Robinhood Review 2024: Pros and Cons Revealed

Company Name	Robinhood Financial LLC
Founded Year	2013
Registered Country/Region	USA
Regulations	FINRA
Product Offering	Stocks, ETFs, Options, Cryptocurrencies
Account Minimum	$0
Account Fees	No annual fee
Commissions	Commission-free for stocks, ETFs, options, and cryptocurrencies
Account Types	Individual brokerage accounts, retirement accounts (Traditional IRAs, Roth IRAs), margin accounts, cash accounts, Robinhood Gold subscription service
Payment Methods	Bank transfers, Debit card transfers
App/Platform	Mobile app (iOS and Android), Web platform
Promotions	✅

What Type of Investor Is Robinhood Suitable for？

Robinhood is suitable for novice traders and mature high-frequency traders. The core reason is that the platform has a simple interface and does not have any commission fees. The platform is designed to make it easy for new investors to browse and trade stocks, ETFs and cryptocurrencies, and the odd-lot feature is particularly suitable for users with limited funds, allowing more investors with smaller funds to participate in the market.

Robinhood's ease of use and low cost appeal to users who lack the time or interest to actively manage their investments but still want to participate in the market.

However, for experienced professional traders, Robinhood's simplicity can be a limitation. While basic functionality is provided, the platform lacks advanced trading tools, customizable filters, and detailed market research and data analysis, making it difficult to meet the needs of active traders who require in-depth market insights.

So while Robinhood is an excellent starting point for beginners, experienced traders may prefer to use other, more comprehensive platforms. Overall, Robinhood is suitable for both novice traders and established high-frequency traders looking for an affordable and easy-to-use platform to start investing.

Robinhood Pros & Cons

✅Where Robinhood Shines:

No trading commissions for stocks, ETFs, and options: This is the main advantage of Robinhood. It does not charge any trading commissions, which greatly reduces investors costs.

No minimum deposit amount: There is no minimum deposit requirement, which lowers the trading threshold for novice investors and can attract more investors.Simple and fast mobile trading program: Robinhood provides a convenient and fast mobile application that allows investors to quickly participate in market transactions. This ease of use makes it a popular platform for novice traders.

Support investing fractional shares of stocks: Robinhood allows users to trade fractional shares, making it easier to invest in high-priced stocks and lowering the trading investment threshold.

Provide unliquid cash flow income for Robinhood Gold members: Robinhood has a service called Robinhood Gold Premium Service. Investors pay a small subscription fee every month to receive unliquid cash flow income, which means that the cash in the investor's account also Gains can be obtained.

❌Where Robinhood Falls Short:

Lack of professional trading tool resources: The trading tools and services provided by Robinhood are below the industry average, and it lacks the financial tools that professional traders need, such as no stock and ETF screeners. In addition, there is a lack of professional investment research reports.Insufficient range of financial products: Not suitable for mutual fund and bond investors, Robinhood lacks mutual fund and bond trading services.No negative balance protection: Investors account assets may become negative if the market fluctuates violently. Without negative balance protection, investor accounts become negative, which causes Robinhood to lose trader numbers.

Is Robinhood Legit？

Robinhood Licenses and Regulations

Robinhood, as a brokerage firm, is indeed regulated by FINRA (Financial Industry Regulatory Authority), which oversees brokerage firms and exchange markets in the United States. FINRA plays a crucial role in ensuring compliance with securities laws, protecting investors, and maintaining market integrity. Robinhood's adherence to FINRA regulations is vital for safeguarding the interests of its users and maintaining trust within the financial industry.

	The Financial Industry Regulatory Authority (FINRA)
Current Status	Regulated
Regulated Country	USA
Regulated Entity	ROBINHOOD FINANCIAL LLC
License Type	Securities Trading License
License No.	CRD#: 165998/SEC#: 8-69188

Fund Safety

Robinhood is a member of the Securities Investor Protection Corporation (SIPC), which protects up to $500,000 in securities and cash (including a $250,000 limit for cash only) for each customer in case of a brokerage firm's failure.

Note that Robinhood Crypto LLC is not a member of FINRA or SIPC, which means users are not protected by SIPC when trading cryptocurrencies. However, Robinhood has also made efforts to protect cryptocurrency investors. For example, Robinhood uses a two-factor authentication program, and users can log in using facial recognition, fingerprint login, and custom PIN codes. If users feel that their account has been operated by someone other than themselves, they can immediately apply to Robinhood to freeze their account to protect the security of their account assets.

How to Trade with Robinhood？

Robinhood has attracted many investors with its simple and fast mobile application. If users want to trade on Robinhood, please do as follows:

Step 1: Register and Open an Account

The first step for investors to use Robinhood is to create their own trading account. Robinhood's registration and account opening processes are combined.

During the entire registration process, users need to complete the following steps: fill in basic personal information and create a platform account first; fill in personal financial status information, choose to turn on message notifications; enter the homepage, bind a bank card, and complete the deposit.

During the entire experience, each page is very instructive, and each page has only one problem point, making it simple and efficient. At the same time, novel illustrations and animations are used to attract users‘ attention, buffer users’ waiting time, eliminate users anxiety, and make the user experience more friendly.

Step 2: Select the Transaction Target

Robinhood offers a diverse selection of assets, including stocks, ETFs, options, and cryptocurrencies, to suit a variety of investor preferences. This diversity allows users to build conservative or aggressive portfolios based on their investment goals and risk tolerance.

When users enter the trading page, they can see basic data, market quotes, charts, news, opinion analysis, section associations (similar to stock sections), recommended attention (recommending stocks that users who follow this stock also follow), etc.; investors can trade based on their own Choose specific trading targets based on preferences and real-time market dynamics.

Step 3: Start Trading on Robinhood

After determining the specific target, click “Buy”. Robinhood provides market orders and current orders, but there is no conditional order option. These will influence some professional traders to formulate strategies. Robinhood supports order-triggers-other (OTO) trading, which investors can use to control potential trading risks.

• Limit Order: The purchase price set by the investor
• Market Order: Usually the cheapest price for selling (buying) in the market
• Stop Order: A transaction that is automatically triggered when the price reaches a certain price level
• OTO (One Triggers Others): Create linked trades

Robinhood Trading Platform

Robinhood's trading platform stands out for its simplicity, making it accessible to investors of all levels. While it lacks some advanced tools like trading simulators and security screeners, it offers basic charting tools for technical analysis, including candlestick, line, and volume charting.

Robinhood focuses on making investing simple and easy. Its powerful features and support for multiple asset classes make the app ideal for users who want to manage their investments on the go. Whether you're a new investor or someone looking for a user-friendly mobile trading platform, Robinhood offers compelling accessibility and convenience.

For those seeking more advanced features, Robinhood Gold provides access to professional research from Morningstar and real-time Level II market data from NASDAQ. Despite these limitations, Robinhood remains highly rated by users on both iOS and Android platforms, reflecting its user-friendly interface and essential trading capabilities.

Robinhood Education

Robinhood's educational platform offers a diverse range of articles aimed at educating users about finance and investing. These resources cover fundamental investing concepts, portfolio management strategies, market analysis techniques, and insights into various asset classes like stocks, ETFs, and cryptocurrencies.

Each article is designed to be informative and easy to understand, suitable for users of all experience levels. Additionally, Robinhood provides multimedia resources such as videos and infographics to complement the learning experience, making complex financial concepts more accessible.

Robinhood Fees Review

Robinhood prides itself on offering commission-free trading across various investment products, including stocks, ETFs, options, and cryptocurrencies.

Stocks and ETFs: $0 for trades on stocks and ETFs

While trading stocks and ETFs is commission-free, there may be other fees such as SEC and FINRA trading fees, which are standard regulatory fees applied to all U.S. stock sales. These fees are typically nominal and are passed on to customers.

Options Trading: $0 for options trades

Per Contract Fees: Robinhood does not charge per-contract fees for options trading.

Exchange & Regulatory Fees: Robinhood charges $0.01 for the Options Regulatory Fee and $0.02 for the OCC Clearing Fee per contract.

Other Fees: While options trading itself is commission-free, there may be other fees associated with exercising options or early assignment.

Cryptocurrency Trading: $0 for cryptocurrency trades

While buying, selling, and holding cryptocurrencies are commission-free, users may incur network fees for transferring crypto to and from Robinhood. These network fees are standard for blockchain transactions and are not charged by Robinhood but may still apply.

Robinhood Gold Subscription Fee:

Robinhood Gold offers premium features for a subscription fee, which varies based on the tier of service chosen. Robinhood Gold subscribers may access features like extended trading hours, professional research reports, and margin investing with increased buying power.

Robinhood IRA Overview

Individual retirement accounts (IRAs) allow you to invest for retirement. Any earnings have tax-deferred or tax-free growth potential, so you will keep more of your money.

Types of IRAs

Robinhood offers 2 different types of retirement accounts: traditional IRA and Roth IRA. You can open 1 of each type of IRA at Robinhood, even if you already have an IRA at another financial institution or a workplace retirement plan, like a 401(k).

Traditional IRA

A traditional IRA allows you to invest for retirement with pre-tax dollars and tax advantages. This means you may be able to deduct qualified contributions now and pay taxes later upon withdrawal or distribution. Your contributions may be fully or partially deductible, depending on your filing status, income, and if you (or your spouse) are covered by a workplace retirement plan.

For the 2024 tax year, anyone with earned income is eligible for an annual contribution limit of $7,000 if you‘re under age 50 (or $8,000 if you’re age 50 or older).

Roth IRA

A Roth IRA allows you to contribute after-tax dollars to invest for retirement. This means you pay taxes on contributions now with potential tax-free withdrawals later. Any earnings are tax and penalty free if they meet certain requirements.

For the 2024 tax year, you‘re eligible to contribute if your income is under $161,000 if filing single, and under $240,000 if filing jointly—with an annual contribution limit of $7,000 (or $8,000 if you’re over age 50).

Set up Your IRA

To begin, select Retirement → Get started and then follow the prompts to set up your account within the Robinhood app or on the web. You can open a traditional IRA, a Roth IRA, or both. If you skip opting in on features, you can always opt in later.

Next, you can choose to either get a new, one-time recommended portfolio or pick your own investments for your IRA.

A portfolio is a group of investments, and each recommended portfolio includes 5-8 exchange-traded funds (ETFs) that we choose for you with an algorithm-based investment process we built. Our process uses your answers to our questions to match you to a portfolio that aims to work with your retirement timeline. Read about the details in retirement recommendations.

You can also create your own portfolio by exploring investments, such as stocks, ETFs, and options (subject to eligibility requirements).

IRA limited margin accounts let you trade with unsettled funds from stock and option sales. With cash accounts, youll need to wait 2 days to trade with funds from stock sales and 1 day to trade with funds from option sales.

Robinhood Review on Products

Robinhood offers a smaller variety of financial products than other platforms. Currently, Robinhood offers stocks, options, ETFs, and cryptocurrency trading, but does not support futures and mutual funds. However, the odd lot trading provided by this platform has great advantages for investors with small capital and attracts many novice traders.

Robinhoods biggest advantage is its rich selection of cryptocurrency trading pairs. Users Enjoy zero-commission crypto trading, with Robinhood offering the lowest average trading costs compared to other platforms. Buy, sell, and hold popular cryptocurrencies like BTC, ETH, DOGE, and more. Set up recurring buys for a hassle-free approach to investing in crypto and easily transfer funds between your Robinhood account and external wallets.

Robinhood Account Type

Individual Brokerage Account

This is a standard brokerage account that allows individuals to buy and sell stocks, ETFs, options, and cryptocurrencies, ideal for investors looking to build a personal investment portfolio without any joint ownership or specific tax advantages.

Retirement Account

Robinhood offers Individual Retirement Accounts (IRAs), including Traditional IRAs and Roth IRAs, which provide tax advantages for retirement savings. Traditional IRAs offer tax-deferred growth on contributions, while Roth IRAs offer tax-free growth on qualified distributions. Investors can contribute to their retirement savings through these accounts and benefit from potential tax savings.

Margin Account

Margin accounts allow investors to borrow funds from Robinhood to leverage their investment positions. With a margin account, investors can potentially increase their buying powerand access additional funds for trading. However, margin trading involves risks, including the risk of loss and potential margin calls if investments decline in value.

Cash Account

Cash accounts are standard brokerage accounts where trades are settled with available cash only, without the use of borrowed funds, ideal for investors who prefer to trade within their means and avoid the risks associated with margin trading. Cash accounts do not have pattern day trading restrictions, making them suitable for active traders who want to trade frequently.

Robinhood Gold (Premium Subscription Service)

Robinhood Gold is a premium subscription service that offers additional features and benefits for investors. Subscribers to Robinhood Gold can access features such as extended trading hours, professional research reports, and margin investing with increased buying power. This subscription service is available for individual brokerage accounts and provides enhanced tools for more experienced investors.

Compare to Similar Brokerages

Broker
	Robinhood	Fidelity	Interactive Brokers	E*TRADE
Regulation	FINRA	FINRA, SEC	FINRA, ASIC, FCA, FSA	FINRA
Account Minimum	$0	$0	$0	$0
Product Offering	Stocks, ETFs, Options, Cryptocurrencies	ETFs, Stocks, Mutual Funds, Options, Cryptocurrency, and Fixed-Income Products	Stocks/ETFs, Options, Futures/FOPs.Event Contracts, Spot Currencies, US Spot Gold, Bonds, Mutual Funds	Annuities, Bonds & Fixed Income, Futures, Options, Stocks, Mutual Funds
Stock Trades	$0	$0	$0	$0
Options Fees	$0	$0.65	$0.65	$0.65
Promotion	✅	❌	✅	✅
Best for	Novice traders	Prefers low fees and long-term investors	Most traders	Novice traders and professional traders

FAQs

How does Robinhood make money？

Robinhood makes money the same way most traders do. First, it makes money through the interest difference on investors' unused cash, secondly, Robinhood makes money by using payment for order flow, and then it makes money by charging interest on stock lending. Finally, Robinhood can also make money by charging interest on margins provided to investors.

Is Robinhood good for day traders？

Robinhood may be suitable for day traders because day traders need to rely on many tools to guide their trading, and the financial tools and services provided by Robinhood will affect the trading strategies of day traders.

How to fund Robinhood IRA？

When you set up your IRA, you can link both your Robinhood and external bank accounts in your Retirement dashboard:

1. Go to Account → Menu (3 bars) or Settings
2. Select Transfers
3. Select Transfer accounts to Robinhood or in Linked accounts, select Add a new account
4. Follow the prompts to link accounts and transfer funds

How to switch IRA limited margin account and cash account？

1. Select Account (person) → Menu (3 bars) or Settings
2. Select Investing
3. Select your IRA
4. In Account type, select either Switch to limited margin account or Switch to cash account