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Robinhood USA Review & Rating 2021

Is Robinhood Brokers Scam Or Legit?

Robinhood is a California based brokerage that proudly charges no commission fees on stocks, ETFs, options and cryptocurrency trading. Robinhood have successfully targeted themselves to young and new investors thanks to their commission free trading, low volume trading options and no account minimum deposit. While they are available in Europe, this will primarily be a Robinhood USA review.

As laws  have changed, Robinhood are no longer the only commission free brokerage out there, so the purpose of our Robinhood review is to test the brokerage to see if they’re still among the best commission free and new investor orientated brokerages. We’ll also talk you through the Robinhood open account process and find out if they have anything at all to offer more advanced traders.

To start off with our first impressions and Robinhood opinions, this is definitely a limited platform aimed at young and new traders with small investments. If you’re looking for a more serious trading platform, check out our TD Ameritrade review and Tastyworks review.

Robinhood Pro and Con
  • Zero commission fees
  • No account minimum deposit
  • Good for beginners and small volume traders
  • Instant access to deposited cash
  • Mutual funds and bonds not available

Robinhood New Customer Offer

Aside from their zero commission policy, another reason they are popular with enw, young investors is the Robinhood open account, get a free stock offer.

If you sign up with Robinhood via an advertisement or with a promo code, then they will give you 1 free stock share valued between $2.50 and $200 once your account has been approved and the requirements have been met. Once your free stock has been put into your account you can either choose to hold onto it or are free to sell after a 2 day waiting period.

6 Steps to claiming the Robinhood open account, get free stock offer:

  1. Register a new Robinhood account
  2. Have your email address verified
  3. Instal the Robinhood mobile trading app on your phone or tablet
  4. Claim your free shares
  5. Fund your account via one of the payment methods – we’ll explain more about deposit payment methods later in this Robinhood review
  6. Refer friends to claim more free stock shares

Usability, Look & Feel

What’s interesting about Robinhood is that it was a mobile app before it was a website, we’ll talk about the mobile trading app later on in our Robinhood review but for now, we’ll focus on the website. Robinhood’s website was launched in 2017 to mirror their already successful mobile app. Overall, the website is easy to navigate, easy to use and is easy enough on the eye, though the very bright lime green on the homepage may be a bit much for some.

The homepage and all of the accessible tabs before you log in are well laid out and have good, fast loading times with no obvious bugs or lags that we could find. The sign in page, however, takes a little longer to load – and some things once inside your account can be a little slow.

One big alarm bell here is that the Robinhood website and app both suffered serious outages in February and March 2020 thanks to market surges, however Robinhood claim to have “beefed up their systems’ since. We’ll have to wait until there’s another market surge to find out how true this is. Robinhood’s website does the job, but perhaps isn’t as robust as those discussed in our Sofi Invest review, Stash review and SogoTrade review.

Robinhood Open Account Options

There are 3 different types of Robinhood open account to choose from; Robinhood Instant, Robinhood Gold and Robinhood Cash. Your Robinhood account is tied to your social security number so you can only have one type of Robinhood open account per person. At the time of writing, Robinhood doesn’t offer retirement accounts, joint accounts or IRA products.

In this section of our Robinhood review, we’ll take a look at the different types of Robinhood open account in a bit more detail:

Robinhood Instant

The instant account is what you’ll automatically start with when you first complete the Robinhood open account process, as the other 2 account types require upgrades. The Robinhood instant account is a margin account, with the ‘instant’ element of the name alluding to the access it gives users to instant deposits and extended hours trading. There are also no waiting times for processing funds when selling stocks or making small deposits of up to $1,000.

Robinhood Gold

A Robinhood Gold account is an upgraded version of the Robinhood Instant account that gives users more buying power and larger instant deposits of over $1,000.

Robinhood Cash

A Robinhood Cash account is actually a downgrade from the Instant and Gold accounts and therefore isn’t an option when you first do the Robinhood open account process, however you can downgrade at any point. With the Cash account, you still get commission free trades, however you don’t get the instant deposits or settlements.

When signing up and registering your first Robinhood open account, don’t forget to claim the Robinhood open account, get a free stock offer!

Robinhood Trading Platforms

We mentioned it earlier in our Robinhood review, but this platform is unique in that the mobile trading platform was created before the website trading platform, as Robinhood started out as a mobile only trader aimed at younger users. This put Robinhood in something of an advantageous situation. A common problem that online brokerages have is trading to replicate their web and desktop platforms onto the small screen, but Robinhood had to replicate a small screen platform on the big screen – a far easier task.

Trading crypto, stocks and EFTs on both Robinhood’s mobile and web platform is pretty much as straightforward and easy as can be, trading options, however, is a slow and sluggish process. The platform is also almost completely non customisable and catered towards new and small volume traders.

If you’re an intermediate level trader or higher, or even if you’re an ambitious beginner, we’d recommend avoiding Robinhood entirely. If you’re a new or very casual trader who wants to do things on the move then Robinhood isn’t too bad, but if you want to grow as a trader, you’ll definitely reach a point where you have to switch to another brokerage. In essence, Robinhood is a sort of Fisher Price trading app.

In terms of aesthetics the trading app veers from the websites green and white colour scheme and goes for the matrix style black background that we’ve become used to with active trading platforms. This is about the only way in which Robinhood resembles a serious trading platform.

Payments

Deposits

When it comes to depositing money into your Robinhood open account, your sole option is by online bank transfer, however the good news is that you get instant deposits of upto $1,000 with a Robinhood Instant Account and over $1,000 with a Robinhood Gold Account. You can also set up weekly, monthly or quarterly automatic deposits using the mobile app. Deposit amounts that don’t qualify for the instant deposit will take upto 5 business days. The maximum deposit amount is $50,000 per day.

Unfortunately, Robinhood do not accept mail check deposits as everything is online – in keeping with them being marketed towards younger traders. You can, however, set up a direct deposit when you upgrade your account to Cash Management.

Withdrawals

Transferring funds from your Robinhood Account to your bank account is fairly straightforward with both the mobile app and web account. You can withdraw upto $50,000 from your RobinHood account per business day, however you can’t make any withdrawals if you still have a pending or unsettled deposit. Once a deposit has been settled, it can be spent or withdrawn straight away. The settlement period before you can withdraw following a sale is the trade date plus 2 days.

You can withdraw funds into a different bank account than the one you made your deposit with, however the process is rather complicated. You’ll be required to give a written explanation of why you want to change account and provide photos of a government issued ID and bank statements proving your the owner of both bank accounts; the one you made the deposit with and the one you want to withdraw into.

Customer Service

This section brings what is perhaps the biggest shortcoming we found when conducting this Robinhood review. In both the app and on the website, the ‘Support’ tab is easy to find, and provides plenty of information to help you with everything you need to know, from getting started to documents & taxes and investing.

However, what quickly becomes apparent is the complete lack of any contact details whatsoever anywhere on the page. The contact button is hidden way down at the bottom of the page and the only way to contact them is by filling out a form that then sends an email to the Robinhood support team. Finding the email address outside the form is basically impossible on the Robinhood website or in the app.

There is absolutely no 24/7 live chat to be found anywhere, neither is there a phone line offering any form of personal customer support. Basically, with Robinhood you’re on your own with the support tools and FAQs. Luckily, the website is at least transparent and helpful enough to partly make up for the complete and utter lack of customer service.

Regulation & Deposit Protection

As is the case with all brokerages that deal with the handling of securities in the US, Robinhood is Securities and Exchange Commission (SEC), which ensures that companies’ dealing are completely transparent and fair. The SEC isn’t responsible for protecting clients’ deposits or funds.

Clients’ funds with Robinhood are protected through their membership of the Securities Investor Protection Corporation (SIPC). SIPC protects members’ clients’ funds upto $500,000 (inc. $250,000 cash claims) in the event of the brokerage encountering any serious financial difficulty. It is worth keeping in mind, however, that crypto investments with Robinhood aren’t protected in any way. As well as being regulated by SEC and SIPC, Robinhood is backed by some high profile investors, including CapitalG, Andreessen Horowitz and Ribbit Capital.

In terms of security, use as Transport Layer Security (TLS) and also offer two-factor authentication through an external app or SMS. Access to the app is also protected via touch and faceID. There have, however, been reports that Robinhood do sell your data.

Additional Offers

Earlier on in this Robinhood review, we spoke about the Robinhood new customer offer, which gives new account holders the chance to get free stock upto the value of $200 when registering a new Robinhood account either with a promo code or through an advert.

As well as this offer, Robinhood account holders can also benefit from the Robinhood Referral Offer: Free Stock for Both. TO claim this offer, login to your account either on the web or through the Robinhood app and click on the account/menu icon. Once you’ve done this, click on the “Invite friends, get free stock” tab and you’ll get a referral link that you can copy and paste to your friends or share on Twitter. If you get enough friends to sign up, Robinhood will then give you the chance to earn upto $500 in free stocks per year.

Robinhood Stocks

Robinhood Stocks Trading

Robinhood offers you the opportunity to buy and sell a variety of stocks and assets, as well as options and cryptocurrency investments. Robinhood Financial has over 5,000 stocks on offer, including ETFs and the majority of US equities.

The bulk of Robinhood Financial’s stock catalogue is made up of US Exchange listed stocks and ETFs. However, if you’re the type of investor who’s looking for a more adventurous overseas investment, then you can choose from a range of over 250 global stocks that aren’t listed on any American exchanges. Unfortunately, however, at the time of writing, Robinhood doesn’t offer any foreign exchanges or tracking stocks.

Extended hours trading

Among the main reasons for investing and trading in stocks with Robinhood, is the fact that they offer extended hours trading. What this does is it gives you an additional two and a half hours of market access every single business day. This extra two and a half hours is provided through pre market and after hours trading

With Robinhood, the pre market opens 30 minutes earlier than the normal market, starting at 9:00am EST, as opposed to 9:30am EST. Meanwhile, the after hours trading gives you an additional two hours at the end of each business day as with Robinhood, you get to trade until 6:00pm instead of 4:00pm.

To clarify, this doesn’t enable you to actively trade outside of normal market hours. What it does allow you to do is view the market and make orders that will then be queued and fulfilled either as soon as the market opens the next day, or at a date and time according to your instructions.

Robinhood Options

Robinhood Options Trading

Options trading can be used either as insurance to protect losses on stocks you’re unsure about or potentially increase profits on stocks you feel extremely sure about. This means that options can be used to reduce the risk of your investment, or significantly increase it, depending on how you buy or sell them.

Options trading is therefore not for beginners. Robinhood realizes this and prevents complete newbies from doing so. In order to begin trading options with Robinhood, you’ll need to have stock trading experience with your Robinhood account and then update your investment profile. You don’t, however, need to upgrade to a Robinhood Gold Account (See the Accounts section of this Robinhood Review for more details).

There is very little in the way of educational or research materials about options made available to account holders, which is a little disappointing. This means, those new to options will have to research and educate themselves about options, which can be quite complex to get your head around. The best they have available in this respect is 3rd party research from Morningstar, which is only available to Robinhood Gold customers at the cost of $5 per month. The saving grace, at least, is that there’s still no account minimum when it comes to trading options with Robinhood, so you’re not required to stick a lot on the line.

Options Trading Fees

Options trading with Robinhood is now included in their $0 commission offerings, which is undoubtedly a good thing. What this means is that there are no base fees, no assignment fees and no per contract commission, which is a huge saving when you consider some other brokerages can charge upto $07.5 per side per contract.

Where Robinhood makes their money from traders here is through interest on cash and by taking payments for market makers in exchange for directing their account holders’ options orders to their trading revenues. This is known as Payment for Order Flow (PFOF) and is a practice that borders on being a little sleazy and lacks transparency. However, to avoid paying commission fees there has to be some form of compromise and, for better or worse, this is how Robinhood are able to offer commission free options trading and still generate revenue from your trades.

Product Conclusion

As a general rule, Robinhood is a platform that’s aimed at young and new investors, and it doesn’t offer much to high volume or active traders. When you consider the fact that options trading is definitely not an entrypoint for new traders, we’d have to say that we wouldn’t recommend Robinhood as a go-to for options trading.

Commission free trading is of course a huge advantage, and the fact that options trading is blocked for new and inexperienced account holders is ethically sound. However, the lack of research material and educational tools tells us that Robinhood is merely interested in just doing enough to cover its own back rather than actively seeking to safely assist the growth of their clients as traders.

Robinhood ETF

Robinhood ETF

In general, funds provide traders and investors with a quick and easy way to invest in a group of multiple companies all at once. The funds that you can invest in on the stock market are known as Exchange-Traded Funds (ETFs). ETFs are fairly easy to understand and are therefore a good place to start for beginner investors, however there are still risks involved.

A popular ETF is the Vanguard S&P 500 ETF, which allows traders to invest in the top 500 largest US companies in one go. Vanguard S&P 500 is available with Robinhood, as are other popular ETFs such as the United States Oil Fund LP (USO), ProShares Ultra Bloomberg Crude Oil (USO).

The trade tickets for stocks and ETFs with Robinhood is extremely easy and straightforward, however accounts lack customizable functions and portfolio management. There’s also a severe lack of educational and research materials just as there was with the options trading.

ETF Trading Fees

As was the case with the previous 2 sections of this Robinhood review, this brokerage offers commission free trading on ETFs. Again, it’s almost difficult to find where Robinhood generates income here as they seem intent on waiving fees at every twist and turn possible. The biggest fee to be found is a $75 outgoing account fee, which isn’t uncommon among brokers. Once again, they’re not completely transparent about this, but other sources seem to suggest that Robinhood generates their income from account holders’ ETF traders through PFOF and selling data before you make trades so that market makers can sell to you at a higher value.

Product Summary

Once again, if you’re handy with a smartphone and are a beginner trader, trading ETFs with Robinhood won’t be a bad option for you. The lack of commission fees is attractive, especially for frequent traders as the money you save could potentially be thousands. However, as of 2019, some bigger name brokers now also offer commission free ETF trading so it’s perhaps look elsewhere before settling upon Robinhood if you’re a more active trader.

Robinhood Crypto

Robinhood Crypto

Since bitcoin was first launched in 2009 cryptocurrencies have exploded in popularity and risen exponentially in value, making them a particularly popular investment option, particularly among the young, tech savvy investors that Robinhood targets itself at.

Despite being aimed at young, mobile investors, Robinhood’s crypto offers are pretty limited at the time of writing our Robinhood review. There are currently only 7 cryptocurrencies available to trade on Robinhood Crypto; Bitcoin (BTC), Bitcoin Cash (BCH), Bitcoin SV (BSV), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC) and Litecoin (LTC). As well as the crypto options they have for trading, RObinhood Crypto also supports real time market data for an additional 10 coins, including some popular cryptos such as Ripple (XRP), Dash (DASH) and Bitcoin Gold (BTG).

Robinhood have stated on their website that they plan on introducing the ability to support the buying and selling of other cryptocurrencies in the near future. However no real statement of intent nor timeline has been laid out, so it’s unclear when new currencies will be introduced or what they’ll be. It would be logical to assume that the cryptocurrencies that Robinhood supports market data for will be among the next to be introduced, however this isn’t necessarily a guarantee.

Trading Costs

Robinhood’s main selling point is that it offers commission free trading, and cryptocurrencies are included in this. You can trade cryptocurrencies commission free  24/7 with Robinhood Crypto in almost all of the 50 states within the US.

As Robinhood Crypto is a trading platform and not an exchange, they use existing changes to fill orders, meaning that, while trades are commission free, trading fees do apply here. The external 3rd party exchanges that RObinhood use include GDAX and Gemini.

Day trading crypto with Robinhood is generally easy and their crypto trading app is sleek in its Matrix style dark design, Unlike stock market trading, you don’t need an established $25,000 portfolio in order to Day trade cryptocurrencies with Robinhood.

One thing that’s worth noting here is that Robinhood Crypto is a separate, fully owned subsidiary of Robinhood Markets, Inc. This means that Robinhood Crypto is therefore not a member of SIPC or FINRA, meaning that users’ funds and investments are not protected through the regulatory bodies. Robinhood Crypto is licensed in Georgia, New York and New Jersey.

Product Summary

In a nutshell, trading in crypto with Robinhood is straightforward and easy in small amounts, especially on the mobile app. This makes it a great beginner option for new investors who don’t want to throw too much money into it. However, those who start to get a little more serious will find that they outgrow the platform fairly quickly.

The small offering of just 7 cryptos is pretty low, however is in keeping with the fact that they do seem to be aimed solely at small volume beginner traders who would perhaps become flummoxed with too many options.

Overall Conclusion

To summarize our Robinhood Review as a whole, we feel that this platform suits exactly who they set out to appeal to; young, beginner traders who prefer to do everything possible with a mobile phone. While they do claim to have options for active traders and higher volumes, Robinhood most definitely falls short here.

While their website appears to be extremely transparent, even up to the point they have a photo gallery with pictures of their staff and California office, Robinhood do seem a little reluctant to reveal explicitly how they generate revenue. This leads us to believe that some data selling, or getting paid to divert user traffic to certain market makers may be going on.

The customer service, research and educational tools could also do with some severe improvement and updating Robinhood’s market to a certain audience has been extremely clever for a relatively new broker, and they don’t have over 13 million customers worldwide for a reason. That being said, we feel they might be at risk of losing their trust if some tweaks and updates to their offerings aren’t made.

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