Robinhood Review: Is it Safe?

Robinhood lets you trade stocks commission-free and has no account minimums. Is it safe? Are there hidden fees? Read on for the pros and cons.

	Get a Free Stock (worth between $2.50 and $200) Get a Free Stock
	Overall Score	4.0
	Stock Trading	5.0
	Options Trading	4.0
	Mobile App	4.0
	Commissions and Fees	5.0
	Ease of Use	5.0
	Research	1.0

5-point scale (the higher, the better)

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Pros and Cons

• Commission-free trades
• No minimum
• Extended trading hours

• No IRAs
• Limited research
• No mutual funds & bonds

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Bottom Line

Free way to trade stocks with limited bells and whistles

• What is Robinhood?
  
• Pros & Cons
  
• Who Robinhood is Good For
  
• Pricing & Fees
  
• Investment & Account Options
  
• Is Robinhood Safe?
  
• 3 Types of Accounts
  
• App Features & Tools (Free)
  
• Robinhood Gold (Paid)
  
• Cash Management Account
  
• Customer Service
  
• How It Compares

What Is Robinhood?

Robinhood is a free trading app that lets you trade stocks, ETFs, options, and cryptocurrency 100% commission-free.

It's great for traders who want to cut down costs. However, this very simple app lacks research, tools, and account options.

It's marketed as the brokerage for those "other than the wealthy."

They don't offer physical branches, banking, or manual account management options. This is how they cut the fat.

The app makes it simple and walks you through the trading process, but you won't get any investing guidance.

Pros & Cons

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PROS:

• Completely 100% commission free
  
• No minimum to start
  
• Offers fractional shares
  
• User friendly app
  
• Real time market updates
  
• Free extended trading hours
  
• Free cash management account
  
• SIPC protected

CONS:

• Limited research and tools
  
• Only individual taxable account available
  
• No mutual funds or bonds
  
• Weak customer service

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Who Robinhood is Good For

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Originally, Robinhood was invented to help Millennials get started investing without giving up a majority of their earnings to commissions. But Robinhood could also be good for:

• Beginners without a lot of capital to invest.
  
• Active stocks, ETFs, and options traders.
  
• Those who want to try trading cyptocurrency.

If you don't require a great deal of research and are confident to make investments on your own, Robinhood could be a great way to get started.

Get started with Robinhood: Claim your free stock today

Pricing & Fees

Robinhood has:

• No trade commission fees
  
• No account maintenance fees
  
• No inactivity fee
  
• No bank transfer fees (incoming or outgoing)
  
• No account transfer fee (incoming)
  
• No returned check, ACH, wire & recall/stop payments fees

Some account fees you may encounter are:^[1]

• $75 account transfer fee (outgoing)
  
• $20 domestic overnight mail
  
• $50 international overnight mail
  
• $5 paper statements

Stop overpaying commissions. Use Robinhood instead

Investments & Account Options

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Robinhood only has these trading options:

• Stocks
  
• ETFs
  
• Options (new this year)
  
• Cryptocurrencies (Bitcoin, Ethereum, and 5 more)

The only account you're able to open is an individual taxable account. There are no retirement accounts or college savings options.

If you're looking for a more robust brokerage, check out the options from M1 Finance. Plus, earn up to $2,500 when you transfer your account.

Is Robinhood Safe?

Robinhood is legitimate. Your investments are covered by the Securities Investor Protection Corporation (SIPC). The SIPC insures the stocks and options investments in your account up to $500,000 (including $250,000 for claims for cash) if Robinhood fails. It does not protect against investment losses from the market.

Robinhood is also a SEC-registered broker-dealer, and a member of the Financial Industry Regulatory Authority (CRD #165998).

3 Types of Accounts

Robinhood offers 3 types of accounts. Each one is designed to suit different investing needs.

Robinhood Instant (free):
You will automatically start with the Instant account when you sign up. This account gives you:

• Instant deposits up to $1,000 (instead of having to wait the usual 5-6 days for ACH to clear)
  
• Instant access to funds after selling
  
• Extended trading hours

Robinhood Gold ($5/month, $2,000 minimum):
This is Robinhood's premium margin trading service. You get more buying power depending on your account size and larger instant deposit amounts. Read more below.

Robinhood Cash (free):
This account does not have instant deposits or instant access to funds. However, there are no restrictions on day trading. And you cannot invest on margin.

Get a Free Stock (worth between $2.50 and $200)
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App Features & Tools (Free)

Robinhood does not have as much tools as other more robust brokerages, but it has enough for the basic investor. Here are some features the app has.

• Extended trading hours. You can trade 30 minutes before the market opens and 2 hours after it closes - from 9:00 am to 6:00 pm.

• Market orders: Execute orders including limit, stop limit, and stop orders.

• Collections: This feature organizes stocks by sector. Sort and compare stocks side-by-side.

• Price Paid: View the average price per share that Robinhood investors paid. This helps beginners judge if the stock is a good buy or not.

• Market updates: Get real-time updates on stocks in your watch list.

• Charts: See candlestick charts and indicators for stocks and cryptocurrencies.

• Day trading: Perform up to 3 day trades in a five trading day period. Cash account users or those with $25,000 account balance have no limitations.

• Instant deposit: Bank transfers up to $1,000 are instantly available for investing (for Instant and Gold account users).

Robinhood Gold (Paid)

Robinhood Gold is the premium margin account (which means you can trade with borrowed money). You can try it for free for 30 days. The fees and minimums are:

• $2,000 minimum investment
  
• $5/month account fee
  
• 5% annual interest based on how much margin you use

Your first $1,000 of margin is included. If you borrow more than that, you'll pay 5% yearly interest on the amount you use above $1,000.^[2]

Some premium features of this account includes:

• Increased buying power. You get up to 2x buying power. For example, if you have $10,000 in cash, you can get up to $10,000 margin for a total of $20,000 buying power.

  You can also set a margin limit so you only borrow what you're comfortable with.

• Bigger instant deposits. Your instant deposit limit is based on your account balance.
  • Up to $5,000 for all Gold users
    
  • Up to $10,000 for balances over $10k
    
  • Up to $25,000 for balances over $25k
    
  • Up to $50,000 for balances over $50k

• Morningstar research. Get in-depth research reports from Morningstar on 1700 stocks.

• Level II market data. See real time bids from Nasdaq.

Robinhood Cash Management Account

Robinhood recently launched its new Cash Management product. There is no account service fee or minimum balance requirement.

It features:

• Free debit card
  
• No fees at 75,000+ Allpoint and MoneyPass ATMs
  
• No overdraft fees
  
• No foreign transaction fees
  
• Interest on your uninvested cash
  
• Direct deposit of paychecks

You don't get a checkbook, but you can request to send a physical check through the app and Robinhood will send on your behalf. This service is completely free.

Robinhood is partnered with program banks (which include Goldman Sachs, HSBC, Wells Fargo, and Citibank). These banks provide FDIC insurance up to a total maximum of $1.25 million.

All Robinhood users can open a Cash Management account. You must have a brokerage account to also use Cash Management.

Customer Service

Robinhood's customer support is very limited. There is no phone support or live chat available. Once you're a Robinhood user, you can only contact them via email.

Robinhood does have an extensive FAQ section in their Help Center on the site. That may be enough if you're okay with finding answers on your own. If you prefer full customer support, then perhaps look into one of the larger brokerages.

How It Compares

Robinhood vs E*TRADE:
E*TRADE is a full service brokerage. It offers a wide array of investment products and account options (including IRAs). It also has two robust platforms along with plentiful research, whereas Robinhood is more bare-bones.

Combining the services of the two brokers, though, can give you the best of both worlds. You can save for retirement through E*TRADE and save on commissions on your stock trades through Robinhood.

	Robinhood	E*TRADE
	Benefits and Features
Stock Trading	$0	$0 per trade
Options Trading		$0 per trade + $0.65 per contract $0 per trade + $0.50 per contract if you make 30+ trades a quarter
Annual Fee	All trades are commission-free. No platform fees.
Minimum Deposit	$0	$500 for brokerage accounts No account minimum for retirement accounts
Mutual Fund Trading		$0 for no-load, no-transaction-fee funds $19.99 for transaction-fee funds
Commission Free ETFs	All U.S. listed ETFs	250+
Phone Support	No
Penny Stocks
Broker Assisted Trades	$10	$25 + Regular Commission
Customer Service	Monday-Friday 9am - 6pm ET	800-387-2331
Good For	Beginners; Active traders
Inactivity Fee	$0	$0
Maintenance Fee	$0	$0
Banking	No service fees for Robinhood Cash Management account. Free debit card with no in-network ATM fees or foreign transaction fees	Checking account offers no minimum balance requirements, free online bill pay, and unlimited debit card and check transactions.
Mobile App	Yes
Desktop App	Yes	E*TRADE Pro (requires you execute at least 30 trades during a calendar quarter or maintain brokerage account balance of at least $250,000)
Futures Trading		$1.50 per contract, per side + fees (excluding bitcoin futures)
Locations	No
Online Community	No
Seminars	No
Virtual Trading	No
Fractional Shares	Yes
Taxable Accounts	Yes
IRA Accounts	No
Stock Trading
Options Trading
Mobile App
Commissions and Fees
Ease of Use
Research
Banking
Online Community
Trading Platform
Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details. Robinhood: Pricing information from published websites as of 04/18/2020. E*TRADE: Pricing information from published website as of 12/05//2020.

Robinhood vs Acorns:
Acorns aims to help young adults save more and invest their spare change. You link your bank and credit cards to the account, and every time you make a purchase, Acorns rounds up the purchase and invests the change.

Acorns automatically selects your investments and manages your portfolio for you. You don't get choose to the stocks like you would with Robinhood. Another advantage is that it supports fractional shares, so you can invest in a share of a stock even with a few dollars.

There is a monthly fee of $1 per month, but if you usually have trouble saving and don't know much about investing, then that could be worth it.

	Acorns	Robinhood
	SPECIAL OFFER $10 Sign-Up Bonus - Learn More	OFFER Get a Free Stock (worth between $2.50 and $200) - Learn More
	Benefits and Features
Stock Trading	Part of service fee. No add-on trading fees.	$0
Annual Fee	$1/mo for Acorns Lite (taxable account only) $3/mo for Acorns Personal (includes IRA and checking account) $5/mo for Acorns Family (includes investment accounts for kids)	All trades are commission-free. No platform fees.
Minimum Deposit	$0	$0
Phone Support	Yes	No
Banking	$3/mo for Acorns + Acorns Later + Acorns Spend checking. Free debit card, no minimum balance, no overdraft fees, and unlimited free or fee-reimbursed ATMs nationwide.	No service fees for Robinhood Cash Management account. Free debit card with no in-network ATM fees or foreign transaction fees
Mobile App	Yes	Yes
Fractional Shares	Yes	Yes
Taxable Accounts	Yes	Yes
IRA Accounts	Yes	No
	$10 Sign-Up Bonus $5 Sign-Up Bonus Try Acorns Today!	Get a Free Stock (worth between $2.50 and $200) Commission-Free Trades Free Cryptocurrency Investing
Acorns: Pricing information from published website as of 09/28/2020. Robinhood: Pricing information from published websites as of 04/18/2020.

Robinhood vs Stash:
Stash offers thematic investing options by letting you choose stock and ETF categories that matter to you. It's aimed towards beginners and will guide you into making smart investment choices for you. But it is not a robo-advisor and will not manage your portfolio.

Stash has no minimum opening balance or investment requirements. It does cost $1 per month for taxable accounts and $2 per month for retirement accounts. Stash allows you to purchase fractional shares, which lowers the amount you need to start investing.

	Stash	Robinhood
	SPECIAL OFFER Sign Up and Get $5 - Learn More	OFFER Get a Free Stock (worth between $2.50 and $200) - Learn More
	Benefits and Features
Stock Trading		$0
Annual Fee	STASH Beginner ($1/mo) STASH Growth ($3/mo) STASH+ ($9/mo)	All trades are commission-free. No platform fees.
Minimum Deposit	$0	$0
Phone Support	Yes - normal business hours, plus Sat & Sun 11a-5p ET	No
Banking	All users get a cash account with a debit card. No minimum balance, no overdraft fees, and free ATM access at 19,000+ ATMS.	No service fees for Robinhood Cash Management account. Free debit card with no in-network ATM fees or foreign transaction fees
Mobile App	Yes	Yes
Fractional Shares	Yes	Yes
Taxable Accounts	Yes	Yes
IRA Accounts	Yes	No
	Sign Up and Get $5 Early Payday	Get a Free Stock (worth between $2.50 and $200) Commission-Free Trades Free Cryptocurrency Investing
Stash: Pricing information from published website as of 08/14/2019 Robinhood: Pricing information from published websites as of 04/18/2020.

Bottom Line

Is Robinhood the only app you should use, even as a beginning investor? We don't think so, but we do think it could be a great way to supplement your investments with other brokers. Without a commission fee, you do stand to save some money on your investments.

If nothing else, it's a great way to get your feet wet and learn how the stock market works without breaking the bank in fees. As always, you should invest with caution, conducting as much research as possible before choosing your investments.

Get a Free Stock (worth between $2.50 and $200)
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Remember: All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Securities offered through Robinhood Financial LLC and Robinhood Securities LLC, which are members of FINRA and SIPC. CreditDonkey is not a member of FINRA or SIPC.

References

1. ^ Robinhood Financial Fee Schedule, Retrieved 12/15/2020
2. ^ Robinhood, Paying for Robinhood Gold, Retrieved 12/15/2020