Yes (not applied to crypto)
Last Updated: June 8, 2021
Yes (not applied to crypto)
Every day at 9:30 a.m. sharp, a bell ring signals the New York Stock Exchange opening. Robinhood may not ring a bell, but it’s all confetti and stuff every time you execute a trade.
Millennials and novice investors are particularly drawn to Robinhood, not because of the app’s animated celebrations but because of its features and zero fees. Still, given all the negative publicity that the brokerage has gained, one can’t help but ask: Is Robinhood safe?
We’ve done an extensive Robinhood broker review to answer that question. Check it out!
What Is Robinhood?
Launched in 2013, Robinhood is a free stock trading app that allows users to trade equities at 0% commission or fees. In addition to investing in stocks, ETFs, and options, Robinhood offers cryptocurrency trading.
Who is Robinhood best for?
The Robinhood stock app is suitable for young people who are new to investing. Given that the platform is rather rudimentary and simple to use, it’s the perfect choice for beginners. Plus, the absence of both trading and non-trading fees and commissions appeals to investors seeking to avoid any extra costs.
Due to the limited investment options, though, Robinhood isn’t a good match for experienced traders.
How to Use Robinhood?
Before you decide to start trading with the brokerage, it’s worth knowing that you can place trades only via the Robinhood mobile trading platform. The first step in your investment journey is opening a Robinhood account. You can do this through the desktop app.
What are the account types?
Robinhood offers only individual taxable accounts. Joint and IRA accounts are unavailable, as the company isn’t a full-service broker.
Once you sign up for Robinhood investing, you’ll open an instant account by default. It gives you access to instant deposits of up to $1,000 and extended-hours trading. If you want more buying power and larger instant deposits, you can then upgrade to Robinhood Gold. This premium account charges $5 a month and requires a $2,000 minimum investment.
Another alternative is Robinhood Cash. This account type is free and doesn’t involve a minimum balance requirement. There are also no restrictions on day trading, but instant deposits and instant access to funds are not supported.
What are the account requirements?
Opening a Robinhood trading account is quick and seamless. It will take you about 10 minutes to fill in and submit your application, while verification takes less than one day.
To open an account, you need to meet the minimum requirements in terms of legitimacy. More specifically, you need to:
- Be at least 18 years old
- Have a valid SSN
- Be a US citizen or permanent resident
- Have a valid address in the USA
Once you’ve filled in the application form, you’ll be asked about your trading experience. Lastly, you’ll need to verify our identity. To do so, you can provide a photo of your ID, passport, or driver’s license.
When your account is verified, you’re ready to start stocks, ETFs, and options trading with Robinhood.
How to start trading?
In numerous Robinhood reviews, users acclaim the brokerage’s minimum required deposit of $0. To begin trading, you don’t need to have any balance on your account. But to open a Robinhood margin (i.e., Gold) account, you need a minimum balance of $2,000. This is a FINRA regulation and applies to all brokerages.
Please note that the Robinhood day trading minimum deposit is way higher — $25,000. But day-trades are rather limited with Robinhood, which is regulated by the company’s Pattern Day Trading Rules. As to them, investors can perform just three day-trades per week.
What can you trade?
Investing with Robinhood is limited to stocks, ETFs, options, and cryptocurrencies. The platform doesn’t support futures, bonds, and mutual funds trading. Plus, all the equities are limited to the US markets. This is a disadvantage noted in many Robinhood app reviews.
What tools are available?
Robinhood platform is rudimentary and barebones. There is no advice on how to buy stocks online. If you’re not familiar with stock investing, market cap, volume, highs and lows, and what the best stocks to invest in are, you’ll need to research on your own.
Likewise, trading tools are minimal. In terms of charts, only technical indicators are available, which is a huge downside.
How does the platform work?
Almost every Robinhood review praises the trading platform’s simplicity and ease of use. After testing it, we can confirm that the workspace is very well-designed, straightforward, and logically structured. On the downside, customization options are limited.
The search function works smoothly, so it’s easy to find stocks to invest in. You can browse assets by typing the name in the search bar, or you can look for them using their tags.
The Robinhood investment app supports market, limit, stop-loss, stop-limit, and trailing stop orders. Similarly, you have an option to set good-till-day and good-till-canceled orders. The platform also provides an estimated cost tab you can find very useful when placing the order.
The brokerage has an outstanding feature that allows you to invest even when the market is closed. With Robinhood trading hours (9 a.m. to 6 p.m.), you can trade 30 minutes before the markets open and two hours after closing.
The chances are that you’re familiar with some of the notoriety that the brokerage has recently gained. Hence, it’s not surprising why you can’t resist the urge to ask the pervasive “is Robinhood safe” question.
The company has been involved in several controversies that are not an immediate consequence of its practice. One of them is the death of a young Robinhood options trader who committed suicide in June 2020 after seeing the negative balance of over $730,000 on his account. Following this grave event, Robinhood started offering educational material and improving its platform.
Another problem that enraged traders in 2020 was the Robinhood stock trading platform outage. For a few days, investors were unable to access the app at the time of high-volume trades and the busiest day of the year.
In January 2021, Robinhood was involved in the short-selling of GameStop stocks. The company decided to restrict trading while the market was extremely volatile, which, again, infuriated traders.
Despite being subject to user backlash more than once, there is no reason to doubt the company’s legitimacy. It’s fully regulated and insured, just like any other brokerage on the market. With our Robinhood review, we can confirm that the app is safe.
Charging zero trading fees, Robinhood has come into the spotlight as the best stock broker for beginners. The minimum balance depends on the account and type of trading. If you’ve opened a brokerage account to trade stocks, options, and ETFs, the Robinhood minimum deposit is $0. But if you want to trade margins with a Gold account, you should have at least $2,000, according to the FINRA regulation. Additionally, margin traders will be charged a margin rate of 5%.
Speaking of the Gold account, keep in mind that there is a monthly fee of $5 ($60 per year). Even though this isn’t a considerable amount, there is no point in upgrading to this account if you’re not a margin trader.
Robinhood day trading has the highest minimum balance — $25,000.
In terms of non-trading fees, Robinhood will charge you $75 for an outgoing transfer.
Robinhood Mobile App
The Robinhood app is fast and easy to use. It meets all the functionality requirements for seamless and functional stock trading. Many users praise its efficacy in their Robinhood app review.
The app supports basic watch lists, stock quotes with analyst ratings and charts, and trade entry, along with recent news and Bloomberg TV. The watch lists functionality, however, is rather minimal. There are few optional columns in addition to the last price and percentage change. For comparison, TradeStation provides over 300 columns.
You can’t customize Robinhood stock charts. There are only two chart types and six date ranges. Furthermore, you can’t perform technical stock analysis.
Even though the app supports alerts and notifications, it doesn’t allow you to set alerts for an individual stock. This is a considerable drawback as such a feature is a standard in the stock trading industry.
Robinhood Customer Support
Customer support is among the brokerages’ weakest spots, as indicated in many Robinhood app reviews.
Users who are experiencing issues or have any questions may refer to the help center on the broker’s website or contact support via email. The expected response time is 24 hours, which is rather slow, especially if you have stumbled upon a problem that needs a quick resolution.
The absence of live chat or phone support is undoubtedly an enormous downside, given that there are brokerages that offer 24/7 assistance.
In this part of our Robinhood app review, we’ll compare the brokerage with its competition to help you find the best stock trading app or day-trading platform.
Webull vs Robinhood
Webull is one of the mobile-focused investing apps and Robinhood’s direct rival. It charges no commission on stocks, ETFs, options, and crypto trading. The minimum required deposit is $0 unless you’re opening a margin account. In that case, you’ll need to deposit at least $2,000.
Unlike Robinhood, Webull has its community which acts and resembles a private Twitter feed. Here, users can comment on or discuss individual stocks and news or predict whether prices will go up or down.
Robinhood vs E*Trade
Due to its simplicity, $0 fees, and 0% commissions, Robinhood stocks, ETFs, and options investments are excellent for novice investors.
E*Trade, on the other hand, is driven toward more experienced traders. Its offer is much broader than Robinhood’s, including future trading and mutual funds. Yet, investing with E*Trade isn’t completely free as the broker charges $0.65 per option contract and $1.50 per future contract, as well as a $19.99 mutual fund fee.
Robinhood vs Acorns
As opposed to Robinhood which is designed for active traders, Acorns is a robo-advisor created with passive investors in mind. Acorns costs range from $1 to $5, depending on the pricing plan you sign up for. There’s no such Robinhood fee unless you’ve subscribed to the Gold plan.
Let’s summarize all the pros and cons of Robinhood.
The brokerage is an excellent first investment app choice. It charges no trading fees and commissions, and the minimum required deposit is $0. This way, you can start investing as soon as your account is approved and verified. The trading platform is fast, smooth, and straightforward. What also helps the company stand out from its rivals is investing outside the official trading hours.
On the flip side, the supported account types are somewhat limited, and so are the assets offered. But given that the platform is designed with beginners in mind, this won’t be much of an issue. Advanced traders may check out some of the alternatives we’ve reviewed — Tradestation or IBKR. We also didn’t like the fact that you can contact Robinhood customer service only via email and wait for a response up to 24 hours.
Did you just ask, “Is Robinhood safe?” Indeed, the company has been involved in various controversies, which has resulted in negative publicity and has hurt the brokerage’s reputation. But one thing is sure — Robinhood is entirely legitimate and safe, and so are your investments with it.
- Free trades
- Cryptocurrency trading
- No account minimum
- Quick and fully digital account opening
- Fast funding
- No mutual funds or bonds
- Limited account types
- Very limited customer support
- Limited research and educational material
How does Robinhood make money?
The brokerage earns via Robinhood Gold fees and interest on cash balances on its customers’ accounts.
How to trade options on Robinhood?
To trade Robinhood options, you need to open an account first. There is no minimum deposit required, so you’re all set and ready to begin investing once your account is verified. To place a trade, you need to find the stock you’d want to trade options for. Next, click on its name, then on Trade Options.
Does Robinhood have fees?
Robinhood doesn’t have trading or commission fees for stocks, crypto, options, and ETFs trades. It charges $5 a month for its Gold account, though. In case you decide to transfer your Robinhood funds to another brokerage, you’ll have to pay a transfer fee of $75.
Is Robinhood good for beginners?
Yes. Robinhood was created with tech-savvy beginners in mind. The broker doesn’t charge any fees and offers a user-friendly trading experience on its simple and functional mobile app.
Is Robinhood legit?
Yes. Top-tier authorities such as the SEC (Securities and Exchange Commission) and FINRA (Financial Industry Regulatory) regulate the company. Also, all your funds are insured by FDIC and SIPC (except for cryptocurrencies). You can rest assured and forget about that notorious “is Robinhood safe” question.