Robinhood Review 2024: Pros, Cons and Alternatives (2024)

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Robinhood Investing is for active, options, and margin traders who want to purchase and trade investments with no commission. However, Robinhood's crypto selection is fairly limited, so investors wanting to trade a wider range should look elsewhere.

It isn't a good choice for true beginners, or those searching for mutual funds and automated investing.

Business Insider's personal finance team compared Robinhood Investing to the best investing apps and found it to be an industry leader for active investing.

About Robinhood

Robinhood offersstocks, ETFs, fractional shares, options, and cryptocurrencies. Commission-free trading on Robinhood is available for stocks and ETFs. The platform also offers IRAs with up to a 3% match for every dollar you contribute to a Robinhood IRA. Only Robinhood Gold members get access to the highest match bonus.

Robinhood Gold isoffering a 3% bonus on IRA and 401(k) rollovers until April 30. For example, if you transfer $10,000 into a Robinhood Gold IRA, you can get an additional $300 in your account.

Robinhood Investing's cryptocurrency and stablecoin selection is a solid choice for those who want to trade assets like bitcoin and ether with zero commission fees. Plus, investors can store crypto assets, NFTs, and dApps offline in a web3 wallet. Serious crypto investors looking for a wide range of cryptocurrencies, however, can find better apps for their needs.

Robinhood accounts are available as both cash and margin. When deciding to open a cash account versus a margin account, it will depend on how you want to fund your account. Cash accounts are funded with existing money from your bank account, while margin accounts can be partially funded with borrowed money from a lender.

Is Robinhood Right For You?

We named Robinhood one of the best investment apps for beginners because of its user-friendly interface and simplified trading strategies. However, a strong caveat: Robinhood is a good pick for people who are ready to start active trading, and understand the risks. If you have never invested money before, period, you should start with passive investing.

Robinhood gets you access to active investing strategy, IRA matching bonuses, and commission-free trades, but you'll get the most out of the app with Robinhood Gold premium features.

Robinhood Pros and Cons

Robinhood Pros

• No minimum investment requirement
• Commission-free trading of stocks, ETFs, options, and cryptocurrencies
• IPOs available
• Earn 0.01% APY on uninvested cash (Gold members earn 5% APY)
• 1% match on IRAs

Robinhood Cons

• Limited selection of cryptocurrencies
• Lack of trading tools and resources
• No automated investing option
• No mutual funds, joint accounts, or educational account options

HowTrustworthy Is Robinhood?

Robinhood has a C+ rating with the Better Business Bureau. TheBBB says the brokerage has a pattern of complaints that show multiple users could not withdraw funds from their investing accounts.

In 2024, Robinhood agreed to pay a $7.5 million settlement after Massachusetts Secretary of State Bill Galvin alleged that the platform used "gamification" strategies to encourage young, inexperienced customers to make risky trades. The original enforcement action was filed in 2020. The deputy general counsel and head of government affairs said the deal "resolves historical matters dating back to 2021 that do not reflect Robinhood today."

In 2021, Robinhood faced intense scrutiny after it halted trading on several stocks — namely GameStop (GME) and AMC Entertainment (AMC) — which skyrocketed due to the efforts of members of a Reddit forum called r/WallStreetBets. The investment app eventually reopened trading on many of the stocks it had temporarily restricted, but its restrictions led to user retaliation and major lawsuits. In 2023, a federal judge dismissed a lawsuit brought by customers who were affected by the restrictions in GameStop trading.

Ways to Invest With Robinhood

Stocks and Funds

Robinhood is best for active traders who place commission-free trades in stocks, options, ETFs, and cryptocurrencies. The brokerage account has no minimum size requirements for most of its investments, but you'll have to make minimum opening deposits for its fractional shares and margin trading offerings. You'll also need a portfolio balance of at least $25,000 for pattern-day trading.

Robinhood offers fractional shares, meaning you can purchase portions of stock in companies without paying the full share price. You'll only need $1 to get started. And its advanced charts give all users access to a more in-depth analysis of different investments.

Moreover, Robinhood's web platform and mobile offerings are straightforward to navigate. And you'll get one share of free stock when you open an account. You'll also get a free stock whenever you make successful referrals and 1.5% APY on uninvested cash (Robinhood Gold members receive 5% APY).

Options

Robinhood's commission-free option trading includes a notable perk: no per-contract fees. Many brokers charge under $1 per options contract, and some platforms use tiered pricing structures that charge lower fees for more active traders and higher fees for less active traders.

But with Robinhood, you'll incur no such fees. It's worth pointing out that options investing carries more risk than stocks and ETFs. Robinhood offers options risk disclosures on its website. And while Robinhood formerly required its users to have a margin account for options trading, you can now trade options with a regular cash account.

Use the investing app's options rolling feature to adjust or extend your options position. Investors can customize trading strategies and easily build spreads with Robinhood's Strategy Builder Plan.

Cryptocurrency

This platform's commission-free rule applies to cryptocurrencies as well. The Robinhood Crypto accountfeature lets you trade various digital currencies such as bitcoin, dogecoin, and ether. In total, Robinhood offers 15 different cryptocurrencies.

This is a limited selection compared to exchanges (e.g., Kraken and Coinbase) that offer 100+ assets. However, the brokerage's selection could still be useful if it supports the asset you want to exchange.

Use any funds deposited into your brokerage account to purchase cryptocurrencies through Robinhood Crypto. Robinhood also rolled out cold storage crypto wallets in early 2022. Before its wallet launch, users couldn't transfer crypto from or to external wallet addresses. But now, you can send any crypto assets to your chosen wallet. In addition, Robinhood offers a web3, non-custodial crypto wallet and DeFi platform.

The app will let users exchange crypto without network fees, store NFTs and access NFT marketplaces, use DeFi protocols, and connect to DeFi apps.

IPOs

Robinhood has IPO access. Unlike other popular brokerages that require a minimum household asset sizefor investors who want to take advantage of the IPO offer price, Robinhood says it has no minimum balance or special status requirements.

This investment offering is best for traders who want to buy a company's IPO shares before they're listed on an exchange for the public. A big downside is that you aren't guaranteed to receive IPO shares when you request them. This is because Robinhood gets a limited amount of shares of each IPO.

Robinhood is also not an underwriter for companies issuing IPOs and will only get access to initial public stock when invited to participate by investment banks. This means there's no guarantee that Robinhood will be able to offer shares of Reddit's IPO, for example.

IRAs

Robinhood provides IRAs for those looking to build long-term wealth through a retirement account. The investment apps offer traditional and Roth IRAs, with commissions-free trades, recommended portfolios, and up to a 3% match on every dollar that goes toward your IRA.

Robinhood only trades stocks and ETFs in its IRAs.

Robinhood Gold

Robinhood Gold allows you to trade on margin and access Morningstar professional research reports and level II Nasdaq market data. Gold has a $5 monthly subscription fee, but you can sign up for 30 free days.

With margin trading, you're essentially borrowing money from a brokerage to invest in securities or other financial assets you can't afford, but you'll need to maintain a $2,000 minimum with Robinhood. Your investments are collateral for the margin loan, and you'll have to repay your borrowed funds. Gold members get a lower margin rate compared to non-Gold members (8% interest instead of a high 12% rate)

Gold members can earn 5.00% interest on uninvested cash in their brokerage accounts. Non-Gold members can earn 0.01% if enrolled in a cash sweep.

Gold members are also the only Robinhood users eligible for a Robinhood Gold credit card.

Robinhood Fees

Robinhood has no minimum to open an account and start investing, plus there's a 0% fee. However, fractional shares have a $1 minimum and a $2,000 minimum requirement to access margin trading. To upgrade to Robinhood Gold, you must pay $5 per month.

There's a 1.75% fee on instant debit card or bank account withdrawals.

How toTransfer Stocks Out of Robinhood

Before you start the transfer, Robinhood asks you to take care of any account restrictions or negative balances, as this will delay the process. To initiate the transfer, you must call your new brokerage and ask them to provide instructions to Robinhood and its clearing partner.

According to Robinhood's support page, you'll also need to ensure the transfer you've initiated is an ACATS (automated customer account transfer service) transfer. This means you can't use other stock delivery methods — such as transfer agent transfers or check transfers — when moving your stocks.

If the brokerage you're transferring to asks for yourRobinhoodSecurities account number, you can find this information by clicking on the account icon in the bottom right corner of your mobile app, clicking Investing, and then copying the number at the top of the screen.

How Robinhood Makes Money

Instead of charging commissions, Robinhood makes money through payment for order flow. When a user makes a trade, Robinhood sends that trade to a third party that places many large orders simultaneously for a slight advantage. The larger company then compensates Robinhood. The brokerage also generates income from interest on securities and margin loans and with Robinhood Gold, a premium subscription service that charges a flat monthly fee.

Robinhood also charges several fees for certain services and transactions, and it may pass on third-party costs to its customers. Learning when you might pay extra is good practice to avoid surprises when using the app.

If you use Robinhood, you won't pay annual, commission, inactivity, or fees for moving money to your bank account. But you'll pay a $5 monthly fee to upgrade to a Gold account and various service fees for requesting a paper statement. The brokerage will also pass on third-party costs, such as regulatory fees and out-of-network ATM fees, to you. It's possible to avoid some of these costs, but you'll need to understand when they may apply.

How to Minimize Robinhood Fees

When you open a Robinhood account, you're already avoiding fees that other brokerages charge. But if you want to minimize some of the other costs of using Robinhood, you can try the following.

• Avoid the upgrade: Consider using the free account instead of upgrading to Gold service.
• Research fees before buying: Before placing a trade or requesting any services, visit Robinhood's support page and look for information about fees and when they apply.
• Search for in-network ATMs: You can withdraw cash from your Robinhood account for free using a debit card at participating stores and at in-network ATMs. Tap the "Find ATMs" button in your Robinhood app to find the nearest withdrawal locations.
• Check out the foreign stock: Before buying shares from a foreign company, find information about potential fees from the bank that issues the American Depositary receipt.
• Go paperless: Instead of paying for paper monthly statements and confirmations, choose the electronic versions.
• Transfer to your own bank account: Robinhood charges you a fee when transferring money to a competing brokerage but not to your own bank account. If you need to pull money out of your Robinhood account, consider moving it to your bank first and then investing elsewhere.

Robinhood Alternatives

Robinhood vs. Fidelity

Fidelity is one of the top online brokers for automated investing, educational resources, investment options, and low-cost trading. Robinhood and Fidelity Investments both offer commission-free trading on multiple investment types. But you'll have a wider range of investment options at Fidelity than you will with Robinhood.

Both companies offer stocks, ETFs, and options, but unlike Robinhood, Fidelity offers automated investing and advisor-managed portfolios for hands-off investors, making it a better fit for true beginners. The brokerage also has a more extensive account and investment selection.

However, Robinhood is better for all-around commission-free trading and crypto trading.

Fidelity investments review

Robinhood vs. SoFi Investing

SoFi is an investment app suitable for all kinds of investors but is generally best for beginners and passive investors. Robinhood and SoFi Invest® have similar investment offerings, but Robinhood is the cheaper option when it comes to trading fees. Though SoFi also offers DIY trading, it's a better choice for those searching for IRAs and automated investing.

If you like the sound of active trading, though, and don't mind doing a bit of your research on your investments, Robinhood's low fees and commission-free securities could be a good fit.

SoFi Invest review

Robinhood — Frequently Asked Questions (FAQs)