financial has launched a new service called Robinhood Gold which gives members extended trading hours, instant access to fund transfers, and allows users to increase their buying power by leveraging margin accounts, all for an additional monthly fee. As one of the few advanced features on the app, this service gives an investment edge to frequent traders that was not previously available through the platform.

Another Robinhood pro is that while it was initially designed for use on smart phones and was already available on iOS and Android, they have also created apps specifically for the iPad and Apple Watch, allowing even easier access to stock trades on the go.


Robinhood Promotion


Get one free $3-$7 value stock when you open an account.


Robinhood Cons


The app’s bare-bones model leaves little room for more advanced tools that serious investors expect from a stock brokerage. For instance, there is no option to automatically reinvest dividends. Since there are no trading fees, reinvestment can be done manually but it’s a hassle and requires more time and effort on the part of the user.

Only stocks, options, a few cryptos, and exchange-traded funds (ETFs) are available. Forget about mutual funds, foreign stocks, bonds, forex, futures, etc.

For customers focused on investing money for retirement, Robinhood only offers taxable personal investment accounts. Retirement accounts are unavailable. Customers seeking these options may be better off using a standard brokerage.

One major Robinhood con is that most functionality is done only on the app. Their website has limited functionality. It could get inconvenient very fast. Another Robinhood con is that there is no advanced trading platform or any investment research tools. The broker also offers no banking features.

One of the largest complaints about Robinhood is the time that it takes for money transfers to become available. Transfers from bank accounts can take up to three business days to become available for use. When selling stock, customers must wait for the money to settle. This can take up to three business days. Users must then wait an additional three business days for money to transfer back into their bank accounts. To combat this, Robinhood has a feature to set up reoccurring bank transfers. Users have the option to automatically transfer money from their bank accounts weekly, bi-monthly, monthly or quarterly. While this option serves to create a stockpile in a user’s account so that trades can be made immediately when the price is right and eliminates the wait time for bank transfers, it can tie up money that may be needed elsewhere.


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How Is Robinhood Different?


Robinhood’s claim to fame is that its users can trade stocks without paying commission fees. It’s based mostly within the mobile app. They have no brick-and-mortar locations to keep their operating costs low.

Robinhood provides users with basic stock trading functions. They can buy and sell stocks, options, a few cryptos, and exchange-traded funds (ETFs). The platform also provides for the use of fundamental tools such as a limit, stop loss, or stop limit order. 

While the app is geared towards tech-savvy, fee-shy millennials, it’s has a simple interface that’s easy to use for anyone with access to a smart phone.


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How Does It Work?


When the app is first opened, the main screen is color-coded based on the status of the market. The background will be white if the market is open but black if it is closed. The total value of a user’s portfolio, as well as the lines on the value graph, will appear either green or red, depending on the portfolio’s performance that day. The graph can be toggled to show performance for different timeframes with a single touch. This makes it easy to gauge portfolio ups and downs at a glance.

Scrolling down on the home screen, users see a section for news and alerts first, followed by their stock holdings, and then their Watch List. Like many other brokerages, Robinhood allows users to make a Watch List of stocks to track with the ticker symbol and current price. This makes it easy to quickly view prices and make decisions. While the mobile interface doesn’t lend itself to in-depth market research, basic information for an individual stock, such as price history, news, stats, and earnings, are readily available all on the same page. Other stocks are easily searchable via a magnifying glass icon on the home screen.

The future of startups can often be unclear but Robinhood is insured. According to their website, Robinhood “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).” This means that despite their startup status, Robinhood has all the protections of a normal brokerage and investor’s assets are secure, even in the event that the company were to fail.


Robin Hood Cons


Robinhood Pros and Cons Summary


As a financial startup out of Palo Alto, Robinhood is a mobile app-based stock trading platform that bills itself as a low-cost, no-frills alternative to a typical stock brokerage.

While lacking many advanced features and tools that many serious stock traders rely on, Robinhood is a useful, money-saving tool for entry level investors or those who are only interested in buying and selling stocks. It’s fee-free model is ideal for people who may not have large quantities of capital to begin with and the app-based platform lends itself for quick trading on the go.


Robinhood Promotion


Get one free $3-$7 value stock when you open an account.