Robinhood Review 2023: How It Compares to Competitors

Navigating the world of stock trading can be daunting, especially for beginners. Robinhood, a popular investment trading app, has made a name for itself by democratizing access to the stock market with its commission-free trading model. 

This platform, known for its user-friendly mobile app, offers a convenient way for novice and seasoned investors to participate in the stock market. 

Related: How To Invest in Stocks: Ultimate Guide | Entrepreneur

In this comprehensive review, you’ll see Robinhood’s offerings, including its commissions, customer service, educational initiatives, investment options, platform technology, and security features. 

What is Robinhood?

Robinhood is a financial services company offering a mobile app and website that provides commission-free trading services. It allows users to invest in publicly traded companies and exchange-traded funds (ETFs) listed on U.S. stock exchanges without paying a commission. 

Related: Why ETFs Are A Good Choice For A Properly Diversified Portfolio | Entrepreneur

Further, it also provides the opportunity to invest in cryptocurrencies like Bitcoin, Ethereum, and Dogecoin through Robinhood Crypto.

Founded in 2013, Robinhood’s mission has been to democratize finance for everyone, rendering the stock market more accessible to the average person. Its sleek, intuitive mobile app and web platform have proven appealing to millennials and new investors. 

Here is a list of the most impressive features of Robinhood:

Commissions and fees

By eliminating traditional trading fees, Robinhood has revolutionized the brokerage industry, forcing many established brokers to follow suit and offer commission-free trades.

Customer support

Robinhood features customer support 24 hours a day and seven days a week via phone or chat. The service aims to answer any questions about the Robinhood app and how to use it properly. 

Educational initiatives

Another critical aspect of Robinhood is its focus on financial education. The platform hosts educational content to help users understand investment concepts and strategies. These initiatives provide valuable insights for users to make informed investment decisions.

Related: Ultimate Guide on Investing for Beginners | Entrepreneur 

Investment offerings

Regarding investment offerings, Robinhood allows you to trade stocks, ETFs, options, and digital currencies. Its feature, “Robinhood Gold,” a paid account, offers additional benefits such as professional research reports from Morningstar, margin trading, and Level II market data.

Platform and technology

The platform also allows for fractional shares trading, enabling users to buy a portion of a company’s stock, not just whole shares. This can be particularly advantageous for new investors investing in high-priced stocks with less capital.

Security features

Despite being a mobile-first platform, Robinhood keeps its security strong. The securities in Robinhood brokerage accounts are protected up to $500,000 by the Securities Investor Protection Corporation (SIPC). 

Further, Robinhood Crypto, a subsidiary of Robinhood Markets, provides cryptocurrency trading. However, it is essential to note that cryptocurrencies are not protected or insured.

While Robinhood does make trading more accessible for a wider audience, potential investors should still do their due diligence. It is crucial to understand the platform’s functionality, its advantages and limitations, and how it fits into your overall investment strategy. 

Understanding how Robinhood works and its offerings can help you decide if this platform aligns with your financial goals and risk tolerance.

Related: Put Your Money to Work When You Learn How to Trade | Entrepreneur

What are the advantages of Robinhood?

Robinhood has been steadily improving its user base over the past few years. The trading platform grew from about a million users in 2016 to nearly 23 million by mid-2022. Among the reasons for this growth explosion are the advantages of using the Robinhood platform. 

One of the most well-known perks for Robinhood customers is they’re given one free stock when opening their account. In addition to this generous gift, here are a few more advantages possible of using Robinhood:

Allows stock, cryptocurrency, and fractional share trading for free

One of Robinhood’s main advantages is the ability to trade a variety of assets commission-free. Robinhood users can invest in a broad spectrum of assets without worrying about trading fees, from stocks and ETFs to options and cryptocurrencies. This low-cost feature has made it popular among new investors and those with smaller portfolios.

Another notable advantage of Robinhood is its offering of cryptocurrency trading. Robinhood Crypto allows users to trade popular cryptocurrencies like Bitcoin, Ethereum, and Dogecoin. This feature is significant, given the growing interest in cryptocurrencies and their potential as investment assets. 

However, it’s important to note that while Robinhood Crypto provides an easy-to-use platform for trading cryptocurrencies, these assets come with unique risks and considerations. 

For instance, while the trading methodology may be similar to traditional investments, crypto assets are uninsured and largely unregulated by the Securities and Exchange Commission (SEC), which renders them all high-risk.

Related: Is Cryptocurrency a Good Investment in 2023? | Entrepreneur

Additionally, Robinhood offers fractional shares trading. This means that instead of purchasing a whole share of a company, users can buy a fraction of a share for a fraction of the price. 

This is a game-changer for new investors or those with limited capital, allowing them to invest in companies that might otherwise be out of their price range. For instance, owning a fraction of a high-priced tech stock is now possible with Robinhood’s fractional shares trading.

Ease of use

Robinhood’s most prominent feature is arguably its accessibility. The platform is known for its user-friendly mobile app, which makes it incredibly easy for users to start trading. 

The app’s clean, intuitive interface allows users to navigate the stock market’s complexities easily. As such, Robinhood’s app is an attractive option for beginners seeking a simplified introduction to investing.

Related: How To Start Investing | Entrepreneur

Instant access to deposited cash

Instant access to deposited cash is another appealing feature offered by Robinhood. Typically, when you deposit funds into a brokerage account, there’s a waiting period before you can use those funds to trade. With Robinhood, these instant deposits allow you to start trading immediately instead of creating a watchlist.  

Robinhood also offers a Cash Management Account, an additional feature that operates like a bank account. Users can earn a competitive APY on their uninvested cash, access it via a debit card, withdraw fee-free from 75,000+ ATMs, and have it FDIC-insured.

No account minimum or monthly fee

The platform also promotes simplicity with no account minimum or monthly fee, making it even more accessible to new investors. 

A Robinhood account can be opened with no initial deposit, and there are no costs to maintain the account each month. This contrasts with other brokers that require a minimum deposit to open an account and charge a monthly fee for account maintenance.

What are the downsides of Robinhood?

While Robinhood offers numerous advantages, such as ease of use, commission-free trading, and the ability to trade fractional shares and cryptocurrencies, potential users should also consider its downsides. 

It’s essential to have a holistic view of the platform, weighing both the pros and cons, before investing using Robinhood. 

Here are a few of the most significant downsides to using Robinhood:

Accepts payment for order flow.

One of the primary concerns is Robinhood’s practice of accepting payment for order flow. Robinhood sells its customers’ orders to market makers (like Citadel Securities), who execute the trades. 

While legal and shared in the industry, this practice has raised questions about whether Robinhood customers get the best execution prices for their trades.

App design may encourage active trading, which is not suitable for most investors.

The design of the Robinhood app, while sleek and user-friendly, may inadvertently encourage frequent trading. The instant, effortless nature of transactions combined with eye-catching graphics can make trading feel less like a serious investment and more like a game. 

This “gamification” of trading has drawn criticism, as active trading isn’t typically suitable for most long-term investors. It’s crucial for users to understand the risks associated with frequent trading and to invest responsibly.

Delayed price quotes.

Robinhood also provides delayed price quotes, which can disadvantage those who trade frequently and rely on real-time market data. Timely and accurate data is crucial for active traders, especially those trading options or volatile stocks. 

While this might only affect long-term investors a little, other trading platforms might better serve those needing up-to-the-minute information.

Limited education and research tools.

In terms of educational resources and research tools, Robinhood could improve. Unlike competitors such as TD Ameritrade, Charles Schwab, or Fidelity, Robinhood offers limited research reports and doesn’t provide Level II Market Data. 

Its offerings are rather primary, focusing mainly on trading functionality rather than equipping investors with extensive resources for market research and investment education. This lack of resources might leave beginners needing additional information and analysis, which they would have to find elsewhere.

Related: How to Invest Like a Millionaire (When You’re Not One) | Entrepreneur

No access to mutual funds or bonds.

Another downside is Robinhood’s limitations in terms of investment offerings. For instance, Robinhood doesn’t allow access to mutual funds or bonds. 

While it does provide a range of options, including stocks, ETFs, Roth IRA accounts, and cryptocurrencies, the absence of certain asset types can be a significant limitation for investors looking for diversification.

Customer support is lacking.

Lastly, despite having a dedicated customer support system, Robinhood’s customer service has received mixed reviews, to put it mildly.  While Robinhood Gold members may be covered, some users have reported difficulty contacting customer support in times of need. 

Getting prompt assistance could be crucial during high volatility or outages. Potential users should consider this factor when deciding if Robinhood is the right platform for their trading needs. 

Inadequate customer support and several other factors played a significant role in FINRA’s decision to fine Robinhood $70 million, the most considerable penalty ever issued by the regulatory body.

How does Robinhood compare to alternatives?

In the realm of online brokers, Robinhood’s simplified trading platform and commission-free model can be appealing to new investors. 

Its user-friendly mobile app and innovative offerings like cryptocurrency and fractional share trading set it apart and have disrupted the brokerage industry. However, it also has some significant drawbacks and faces tough competition from platforms offering more resources or diversified services.

Before opening an account with Robinhood, it’s worth considering how it stacks up against its competitors: 

Robinhood vs. Public

Starting with Robinhood vs. Public, both platforms offer commission-free stock and ETF trading, a boon for cost-conscious investors. However, unlike Robinhood, Public does not offer options trading, crypto trading, or crypto exchanges. 

Public’s standout feature is its social investing model, where you can follow other investors, share ideas and learn from the community — a feature not offered by Robinhood. Concerning customer support, Public also holds an edge over Robinhood, with more responsive and accessible service.

Robinhood vs. Stash

Moving onto Robinhood vs. Stash, Stash provides extensive financial services, including banking, investing, and retirement options. 

While Robinhood offers a cash management account with a debit card and FDIC insurance, it doesn’t match the breadth of Stash’s offerings, including savings accounts and individual retirement accounts. 

On the other hand, Stash charges a monthly fee, while Robinhood allows for free stock trading. Both platforms offer fractional shares, but only Robinhood supports crypto trading.

Robinhood vs. eToro

The comparison between Robinhood vs. eToro reveals some interesting contrasts. eToro is known for its social trading feature, allowing you to mimic successful investors’ trades. This feature could be handy for beginners. 

Like Robinhood, eToro offers cryptocurrency trading, but it stands out with its more comprehensive range of available cryptocurrencies. While both platforms have a mobile app, eToro also provides a fully functional web platform, which Robinhood lacks. However, it’s worth noting that eToro charges withdrawal fees, unlike Robinhood.

Robinhood vs. Others

It’s also worth mentioning other significant competitors like ETRADE, Charles Schwab, Webull and TD Ameritrade:

• ETRADE and TD Ameritrade stand out with comprehensive educational resources, robust research tools, and extensive investment offerings. 
• Charles Schwab offers an impressive suite of services, including mutual funds and retirement accounts. 
• Webull, like Robinhood, caters to more tech-savvy traders and provides extensive market data, but it also offers a more robust web platform.

Robinhood FAQs 

How do you take your money out of Robinhood?

To withdraw funds from your Robinhood account, you must first sell any stocks or ETFs you own. You can initiate a transfer to your linked bank account once the sales are complete and the funds are settled. 

This process typically takes five business days. Remember, if you use Robinhood Gold, the margin account feature may affect your available withdrawal amount.

Does Robinhood charge a per-contract fee on options trades?

No, Robinhood does not charge per-contract fees on options trades. This is one of the ways Robinhood maintains its commitment to commission-free trading.

How many accounts can you open with Robinhood?

Robinhood accounts are tied to your Social Security number. As such, you can only create one brokerage account and one cash management account, regardless of the balances involved. 

Is Robinhood the right brokerage product for you?

Whether Robinhood is the right brokerage for you depends on your investing needs, risk tolerance, and financial goals. 

Related: 3 Keys to Building and Increasing Personal Wealth Today | Entrepreneur

As a new investor, the Robinhood app’s simple, intuitive user interface may be appealing. It offers the chance to invest in various stocks, ETFs, and cryptocurrencies, and the availability of commission-free trades and fractional shares can make investing more accessible.

However, there are a few limitations you should consider. While Robinhood does offer some resources for learning about the stock market, they are pretty limited compared to other online brokers like Fidelity or Charles Schwab. If in-depth research reports and education tools are essential to your investment strategy, Robinhood might not be the best fit.

Also consider the impact of Robinhood’s business model, including accepting payment for order flow, which has been a subject of criticism. 

This may impact the quality of trade execution, potentially leading to less favorable prices for your trades. It’s always essential to understand the mechanics of the platform you’re using, including how it generates revenue.

Robinhood may not be the best choice if you’re interested in mutual funds or bonds, as these are not currently offered. 

Similarly, while the platform does have options trading, those seeking to trade on margin must upgrade to a Robinhood Gold account, which comes with a monthly fee.

The bottom line.

While the platform has proven popular among millennials and has had a significant impact on the brokerage industry – bringing in a wave of new investors to Wall Street – it’s essential to take a balanced view and consider the strengths and weaknesses of the Robinhood platform. 

If you are considering creating an account, ensure you understand the risks involved in investing and whether the platform suits your needs and goals. The bottom line is that Robinhood offers a unique and modern approach to investing, which may or may not suit every investor’s needs.

Before making a decision, potential users should thoroughly review all the information available, including Robinhood reviews from other users, and consider consulting with a financial advisor. 

It’s crucial to approach investing with a clear understanding of your personal goals and the level of risk you’re comfortable with.

Related: The Pros and Cons of Hiring a Financial Advisor | Entrepreneur

Remember, investing in the stock market always comes with risks, and while platforms like Robinhood can make investing more accessible, they don’t eliminate those risks. Always invest wisely and within your means.

If you want to learn more about investing, check out some other articles at Entrepreneur for additional information.