Pros

• Easy to use

• Low cost

• Fractional share trading

• Access to some Cryptocurrencies

• Cash management feature

Cons

• Ease of use has likely lead to many users investing without a plan or taking on too much risk.

• Limited research available unless you upgrade to Robinhood Gold.

• No retirement account choices.

• You can trade a limited number of cryptocurrencies, but they can’t be transferred to other wallets or used to purchase other items like other crypto exchanges.

Robinhood

Often referred to as the investment app for millennials, Robinhood paved the way for low cost investing. As far as I can tell, they almost single handedly forced the big brokerages to eliminate commissions that for a long time disproportionately impacted small time investors like you and me. So here’s the skinny on Robinhood:

Robinhood Drawbacks and Downsides

One of the main criticisms I have heard about Robinhood is that it has flooded the market with inexperienced investors. The platform has been made so accessible that many people are investing without a plan or taking on too much risk. I would tend to agree with this sentiment. If you’re going to be a serious investor, with serious goals make sure you have a plan before you start.

In depth research and analysis is limited on the basic version of Robinhood. On the desktop version of the app you have some ability to analyze charts with moving averages and a few other indicators, but it is limited. Chart indicators are not available on the mobile app. For more robust research features you will need to upgrade to Robinhood Gold which currently costs $5 per month.

Robinhood does not currently offer retirement accounts like traditional or Roth IRAs. So unfortunately we can’t take advantage of the tax benefits of these accounts. If I was to guess, at some time in the future Robinhood will offer some retirement account options. We shall see.

While you can buy and sell some cryptocurrencies, it is very limited and the funds can’t be transferred or otherwise  used to make purchases with cryptos. There are only 7 cryptocurrencies we can trade, but it does include the 2 largest cryptos, Bitcoin and Ethereum. And finally, not necessarily a negative for some traders, but Robinhood does not allow you to use your cryptos for purchases or transfers to other accounts or crypto wallets. All buying and selling of cryptos remains contained within the Robinhood platform.

Robinhood Perks and Positives

For me, one of the biggest benefits to a Robinhood account is the ability to trade cryptocurrencies. Again, the number of cryptocurrencies is very limited (Bitcoin, Ethereum, Litecoin, Bitcoin SV, Bitcoin Cash, Dogecoin and Ethereum Classic). To my knowledge, Robinhood is the only stock brokerage I am aware of that allows direct crypto trading. Meaning that one of the only platforms where you can trade stocks, ETFs and cryptocurrencies. Although I expect more brokerages to offer direct crypto trading as the market matures. If you are looking to trade a wider range of cryptocurrencies, you can look into Coinbase, Binance or Uphold. See our review of Uphold here.

Towards the end of 2019, Robinhood started offering Cash Management. Basically any uninvested cash in your account earns interest through Robinhood’s partnerships with several banks. Interest rates in general are low, but the rates offered in Cash Management are very competitive. There are no extra costs, minimums or foreign transaction fees for this and it comes with a debit card. 

Last, but not least, are the fractional share trading. Historically when you bought a stock you would need to buy at least 1 whole share. And for stocks that were really expensive, you needed to have a few thousand dollars laying around. Fractional trades are not unique to Robinhood, Charles Schwab and Fidelity also offer fractional trading.

Earn a Free Stock

If you would like create a Robinhood account, you can also earn a free stock by using the following referral link here.

Final Thoughts

Robinhood was purposely designed to be easy to use to make investing more accessible to the masses. If you absolutely need more research, the big brokerages (like Fidelity) are a better bet. However, access to cryptocurrencies, Cash Management and fractional share trading has made Robinhood a very attractive investment app to have in your arsenal.