What is The Robinhood App?
Robinhood is an incredibly popular stock trading app. The fact they don’t charge fees has proved very popular with the public. When they first started “no fees” this was unique, but several other companies have now copied this strategy. The strategy worked and drew in 13 million accounts, typically from young people new to investing.
In June 2021 Robinhood app was forced to pay $70 million to shut down some investigations that related to misleading customers, approving ineligible traders for strategies that proved to be risky and numerous outages that stopped investors from accessing the platform. The problem of whether Robinhood has the resources to serve the vast number of accounts was the core of this problem. The question is whether they have learned from this experience.
When Robinhood was the only game in town when it came to no fees, this competitive edge allowed them to gloss over potential problems, but now they are no longer unique they have to compete on other fronts as well.
Making Money With The Robinhood App
Robinhood App users can invest in the following options:
1. Long stocks, no short selling, and no penny stocks.
2. Both simple and multi-leg options
4. Fractional stock trading (just under 7,000 stocks and ETFs)
This is a rather limited range compared to some other platforms, but the upside is the limited options help in keeping the platform easy to use.
The robinhood app is one of the few brokers that allow investors to trade cryptocurrency. There are several options here:
1. Bitcoin (BTC)
2. Bitcoin Cash (BCH)
3. Bitcoin SV (BSV)
4. Dogecoin (DOGE)
5. Ethereum (ETH)
6. Ethereum Classic (ETC)
7. Litecoin (LTC)
They also provide data for another ten varieties of coins.
Features of The Robinhood App
Both the website and app are very usable – Robinhood was started as a place where newbies could begin to invest. It was more of a platform for beginners than experienced investors. This has not changed, and the platform still lacks subtleties that experienced investors will appreciate but which the novice may not even be aware of.
Streamlined trade experience – The screens on both the app and website make it easy to trade. However, this simplicity is achieved by removing a lot of the customization available elsewhere. As a newbie, this may not be a problem, which is why this platform is so suited to novices.
Investor education – You would expect a platform aimed at beginners to have a large library of training materials. Robinhood does not, although the company is slowly adding new training material
How The Robinhood App Makes Money
People often ask how the Robinhood app makes money since they do not charge fees. It is quite simple they make a lot of money from the interest suiting in all those 13 million accounts that are awaiting investing. They also receive a fee from Market makers in return for pointing their customer’s equity and options orders their way. They also loan your sock to another trader or hedge fund, so, typically they can sell it short. Robinhood keeps all the fees for these transactions
Robinhood App PROS
1. As long as you do not upgrade to Gold, you get free trading and cash management.
2. The website and the app have very similar user interfaces which makes switching back and forth between them much easier. In fact, it is generally well designed for functionality and easy to use.
3. You have instant access to your money and there is no account minimum.
Robinhood App CONS
1. Generally speaking, the Robinhood app is very limited in what it offers its customers (apart from cryptocurrency trading) and there are not many opportunities to diversify your portfolio. If mutual funds/bonds fractional share, and investing in retirement are of interest to you, Robinhood may not be for you.
2. At the beginning of this article, I mentioned the penalties for outages that were imposed on Robinhood. It seems that they have not fully learned from this experience and customer service continues to be patchy. Though it has to be said that this problem exists with other platforms too.
3. While Robinhood is rare amongst brokers in allowing trading in cryptocurrency, the spread can be a lot more than is common on other platforms.
Are you a novice investor, looking to try out investing for the first time? If so Robinhood may be right for you, in that have simplified things as much as possible, removing some of the complexity and options typically available. As a beginner, this may make things easier for you, but as you gain experience and seek a more sophisticated solution, Robinhood may no longer seem so attractive.
There are many investing apps out there in the market. The focus on this article was to a better understanding of just one. If you haven’t had a chance to read others, my review on Acorns and Betterment have a similar tone. Please make sure you go back and read those. Personally, I enjoy my Acorns app and have had it for quite some time. If you are interested in another investing app other than the two above, please check out my review on Stash. It might be a better option for you. There is nothing that says you cannot have multiple investment accounts. I would encourage doing your own review of Robinhood and others. One of the best things to look for in any investing apps is the cost and the options to invest.
Before you go…
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