THE COMPLETE BEGINNERS GUIDE
How to Use Robinhood
What is Robinhood?
Robinhood is a broker-dealer, financial application where users can trade stocks, options, and funds. The Robinhood app also deals in cryptocurrency and lets you easily buy and sell. With over 10 million users on the app, Robinhood is an excellent platform for new traders, which is why we have created this guide on How to Use Robinhood.
Due to Robinhood’s no commission and fees policy, the new traders get a good chance to learn how to make money. Moreover, they also don’t need to have any limited minimum deposit to start trading. So basically, your trading can begin at any amount of money that you can comfortably afford.
Since late 2019, many other online brokers have also started offering the no commission and fees policy. And that has been quite unfortunate for Robinhood in terms of its customer base and popularity. However, it remains one of the few applications that offer the trade of cryptocurrency, making it a perfect choice.
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HOW TO USE THE ROBINHOOD APP
To start on the Robinhood app, you first have to sign-up and deposit some money into your account. Once you log in, you’re faced with a bare-bone interface showing you the current market-data, which gets updated in real-time. There are plenty of options to keep track of your progress. You can look at previous prices of the stocks that you’re interested in, check your account’s history, etc.
The app also separately shows you the stocks that you own and the stocks that you would be interested in buying. Clicking on stock will prompt its price history, further details, and the buy and sell option. The push notifications option in the app is excellent, as it keeps you updated. Throughout the day, you get essential notifications related to your owned stocks and your watch-list stocks. Your notifications can also be customized in the settings, according to the information you want.
Overall, the application features a very simple and easy to understand layout. Most beginners end up loving this layout, while some experts might dislike it due to the limited information it has. The experience that Robinhood offers, be it on their website or application, is quite comfortable. This is the reason why it’s one of the best stock trading applications for newbies.
Time to get your
PROS OF ROBINHOOD
- No Fees – Indeed, Robinhood doesn’t have any fees or commission. In fact, this used to be a major USP for the company until recent times.
- No minimum deposit – What makes this company so suitable for beginners is that it doesn’t require you to deposit a certain amount to start trading.
- Diverse Investment Options – Robinhood’s trading and investment options are plenty, ranging from Stocks, Options, ETFs, and even Cryptocurrency.
- Mobile-Friendly – Robinhood works best on a smartphone, through the application, which offers excellent flexibility. But it can also be accessed through a desktop without any problems.
- Upgrading Options – There are two options for Robinhood users. Upon signing up, you automatically become a Robinhood Instant member where you can instantly make deposits and trade stocks.
For a $5 price per month, you can upgrade to Robinhood Gold. This premium membership gives you access to better information and the ability to make bigger instant deposits.
- No Transfer Fees – There are no fees for transferring.
- Notifications – The push notifications option of the app allows you to get important market news.
CONS OF ROBINHOOD
- No Research Tools – There are no proper research tools on Robinhood. That is why there’s a lot of information lacking, and many experts don’t like Robinhood.
- No Apps For Web or Tablets – One con is that there is no proper web app or an app for tablets for Robinhood, which limits its usage a little.
- No IRA Options – Robinhood doesn’t offer any Individual Retirement Account (IRA) services to its customers.
- Limited Customer Service – One major let down about Robinhood is that they only offer customer service support through the email option.
- Single Account Type – Robinhood only offers a single type of account, and that is Taxable Accounts.
- No Mutual Funds & Bonds – Robinhood deals in a lot of things, but it doesn’t deal in mutual funds and bonds.
- Delayed Information – The information base of Robinhood isn’t the greatest. There’s very little information available, and there are a lot of information delays.
- App Failure – Sometimes, many app users experience unforeseen app failures, which can cause a lot of problems for them.
HOW DOES ROBINHOOD MAKE MONEY
How Robinhood makes money if they’re taking up no commission or fees, is a prevailing thought. Robinhood somehow attracts customers with free signups but still manages to survive and make money.
In this section, we’ll look into the different revenue streams Robinhood has, which the company uses to make money. That is why they’re so popularly and easily able to offer the no commission and fees benefit.
When it comes to transparency with the source of income, Robinhood is at the top. The Robinhood company has mentioned all their sources of income on the website. Unlike its competitors, Robinhood doesn’t charge any commission and fees. But following are the sources, through which Robinhood still manages to make money:
Robinhood Gold Premium Account
One source of income for Robinhood is the Robinhood Gold, premium membership account. For premium membership, you have to pay $5 per month. Getting a premium membership gets you more access and options. You can look at Morningstar’s research reports, make bigger deposits, etc.
Since you’re also allowed to do margin investing, you basically borrow money from the Robinhood Securities. Once you’ve borrowed your first $1000, you have to pay a mandatory 5% interest on the borrowed amount, like any other traditional stockbroker getting interest in the customer’s cash, similar to banks collecting interest on cash deposits.
The buying and selling orders of stocks, options, and ETFs
are sent to various market makers who do the final processing. Market makers compete with the exchanges and therefore give rebates to the brokerage firms. The reason why firms go to market makers and not exchanges is that they offer better prices.
When you place an order, Robinhood Securities send these orders to one of their many market maker connections. The market makers are chosen based on execution. Your orders are shipped to the ones who provide the best executions.
The same thing happens with Robinhood Crypto. In exchange for the information that trading venues provide about the best prices, Robinhood Crypto receives volume rebates. These different rebates from another source of income for Robinhood.
Robinhood also has a direct cash income. The uninvested cash which fails to make it to the Cash Management systems of banks is taken up by Robinhood and deposited in bank accounts, giving reasonable interest rates.
Income Through Stock Loans
Robinhood Securities also lends stocks. These stocks are given to various parties who have purchased them on a margin.
Through Cash Management Services
Sutton Bank runs the Robinhood debit card service. The bank receives an interchange fee for licensing the card through Mastercard International. This interchange fee is sent directly to Robinhood Financial. Interchange fees are usually paid as a cover to different processes like transaction processing or any losses caused by some kind of fraud.
Other Sources Of Income
There are some other small-scale sources of income for Robinhood. These sources of income are:
- Fees that banks give to Robinhood Financial and Robin Securities for bringing in funds to them.
- Robinhood also charges you a $10 fee, if you successfully make a transaction through a phone call.
- If you need assistance in purchasing a foreign stock, Robinhood can also offer you that. For their assistance services, they charge you somewhere around $35 to $50.
- One common practice is the industry is receiving payments for order flows. And Robinhood also makes money from that
ALTERNATIVES TO ROBINHOOD
- Webull: Much like Robinhood, Webull is an American based startup offering brokerage services. Moreover, like Robinhood, Webull also doesn’t take any fees or commissions.
Webull is also considered very safe for trading as several top-class financial companies cover it. However, Webull doesn’t offer any credit or debit card services, unlike Robinhood.
- E*TRADE: E*TRADE is another online brokerage firm. It has two very well modeled applications that focus on two distinct trading styles. E*TRADE also has three different desktop-based platforms that work great in attracting different investors with varying investing styles.
E*TRADE initially did use to charge a fee, but now they’ve stopped that practice. However, they still do charge for Options at around $0.5 to $0.65 for a contract, depending on the trade volume.
- Firstrade: Firstrade is another American based online brokerage firm giving you the option of getting free access to stocks, options, ETF, and even mutual funds, unlike Robinhood. Firstrade does have non-trading fees, but they’re quite low.
Although it doesn’t offer debit/credit card services, overall, it is still vast and offers many research options.
We hope you see from this article that you don’t have to be an expert to become an investor. You just need to start. And with user-friendly platforms, like ROBINHOOD, that make the process simple…starting is as easy as downloading the APP right now!
Love and Prosperity,
Wendy and Curtis
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