Over the last five years, Robinhood has almost single-handedly revolutionized online stock trading thanks to two innovations: commission-free trading and a minimalist mobile app. Founded in 2013 by two Stanford grads before opening to the public the following year, Robinhood has made investing more accessible to the general public by removing the two biggest barriers — cost and confusion. That’s why we named Robinhood “best for beginners” in our review of the best online stock trading sites.
Robinhood lets you invest in stocks, ETFs, options, and cryptocurrencies, “all commission-free, right from your phone or desktop,” according to its website. “Intuitively designed for newcomers and experts alike,” it adds, “Robinhood gives you a clear picture of your portfolio’s performance over time, so you can adjust your positions and learn by doing.”
Is it true?
Yes, Robinhood’s trades are indeed commission-free. And while many trading platforms have a steep learning curve — do you know how to read a candlestick chart? — Robinhood’s mobile app is streamlined and intuitive. “A self-directed trading platform like Robinhood can be right for the right person,” says Larry Sprung, CFP, founder and president of Mitlin Financial, a registered investment advisory firm (RIA) based in New York. “Not everyone needs or wants financial advice, [and] certain investors may even have a hard time finding an advisor that’s a good fit for them. In instances like these, [Robinhood] presents an opportunity to get started and invest. The platform can also provide a starting point for people to learn more about their money and what investing is all about.”
- In business since: 2013
- Price: $0 per trade
- Barron’s rating: N/A
- Kiplinger rating: N/A
- Services: stocks, ETFs, options
- Fees: $50 outgoing transfer fee to move equities to another broker
- Terms: no account minimums, no inactivity fees
- Pros: user-friendly, commission-free trade
- Cons: limited resources and trading options
Instant deposits up to $1,000
Professional research from Morningstar
Level II market data from NASDAQ
Robinhood doesn’t charge a single commission fee for trades — not for stocks, not for ETFs, not for options, and not for buying or selling. That alone is a very compelling reason to use Robinhood instead of pay-per-trade online brokers, especially for investors with small balances, where fees can eat up all of your gains. There used to be a debate about whether Robinhood’s trades were truly “free,” because prior to 2018, Robinhood did earn a tiny ($0.00026 per dollar) “payment for order flow” on every trade, which would then slightly inflate the price of each stock you bought. But last year, Robinhood launched an internal clearing system that removed the need for a middleman broker, and it now makes money via interest and Robinhood Gold, a paid subscription plan.
User-friendly trading platform
Robinhood’s mobile app and website are hands-down the most user-friendly — and fun — we’ve ever tested at Reviews.com. The interface is sleek, modern, and minimalist, which makes it feel more like playing fantasy football than managing your portfolio. But experts disagree on whether that’s a good thing. In a our review of the best online stock trading sites, Kendra Clarke, the VP of data science and product development at sparks & honey, a culture and trend consultancy in New York, had this to say: “Whenever you introduce that kind of fun and gamify an app, you create an emotional attachment … [but the design] doesn’t necessarily draw a straight line to the gravity and importance of certain elements of what’s happening.”
In other words, if the Robinhood app makes it really fun to buy and sell stocks, you might be tempted to trade too frequently or too impulsively — selling “red” stocks too early and missing out on future gains, or buying “green” stocks near their market peak. But as long as you remember that stock trading isn’t a game and stick to your investment plan, Robinhood’s app isn’t any more dangerous than Fidelity’s or E*TRADE’s; it’s just prettier and easier to use.
Access to Morningstar research for $5 per month
Trading with Robinhood is free, but it does offer an optional paid subscription program called Robinhood Gold with a few attractive perks for $5 per month: access to industry-leading Morningstar ratings and reports on 1,700 individual stocks, Level II Market Data on more than 3,000 NASDAQ stocks, larger instant deposits, and margin trading. “With the addition of research to its offering, Robinhood Gold now makes a lot more sense for beginning investors, who often need the professional analysis to help make smart investing decisions,” says Jim Royal, an investing and wealth management reporter at Bankrate. “A research offering makes Robinhood Gold more valuable to its customers and at very low cost.” Of course, if you’re trading at a low volume, $5 per month ($60 per year) might take a decent bite out of your gains, so this option is best-suited for high-volume traders.
No bonds, mutual funds, or futures trading
For a truly balanced, diversified portfolio, many investors turn to bonds and mutual funds, while some advanced traders like to speculate with futures. Robinhood doesn’t offer those yet, but you can trade ETFs, including a few bond market ETFs and index ETFs.
Limited resources without paid subscription
Without paying $5 per month for Robinhood Gold, Robinhood doesn’t offer much research to help you evaluate stocks or ETFs. You’ll get more powerful tools by trading with Fidelity or TD Ameritrade, so it all depends on how much research you’d like to do before making investment decisions. Robinhood does offer some handy how-to guides on its website and mobile app, but they aren’t any more detailed than what you can find by Googling your investment questions online.
*Offers commission-free or transaction-free trading
Robinhood vs. Fidelity
Robinhood and Fidelity are essentially at opposite ends of a spectrum. Fidelity Investments has been around since 1943, and its website and mobile app show signs of age. However, Fidelity does offer the best tools and resources in the industry — and it just went commission-free on stocks, options, and ETFs. Like TD Ameritrade and Vanguard, we recommend Fidelity for experienced investors trading with large volumes, whereas Robinhood is a much more accessible entry point for beginners.
Robinhood vs. TD Ameritrade
While Robinhood offers the simplest platform, TD Ameritrade provides the most powerful. That’s why we named Robinhood “best for beginners” and TD Ameritrade “best platform design” in our review of the best online stock trading sites. If you’re just starting out and you aren’t investing an enormous amount of money, Robinhood is still your best bet as a beginner because of its approachable interface — unless you want to trade bonds, mutual funds, or futures.
Robinhood vs. E*TRADE
E*TRADE used to be the new kid on the block like Robinhood is now, challenging older brick-and-mortar brokers with its digital platform. But today, E*TRADE’s services are far more similar to TD Ameritrade. If you’re a beginner, if you’re not looking for advanced tools, or if you want to cut down on costs, Robinhood is a more appealing option. Otherwise, E*TRADE is the way to go — especially since it doesn’t charge commission on stock, ETFs, and options trading anymore.
Is Robinhood safe?
Robinhood is regulated by the Securities and Exchange Commission (SEC), and its accounts are covered by the Securities Investor Protection Corporation (SIPC). As with Fidelity or E*TRADE, the primary risk from Robinhood comes from user error. If you’re a novice trader, Robinhood’s easy-to-use platform and slick interface may compel you to buy and sell stocks too impulsively. When using Robinhood, make sure to take things slow and stick to your investment plan to avoid unnecessary risk to your portfolio.
How does Robinhood make money?
According to Robinhood’s webiste, Robinhood makes money through Robinhood Gold (a premier service priced at $5 per month), interest from customer cash and stocks, and rebates from market makers and trading venues. This allows the company to offer baseline accounts for free.
The Bottom Line
There are good reasons why Robinhood quickly became one of the most popular investing platforms in the U.S. — it’s free, easy to use, and even fun. If you don’t want to pay commission fees, there is no better trading option. On the other hand, if you want access to more advanced trading features or resources, consider a cost-per-trade broker like TD Ameritrade, or try a Robinhood Gold subscription for a month or two and see the difference.