Have you heard that you need a lot of money to invest or investing is for rich people? I initially
thought that, too, as I opened up my Roth IRA with Vanguard until I had enough in the money market to transfer money into a mutual fund.
Well, thanks to apps like Robinhood, no longer do you have to have $3,000 to invest as you would with most brokerage mutual funds to invest. If only Robinhood had been around sooner, I could’ve started my financial journey much earlier. Now I will review Robinhood and my
experiences with the popular app.
What is Robinhood?
Robinhood is a popular investment app used primarily by millennial demographic to trade
stocks, EFTs, and Bonds on their phones. The app is a popular alternative for millennials that want to invest with little money or without having to buy a mutual fund through a typical a brokerage account or day traders
Changing The Industry
The app differs from other platforms as it has commissioned free trades. The app has changed
the industry and big brokerages have taken notice and cut fees and commissions on funds. They are benefiting investors across the board, as fees can cut into your investment earnings.
Pros & Cons of Robinhood:
Like any financial app or investing technology, there will be pros and cons when it comes to the
platform. For Robinhood, here are revered pros and the not so friendly cons of the platform:
Pros
● -Commission-free
● -Hands-on easy to use platform
-Exposure to International Stocks
● -Options to invest a variety of ways, stocks and risky alternatives
● -Robinhood Gold feature for extended trading
● -Partial Shares options
● -Dividend Reinvestment
● -Categories such as Top 100 stocks
● – Free stock for joining and referrals
● -Cash Management (Although currently low-interest rates in the current market)
● -Learning experience
● – *Can create passive income capital gains and dividends (Also potential for loss, due to
viotile markets No guarantees individual stock investing)
Cons
● -Delayed time on stock trades (doesn’t seem always to trade real-time, can be seconds
off from my experiences)
● -Occasionally glitches
● -Customer Service not Great
● -Had an issue with the server in March leading to lawsuits
● -Doesn’t teach how to invest
● -Isn’t as tax efficient and Roth IRA at brokerage such as Vanguard Fidelity, Charles
Schwab.
● – For inexperienced investors can be particularly risky
● -Easy to get anxious and make poor decisions
● – Waiting for funds to start trading or withdrawing after the sale. (6 trading days after the
sell of securities can you withdraw money into your bank)
● – Others in Space Webull, M1 Finance, Wealthfront, Betterment, Stash, Acorns
● – It doesn’t have to invest advice or help other apps provide.
● – It doesn’t offer tax-loss harvesting, a strategy used by other apps to sell stocks that lost
money at the end of the year that may have lost money to reduce taxes. (Typically this
would likely be done in December) Once you sell a stock, wait 30 days before you can
repurchase stock to qualify for capital loss. Otherwise, it is considered a wash sale.
Who is Robinhood for
Millennials or people interested in trading stocks. People who have money to invest or risk.
What’s cool about Investing on Robinhood?
People who have ever been interested in being Shareholders in a company that you consume products and services from, for example, if you buy the latest iPhone, maybe you’d consider
Apple stock, if you like coffee, instead of $5 latte perhaps consider Starbucks
ETFs you may decide to invest in a sector or basket of companies you have options in ETFs
A few popular ETFs include l
VOO S&P 500, VTI Total Stock Market, QQQ (100 stocks on Nasdaq including Tesla) BND
Total Bond or with your values such as social responsibility fund like ESGV that tracks stocks that do suitable for environmental and or social issues
Note-These are examples, not stock recommendations) Stocks are volatile and come with risk and I am not currently a financial Advisor or fiduciary)
How does Robinhood stack up against the competition
● Robinhood is the most popular downloaded mobile investment app.
● Stash is 2nd most popular Stash is educational for beginners and encourages more EFT trading, which usually is safer than individual stocks as far as being less volatile, and having a mix of companies to diversity. Stash, however, takes a $1 month for service, which makes the app more expensive to use than Robinhood. Stash has fractional shares and automatic weekly payments into ETFs and stocks.
● Acorns is another app suitable for beginners but are less aggressive investments, and it’s a better savings account for purchases you round up using your debit card, in theory,
helps you invest spare change.
Betterment and Wealthfront are more diversified portfolios or pies that offer help from financial professionals and Robo investing. These apps have excellent benefits. Robinhood doesn’t include pie portfolio and tax loss harvesting.
Other apps comparable to Robinhood are WeBull and M1 Finance, with a similar setup.
*Disclosure of list I have only personally used and invested with Robinhood, Stash, and Acorns
app.
Cool Things to Know About Robinhood
It’s a game-changer for investors that can now invest instead of waiting on the sidelines. People can now get into stocks, even partial shares of companies. The feature includes 100 Most
Popular Stocks held by users on the app such as FAANG Facebook, Amazon, Apple, Netflix,Google and other popular stocks such as Microsoft, Tesla Starbucks, and Disney to name blue-
chip stocks
*Not a recommendation to buy these stocks.
The app has created fresh ideas, such as cash management, cryptocurrency trading,
international stocks from around the world, options trading, and dividend reinvestment options.
Where Robinhood can improve
● Customer Service is lacking. Difficult to contact them over the phone. Buying and selling
shares may be sold at a higher or lower price than you initially went to swipe /slide for
trade. (In day trade stock that can make a massive difference on timing)
● More material to educate people to make wiser investment decisions. Robinhood app is
so easy to use, one consideration it can be addicting to watch on your phone, and may not
be best for people who like to gamble or buy and sell on impulse.
● Robinhood is still in the early years of development, and they are trying to appeal to
many types of investors and evolving and growing. However, they can find a better way
to help investors make wiser decisions. The app trades stocks, and EFTs, but doesn’t buy
mutual funds and Index funds which is an advantage of brokerages with retirement
accounts such as Vanguard and Fidelity which each offer a variety of low-cost funds that
track the market. It is tough to time market and most stock pickers even professionals
will perform underperformance the market index over ten years, (as Warren Buffett
famously won a bet with a hedge fund manager by having S&P 500 vs. hedge fund with
higher fees and more trading)
Final Thoughts
● Robinhood is a great app and game-changer for generation millennials and younger
allowing younger people to begin to take steps towards wealth accumulation sooner.
● Many people will make a lot of money on Robinhood; many others may be better with a more passive investing approach. During a bull market, you feel like a genius with stocks, bear market, or recession; you may lose a good chunk of your portfolio and
might want to sell as market bottoms out.
● Robinhood is not for the faint of heart that panics and sells at lousy news or stock trading lower. New Investors may want to practice on stock simulations or more conservative apps like Acorns or Stash you can learn.
Robinhood is a fantastic app for people that do proper research on stocks and have money to invest and can tolerate losses on the money they don’t need in the short term.
● Especially now in the current economy, stocks fluctuate significantly in the short term.
Still, in a long time, most stocks go up as, on average, historically, the market (measured
by index funds such as S&P 500 and Total Stock Market) has returned 7.2% after
inflation, even accounting for recessions. If you have the right temperament and don’t
panic, sell and buy, Robinhood may be an excellent app for you to Increase Cash Flow
with the potential for capital gains and passive income.
