What You Need to Know About Robinhood
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When you hear the name Robinhood you probably think about the vigilante that steals from the rich and gives to the poor, but the cleverly named modern-day Robinhood is a free-trading app that allows users to trade securities without paying commissions or fees. I always like to be up-to-date about what happens in the financial community, so I did some research and found out what Robinhood offers.
What Can People Trade on Robinhood?
Robinhood is similar to other online trading platforms in that users on the Robinhood platform can participate in stock, Exchange Traded Fund (ETF), options, and even margins trading. Where Robinhood stands out among its peers is that Robinhood is one of the few platforms that also allows cryptocurrency trades.
Brokerage accounts or individual taxable accounts are the only accounts that Robinhood supports. There are no retirement accounts or tax-advantaged accounts available on their platform.
Is Robinhood Good For Beginners?
Robinhood’s platform is very streamlined and user-friendly. They offer both mobile and web-based trading, but the platform itself is purposefully uncomplicated. The streamlined platform and no-fee trades do make Robinhood a great choice for beginners with one small caveat. Robinhood is not a research platform and novice investors will need to do their research about which products to invest in elsewhere.
How to Get Started on Robinhood
Robinhood makes the application for a brokerage account process pretty easy for anybody willing to take a couple of minutes and sign up online. As with any application involving money, users have to enter their name, date of birth, and Social Security number. If that doesn’t sit well with you, you probably won’t like online trading either. Users will be notified within a matter of minutes whether they’ve been approved and then they can start trading right away.
There is no minimum account balance. Money to make trades must be transferred in from bank accounts. Robinhood allows users to transfer $1,000 immediately from banks to start trading. Transfers over $1,000 can take 4 to 5 business days to process. Users who plan to participate in margin trading must maintain an account balance of $2,000, but that is a trade requirement and would be seen at any online trading platform.
Is Robinhood Right For Anyone?
Whether you are an experienced investor or a novice, Robinhood’s no-fee platform, streamlined interface, and cryptocurrency trading make it an attractive option. If customer service is important to someone, Robinhood is probably a hard pass. Even though there is a sophisticated help center online, Robinhood has no phone number and all support is done through email. In an environment where timing is everything, this lack of customer support could be a major turn-off.
Bottom line, investors willing to do their own research and make trades quickly and easily as part of your overall investment portfolio, Robinhood is a great choice. Many online trading platforms are now offering commission-free, no fee trading though so this is not the only opportunity.
Pros and Cons Robinhood:
Pros:
- No Account Minimums
- No Trade Fees or Commissions
- Quick Approvals and Immediate Access to Funds
- Participation in the Cryptocurrency Space
- Stock, ETF, Options, Margin Trading
Cons:
- Customer Service Difficult to Contact
- No Frills Platform
- No Retirement Accounts
- No Research Support
So, what does this all mean for bankers? I believe it’s not more than hype in a, however, growing trend to self-investing. I mean, it’s clear that people get more accustomed to self-trading in the long run. But just because there is Robinhood not everyone will stop using traditional banking services. As mentioned there are a lot of other platforms also offering commission-free or at least low-cost trading. There will always be clients that need more than just a technical platform to do trades. I mean, this is not banking, is it?
So stay updated with me here on TheBankerBlog.com.