Robinhood App Review: I saved $420 in trading fees in 6 months

Summary: In short, I have saved $420 in trading fees in 6 months (calculations below). I tested the new Robinhood stock trading platform, since September 2015. This article is a personal summary of the headaches and “fucking awesome” moments that I yelled out loud the past couple months. Let’s face it though, you hate trading fees and you’re curious to see what all the hype is about with the new Robinhood App.

robinhood-logo

What is Robinhood?

Robinhood’s biggest claim to fame, it has $0 trading fees. I said that right. The average trading fee is $7-$10 per trade and Robinhood said screw that! Traditional brokerages make SO MUCH MONEY, that Robinhood formed a different business model where they don’t make money on their trades (I’ll explain how their make dough in a bit)

You’ll first notice: You’ll always see Robinhood called the “Robinhood App” because it’s not a traditional brokerage with a website, it is purely only an app. This is one way they keep their costs down, but also because their target audience is millennials. Robinhood specifically target new millennial investors usually around the average age of 24. Those who are starting out with little money, who can’t pay trading fees but want to start investing in a simple way.

It’s open to everyone: Everything I read on Robinhood talks about their waiting period. I didn’t encounter that at all. I simply downloaded it on my android phone (originally built for Apple, but works on both) and signed up. They make it easy.

How Robinhood makes money

If you ever want to understand a company, understand the way they make money. Nike and Gap use child labor to make a higher margin. I’m not here to judge, just shining an example why should know the fundamentals of how profits are made. Let’s take a look at Robinhood’s.

Robinhood, makes money by:

  • Collecting Interest from the cash you have lying in your brokerage account that isn’t invested. For example if you have $900 in your account and are waiting for stock prices to come down, traditional brokers are gaining interest off that $900 like a savings account. Some brokerage accounts give some of this back, but Robinhood keeps it. You won’t lose any money, but you just won’t gain anything extra from un-invested cash. So invest it!

Most electronic trading firms pay little to nothing to place trades, but individual investors are getting taxed up to $7 – $10 per trade. Robinhood saw this as an opportunity.

Robinhood App Review: My experience

Signing up: Pretty simple. I downloaded the app from the Google Play store on my android phone. You will fill out the same info you would opening a bank account. You will have to give your social security number, so be warned, but this is the same info you’d give to any brokerage account. It just feels weird because you’re doing this all over a phone.

Once you register and sign in. You don’t have to use your email and password every time. You can set up a 4 digit pin for security in case you lose your phone.

Connect your bank account: Everything is electronic, so you need to connect your bank account. Both traditional brick & mortor banks as well as virtual banks will work. I connected both my Wells Fargo account and Ally account. Keep in mind, when you sign up, you won’t be able to trade right away. There is usually a 5 business day waiting period once you sign up. This is usually just for Robinhood to verify that your money (a few cents) can be sent to your bank and back.

Is it weird doing everything over an app? There is definitely an adjustment period where you need to get comfortable trading over the app. I’ve never traded over anything else, but it turned out quite easy. There are not many buttons and it’s straight forward.

  1. Search for your stock ticker
  2. There is a large buy button, click it
  3. There is a verify screen, where you must swipe up to verify. This removes people who accidently double tap from making mistakes.
  4. Done.

Here is a look at what the app looks like.

Robinhood App Review - Screenshots-01

 

What I like about the Robinhood App

In the last 6 months, I have done 60 trades. These were a majority of buys and averaged around $101.23 per trade. I prefer dividend investing. So when I have an extra $100, I want to invest that immediately, because the longer it’s invested, the more it’ll make. Traditionally I would keep that $100 in my savings account until I had $1,000 or so to justify a $7 trading fee. Now I just buy stock immediately!

I can do this at my desk at work. I receive a notification from Robinhood that HCP has decreased 10%, I can open up the app and buy 2 shares of HCP faster than I check Facebook (Facebook is addicting). I don’t have to think about the cost/benefit of paying $7 to do this, it’s free! In the total span of 60 trades in 6 months assuming a the minimum fee of $7 I have saved $420 in trading fees. Awesome right?

What I don’t like about the Robinhood App

  1. The biggest issue with Robinhood is the three business day wait period. If you transfer money to your Robinhood brokerage account on Monday, it won’t be available till Thursday. If you sell a stock, you won’t have that cash available to you till 3 business days. Yes it sucks, but I have more time than money. Easily worth $0, but worth sharing. Just wait till Robinhood Instant is revealed to everyone.
    UPDATED – There is no more wait period for Robinhood Instant. It’s open to everyone, so no more 3 day wait period for your investments. This is awesome! 
  2. There is no website to access your stocks whatsoever. That means I can’t connect it to Mint (my money manager). Mint as consistently stated that since Robinhood doesn’t have a website, it can’t connect to the brokerage account. So my true financial worth isn’t provided. This does kind of suck.
  3. There is no in depth analytics to analyze stock values. It gives the basic info, but I usually use Yahoo Finance to do my research and just use the Robinhood App for pulling the trigger. With so many great analyzing tools on the web, this isn’t the biggest loss.
  4. I would be remise if I didn’t mention the recent glitch Robinhood had. I woke up earlier this week to find that Robinhood glitched out and didn’t display my portfolio value. I literally freaked the fuck out. My balance went from $6,604.54 to $8.14 (which was my available cash). I immediately noticed that I still had all my stock positions, but it just didn’t total correctly. I knew since it was displaying my available cash instead of the portfolio value, this was a glitch and pulled the wrong info. I rightly, emailed customer support and they fixed the issue in a couple of hours. I don’t think it was too crazy, but some people on the world wide web wouldn’t shut up about it. Maybe it is the $0 free trades, but I can live with a small glitch for saving $420.

Don’t let those negative comments scare you, I have absolutely loved the Robinhood trading platform! I plan on continuing to use it as my primary brokerage account for years to come.

The last word

Robinhood isn’t the first to try the $0 free trade. Other companies have done this in the past and frankly failed. It’s a difficult business model, but I think Robinhood is doing it right. They have received financial support from some large names like Google Ventures, Index Ventures and Ribbit Capital. They have something special.

I will continue to use Robinhood as my brokerage account for the foreseeable future. I do small trades and that $0 trading fee is perfect for my investing style. If you are tired of paying for trading fees, I’d suggest you give it a try.

Upcoming: The only hiccup is the 3 business days waiting for available cash either from your bank to Robinhood or selling a position, that available cash will take 3 business days to be available. However that’s not forever.

Robinhood Instant is being released (to only a few people at a time). This will remove the 3 day waiting period (up to $1,000) and will make this brokerage app truly a force to be reckoned with. You can move up the waiting list if you refer it to friends, so if you want to try it, please use my referral link.

I believe the Robinhood Business model will influence other brokerage firms in the future and they’ll lower prices to target this millennial demographic. This will be awesome for future investors. Would you be willing to try it? If not, what are your reservations?

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24 replies
  1. The Dividend Mogul
    The Dividend Mogul says:

    Wallet Squirrel,

    Thanks for sharing this! I have also been using Robinhood for a while now. It is a great feeling to not worry about commissions. You can literally by a share of a company whenever you have enough for one single share! Couldn’t have wrote it better myself. I look forward to Robinhood Instant!

    – The Dividend Mogul

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Thanks Dividend Mogul!

      I completely agree, when I have $54 in my account, I expect to buy $54 worth of stocks. I know a lot of Dividend Investors like Scottstrade and DRIP investing, but I’m good with reinvesting those dividends in other stocks that I choose and not paying $7 – $10 per trade.

      I am EXCITED for Robinhood Instant, currently 51,397 of 241,662 in line. It’s going so slowly though. No worries, I’m good with the 3 business day wait times for now.

      Reply
  2. Investment Hunting
    Investment Hunting says:

    I used Robinhood when it was in beta. I liked the app, however I stopped using it for now. I’m trying to build up a portfolio with one broker so I can sell covered calls. I cannot do this with Robinhood, so it’s not what I’m using today. I do like the service though. I’m hopeful that they will auto DRIP and add more features in coming years. Thanks for the great review.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Ha ha ha I just had to look up “selling covered calls”. I didn’t know about this. I’m still wrapping my head around all the options we have as investors. I’m still on simple buy and hold which Robinhood has worked perfectly, but that sounds cool!

      I think with the way Robinhood is growing, they will soon add other options such as auto DRIP following their Robinhood Instant roll out. Hopefully, other brokerages will try to compete and make their features more cost effective. That’s the way I see the future of brokerages going at least.

      Reply
  3. DivHut
    DivHut says:

    Always great to read a review from someone that actually uses the product. I always say that if I was starting out today I would go to Loyal3 or Robinhood. It’s great not having to pay a commission as you can place very frequent and very small dollar value trades. In all, I can’t complain. My current commission schedule is $2 a trade with Sharebuilder from a legacy deal they had for Costco members. Thanks for sharing.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      $2 is the cheapest I’ve heard of from any dividend investor. Way to go!

      I might try/write a review about Loyal3 in the future, we’ll see. I think the biggest thing it has going for it is the opportunity to invest in IPOs. I just don’t like the limited amount of stocks you can buy. Thanks for commenting!

      Reply
  4. All About Interest
    All About Interest says:

    Thanks for sharing. I don’t know much about the service but it looks interesting. I jumped on Motif and plan to build up that portfolio before I get another broker. If Robin Hood ever gets a DRIP program, I’d be very interested.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      It’s a pretty interesting business model. I think it’s definitely a contender for beginner dividend investors. I’m hoping they get DRIP in the future, but I’ve never been a big fan of the DRIP program. I personally like being able to reinvest my cash from dividends into new stocks.

      Maybe since I talk/think/write about dividends all the time, I’m pretty active in reinvesting them right away. =P

      Reply
    • Mike H.
      Mike H. says:

      I use Motif as well as Firstrade for dividend investing. The lack of DRIP for these accounts is actually a plus for me: I only like DRIP for ETFs or mutual funds. Motif has a few drawbacks, but not much, and it’s only a headache around tax time :). Robinhood seems like a very attractive app, but not being able to link it to Personal Capital is too bad.

      My question with Robinhood is: what’s the endgame? Let’s say you manage to accumulate a large portfolio $30 at a time. When you finally own 100 shares of 20 companies, does Robinhood still make sense? Or will you basically have to transfer to another institution/platform?

      Reply
      • Wallet Squirrel
        Wallet Squirrel says:

        I will probably stick with Robinhood up to $500,000 (max insurance rate for most brokerages) and only for dividend investing. If I ever try out day trading or options, it doesn’t make a lot of sense with the 3 day wait periods after selling or transferring money into your bank. It really only makes sense for beginning investors in my opinion.

        As for the end game, I think they are starting small and growing. They are currently looking for a web developer and I’m curious to see if that means they’ll soon have a website brokerage. If so, you’ll be able to link up with Personal Capital (or my favorite Mint) in the future. Overall, I think Robinhood has a lot of room to grow and will start loading up on more and more features in the future. I’ll let you know when I start seeing these come to fruition. =)

        Reply
        • Mike H.
          Mike H. says:

          I have too many investment accounts as it is, and I’m looking to consolidate. Robinhood seems like a great idea day-to-day, but I’ll have to find out how easy it is to transfer shares out of Robinhood.

          If it’s easy, I’m in: my strategy would be to incrementally build my positions sans fees, then when they reach a certain size (say, 50-100 shares), transfer them to another brokerage with more capabilities.

          I’m in a very similar boat as you are, and with the exception of my Dodge & Cox fund (which I think is worth it), I hate fees with the white hot passion of a thousand burning suns.

          Reply
          • Mike H.
            Mike H. says:

            Answered my own question: you can’t move shares into or out of Robinhood. Per their FAQs, they don’t support ACATS at this time. That’s a real shame.

          • Wallet Squirrel
            Wallet Squirrel says:

            Sucks about your find of moving shares out of Robinhood. I haven’t given it a lot of thought but that should definitely be a consideration.

            However wanted to ask, what is a Dodge and Cox fund? Sounds like nasty game of middle school dodgeball.

          • Mike H.
            Mike H. says:

            Haha, that sounds like the worst game ever.

            They’re a mutual fund company. I have their large-cap fund in one of my 401(k) accounts, and it has a massive investment fee (like 1.05%), but their track record and stability are better than anything else in that 401(k) lineup.

            Every fiber in me says that high fees aren’t worth it. I certainly wouldn’t invest in something with that high of fees in a taxable account.

  5. Dividendsdownunder
    Dividendsdownunder says:

    Hey there, nice review, I definitely learned a few things. I don’t think this is in Australia yet, it will be interesting to see if they do.

    I do hope the big firms take note of how much cheaper it is to do investing through this and then lower their fees.

    Tristan

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      They are currently rolling out in China, maybe they’ll start making their way south afterwards =P

      I think since it doesn’t cost the big firms much to make trades and they make a lot ($7 – $10 per trade) from us as investors, they’ll likely hold out as long as they can, but eventually they will come down in price. Like Elon Musk says, others people margin is my opportunity. I think that’s pretty close to what he said at least and Robinhood is definitely trying. All other free trade platforms have failed in the past, but these guys have a good management crew and a couple well known investors who are vested in their success.

      Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Maybe they’ll make their way down to Australia after their current roll-out in China. =)

      PS. I love Australia, I did a study abroad there once. Awesome place! I hope you guys get it soon.

      Reply
  6. Dividend Diplomats
    Dividend Diplomats says:

    Wallet Squirrel,

    First – amazing review, I love how you do it and I love the chart/picture template you have for what it looks like – i.e. please do this when you do more reviews! And you see from the comments – it definitely is attractive and informative, plus it has your point of view.

    I will wait for the Robinhood Instant to see if there are further features – 3 being: DRIP, Quicker Money Transfer, and to see if it will branch into IRA type accounts.

    Great review and I’m excited you saved so much money!

    -Lanny

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Aww Dividend Diplomat, you’re making me blush.

      Thanks for the feedback. I was really impressed with the app and even more with the savings. I’m now 32,035 of 228,050 in line for Robinhood Instant! So it’s definitely possible to move up. I’ll let you know if I find any of those features in the future.

      As far as making things look pretty with graphics, you got it.

      Reply
  7. Aadithya
    Aadithya says:

    Hi, I didnt read through the comments to see if this was addressed. – Robinhood Instant is here which allows for cash available instantly when you transfer from bank or sell shares. This was the biggest cons and now that has been addressed.

    Reply
    • Wallet Squirrel
      Wallet Squirrel says:

      Hi Aadithya, thanks for visiting! I just made the update to the con list. They do allow for up to $1,000 in cash to be deposited/withdrawn instantly now which is perfect for someone like me who only does a few hundred at a time.

      Thanks for the reminder. =)

      Reply

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