Robinhood is a very unique online broker as they are achieving something that at first seems impossible. They are currently one of the few discount brokers that offers customers the ability to trade without any commission. Robinhood is a fantastic way to get stuck into trading without the fears of not only losing your money to the market but also to the broker your using. However, with zero commission, it seems pretty obvious that the broker is going to make some cuts when it comes to tools and research.
In fact, that is exactly what Robinhood has done. They have stripped away any form of desktop application and have gone 100% mobile. Robinhood, as a company, started in 2013 and began as a venture project. As a result, they relied heavily on their investors to keep them afloat. However, they have now began to explore other monetization methods.
This review will be going through Robinhood and will briefly explain its features. If you’re not a fan of the standard commission fees and don’t like to trade at home, this might be the perfect solution for you.
Commissions and Fees
Well, I am not sure if I should include this title because there are no fees when you’re using Robinhood. To this day, they have kept up their promise of creating and providing a zero commission fee structured broker. They also do not require any initial account deposit to get started with. However, this begs the question of how they actually make money from this business model.
More recently, Robinhood as began to explore other ways to make money on their platform and have come up with a paid membership that clients can get to give them more buying power. The new model also gives traders the ability to trade after-hours. The price of the gold membership depends on how money you have deposited into your Robinhood account at the time. I won’t break down the numbers for you but you can check them out on their website.
Features and Things You Should Know
Although the concept of zero commission seems like a fantastic idea, there are a few catches. The first one is that the Robinhood system is built for mobile and mobile only. Sure, this has its benefits but for most traders they will want to sit down at their computer and work through the stats and charts. That’s the other thing you need to know about Robinhood, they don’t have any advanced features – its very bare bones.
In addition, when it comes to the simple things like actually ordering the stocks, you should be aware that limit orders and stop loss orders have only recently been introduced and you can only pull up publically listed stocks. There is no support for pink sheets or OTC. In addition, mutual funds and EFTs are not supported. This platform is only decent for equity trades.
On the face of things, Robinhood trading is a dream come true. Finally, a platform that doesn’t charge any commission. However, as you dig deeper into the system, things become a little clearer. With the zero commissions comes less research and features and a limited design. You can only trade equity on the application and there is no support for mutual funds, options or ETFs.
In addition, when you do the math and compare the gold membership to other brokers, it actually isn’t economically possible to save money with Robinhood despite the zero commission. With this platform, the concept is good but the execution is a little disappointing.