Originally posted on August 8, 2018. Last revised on June 30, 2020.

What is Robinhood?

Looking for an easy way to get started trading/investing in stocks and/or cryptocurrency?

Robinhood is an insured brokerage with no fees, trading costs or account maintenance costs – it’s literally free to trade. It started as a mobile-only app and has evolved into also having a web platform.

What are the pros and cons?

  • Robinhood offers minimal resources with not much in the way of research or analysis tools.
  • Robinhood’s cryptocurrency trading isn’t yet available in all states, and you don’t actually hold the crypto coins you own (which could be a plus, for some), the opposite of Coinbase Pro. The cryptocurrency remains in Robinhood’s possession meaning speculators cannot use their coins to pay for goods or services, only for trading purposes.
  • Robinhood doesn’t offer fractional shares for dividend reinvestment. In other words, if you own positions in stocks that pay dividends, those dividends will only be provided as cash in the account which you will need to reinvest manually (and may not be able to if the dividend amount you receive is less than the cost of a share of the stock). For dividend reinvestment, we recommend a traditional brokerage such as Charles Schwab.
  • Reports from reputable sources such as Investopedia (click here for their article on Robinhood) suggest that Robinhood  may make money from methods that may be detrimental to individual investors’ returns. For individual investors, such activities can affect your returns when trading larger quantities (typically orders of 300 shares or more). For these reasons, we recommend Robinhood as a good place to get started trading and then suggest moving to a different brokerage (such as Charles Schwab or Fidelity) when you feel ready to move up in size.

Alternatively, Consider Schwab

If you want to be able to create or manage an IRA (either Traditional or Roth), Get Irked recommends Charles Schwab (previously OptionsXpress). Thanks to the pioneering no-trade-fees approach of Robinhood, Charles Schwab reduced its commission costs to zero back in October and there are no ongoing maintenance fees.

In fact, for the majority of users Schwab is the preferred choice as it offers more robust options for trading including contingent and conditional orders (Robinhood offers trailing stop orders but does not offer additional conditional programming at the time of writing). In addition, Schwab also provides a fully-featured desktop software platform called StreetSmart Edge which even includes free streaming of CNBC regardless of whether you have access to the channel via cable.

A reminder about Insurance

Although all brokerages recommended by Get Irked insure you against loss of your USD funds should the brokerage go out of business, there is no protection against downside risk in holdings (i.e. if your stock’s value drops). If your asset’s value decreases, YOU must make the decision whether or not to take the loss.

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Disclaimer: Eric "Irk" Jacobson and all other Get Irked contributors are not investment or financial advisers. All strategies, trading ideas, and other information presented comes from non-professional, amateur investors and traders sharing techniques and ideas for general information purposes.

As always, all individuals should consult their financial advisers to determine if an investing idea is right for them. All investing comes with levels of risk with some ideas and strategies carrying more risk than others.

As an individual investor, you are accountable for assessing all risk to determine if the strategy or idea fits with your investment style. All information on Get Irked is presented for educational and informational purposes only.