Now considered the most popular investment app for new investors, Robinhood has quickly amassed close to 15 million users in just over five years. Robinhood help blazed the trial for fee-less trades. However, they are not without controversy, recently coming under fire for providing margin accounts to inexperienced users. So, while more brokerages come online, how does Robinhood hold up? We take a close look in our 2021 Robinhood Review.
Robinhood is a free trading and investment app that was created in 2015 with a revolutionary approach of offering free trades. This helped drive a massive amount of new users to its platform and helped it grow from 500k users in 2015 to 13 million in 2020.
Robinhood offers stocks, options, ETFs, and cryptocurrencies. However, Robinhood is starting to face stiff competition with new investing apps coming online every day. Users have more options than ever when it comes to alternative investing. We touched on several with our M1 Finance Review and Betterment Review.
With more investing applications hitting the marketplace each day, Robinhood quickly had to create additional features to remain unique. They created features such as fractional investing, recurring investing, and margin accounts. The later of which has created great controversy.
Margin accounts allow users to borrow money from Robinhood to invest more than they have in their account. However, because 25% of total Robinhood investors are first time investors, problems arise with many inexperienced users borrowing money that then goes negative and they cannot pay back. It was found that investors who borrowed money from Robinhood were nearly 14 times more likely to be unable to pay those loans vs. other brokerages.
Controversy aside, Robinhood remains a popular, online investing brokerage for good reason. Its simple interface makes it easy for users to navigate and execute trades.
Below, we’ll take a closer look at all Robinhood has to offer, who it is best for, and what makes Robinhood a popular investment app for beginners in our 2021 Robinhood review.
Our Rating:
3.5/5
Robinhood is a good investment app for those with a moderate amount of investing experience. Their user interface excels in usability but lack resources for new investors. They have expanded offerings into a gold and cash management account.
best for:
Intermediate investors, options traders
Get Robinhood Pros & ConsPros:
Cons:
At Wealthplicity, we rate and rank our investment apps based upon the most important criteria to the customer. We look to keep this criterion consistent across all reviews but may adjust upon industry or offerings.
Robinhood is best suited for those investors who already have a small to moderate amount of experience. That isn’t to say that beginners cannot use this platform. As I mentioned earlier, nearly quarter of Robinhood’s users are first time investors.
Robinhood makes it very easy for new investors to get started investing, but it lacks critical features that new investors need to be successful. It has next to zero customer service, does not have educational material or access to advisors. It also does not prompt users to input financial goals or consider their risk profile. These are all important aspects for new investors to have before even trading a dollar.
Let’s take a closer look at the Robinhood review and break down the overall ranking criteria.
Robinhood Fee structure is what made it so popular in the first place. There are no sign-up fees, no inactivity fees or transfer fees. If users want to sign up for Robinhood Gold, it is $5 per month.
Robinhood has a good number of features and offers. They provide access to thousands of securities, the ability to trade options, cryptocurrency, and fractional shares. Though they fall short in their access to mutual funds and bonds. So, investors seeking to diversify their portfolio may find this limiting.
Beyond their traditional investment platform, Robinhood now offers a Cash Management feature. Similar to a savings account but with a yield of .3% – much higher than the current national average of .04%.
If users want to upgrade their account to Robinhood Gold, they have access to the following features:
Investors do not need to be accredited to use Robinhood and there is no account minimum. Though users do need $2,000 in order to access a margin account.
For those investors seeking to trade options, a small questionnaire about your investing knowledge is required.
Robinhood’s app provides seamless usability. Even for first time investors, getting started is very straight forward. This is the biggest draw to Robinhood is its simplicity.
They put a ton of effort into their mobile app which was launched even before a desktop interface existed. This tech first approach has paid off as far as their growth and claiming the spot as one of the best User Interface’s on the market. However, with so much focus on their app, other aspects of their brokerage fall short.
Customer service is a not a top priority for Robinhood. Recently, they have made strides in creating new customers service centers but this was only after a national outcry of lack of assistance. Earlier this year, Robinhood users flooded the FTC with claims they were unable to liquidate their accounts. Any complaint simply went into a “void”.
It’s tough to retro-fit Customer Service into a space that is growing exponentially, so this will continue to be an issue for the near future.
Robinhood’s transparency has been a hot-button issue. They do have an extensive FAQ section on their website but that primarily pertains to using their app. However, they came under fire by the SEC last year when they were found to be misleading customers around order pricing.
They also faced issues in the state of Massachusetts who claimed Robinhood attracted inexperienced investors through gamification practices and provided them access to risky options products.
More recently, they came under fire when they restricted access to Meme Stock trading and other heavily shorted stocks.
Robinhood is a decent investment platform. Features like fractional investing and easy access to options make usability top notch. If you have a moderate amount of investing experience and understand your investing goals and risk profile, this can be an attractive option. However, if you are new to investing, there may be several better apps like Betterment that cater to investors who are just getting going.
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