Robinhood Review 2020: Pros, Cons & How It Compares

Robinhood also seems committed to keeping other investor costs low. The Clearing by Robinhood service allows the company to operate on its own clearing system, which reduces some of the service’s account fees.

One of the biggest fees Robinhood charges is the $75 outgoing account transfer fee, but that’s not an unusual fee among brokers. (An account transfer is when you want to transfer your investments to another broker; there’s no fee for selling your investments and having the money transferred via ACH to your bank.)

Account minimum

Robinhood doesn’t have one, which means investors can get started right away. Of course, in order to invest, you’ll need enough to purchase the investment you have your eye on. (Like other brokers, Robinhood requires a $2,000 minimum portfolio balance to open a margin account. This is a Financial Industry Regulatory Authority regulation.)

Fractional shares

Like some other brokers, including Interactive Brokers and Charles Schwab, Robinhood has introduced fractional shares. That means you can pay as little as $1 for a portion of a share, even if that share’s full price is in the hundreds of dollars. This feature makes it much easier to build a diversified portfolio — you’re able to buy many more companies, even if you don’t have a lot of money to invest.

High-yield savings

In December 2019, Robinhood started offering a cash management account that currently pays 0.30%. The account comes with a debit card and free ATM withdrawals from more than 75,000 ATMs, and offers up to $1.25 million of FDIC insurance thanks to Robinhood’s agreements with several banks.

Ease of use

If you’re accustomed to using a smartphone — and Robinhood’s target user base obviously is — you’ll find the sign-up and account funding process quick and painless. It all happens within the app in a matter of minutes, with just a few quick questions that gather your personal information, contact details, Social Security number and means of funding your account. The company says approved customers are notified in less than an hour, at which point they can initiate bank transfers.

Robinhood uses instant verification with many major banks, sparing users the hassle of reporting micro-deposits to an account to verify information. Bank transfers of up to $1,000 are available instantly for investing, as are proceeds of up to $1,000 from selling stocks. Deposits larger than $1,000 will take four to five business days to process. Users can set up automatic deposits on a weekly, biweekly, monthly or quarterly schedule.

Streamlined interface

This could be a negative, as the service doesn’t offer all the bells and whistles of a typical online stock broker. But for investors who know what they want, the Robinhood platform is more than enough to quickly execute trades. It supports market orders, limit orders, stop limit orders and stop orders.

Both the mobile and web platforms also include a feature called collections, which are stocks organized by sector or category. Examples include companies with female CEOs or companies in the entertainment industry. On web, collections are sortable and allow investors to compare stocks side by side.

Robinhood also offers a tab bar at the bottom of the app, which offers quick access to portfolio values, watch lists, transaction history and account statements.

Robinhood Gold

Robinhood Gold offers investors the ability to trade on margin, also known as borrowed money. The opt-in service carries a flat monthly fee of $5.

New investors should be aware that margin trading is risky. You’re trading on money borrowed from the broker, which means you can lose more than you invest.