Robinhood Review 2021: Pros, Cons & How It Compares

Robinhood offers commission-free stock, ETF and options trades, a streamlined trading platform and free cryptocurrency trading, and now offers fractional trades and recurring investments for long-term strategies.

Chris DavisFebruary 7, 2021
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Our Take

4.0

NerdWallet rating 

The bottom line: Robinhood provides free stock, options, ETF and cryptocurrency trades, and its account minimum is $0, too. Mutual funds and bonds aren't offered, and only taxable investment accounts are available. Still, if you're looking to limit costs or trade crypto, Robinhood is a solid choice.

Robinhood

on Robinhood's website

on Robinhood's website

Fees

$0

per trade

Account Minimum

$0

Promotion

One free stock

for new account owners

Pros & Cons

Pros

  • No account minimum.

  • Streamlined interface.

  • Cryptocurrency trading.

Cons

  • No retirement accounts.

  • No mutual funds or bonds.

  • Limited customer support.

Compare to Similar Brokers

Robinhood
TD Ameritrade
Interactive Brokers IBKR Lite
NerdWallet rating 
NerdWallet rating 
NerdWallet rating 
Fees

$0

per trade

Fees

$0

per trade

Fees

$0

per trade

Account Minimum

$0

Account Minimum

$0

Account Minimum

$0

Promotion

One free stock

for new account owners

Promotion

None

no promotion available at this time

Promotion

None

no promotion available at this time

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Full Review

Robinhood is a free-trading app that lets investors trade stocks, options, exchange-traded funds and cryptocurrency without paying commissions or fees. In its early stages, Robinhood stood out as one of the only brokers offering free trades. But with many big-name online brokers eliminating trading commissions and fees, Robinhood has had to find other ways to stand out, which in 2021 includes a new recurring investments feature. That said, it's still a solid choice, and currently it's one of the few brokers that gives investors the opportunity to trade cryptocurrency.

Robinhood offers both web and mobile trading, but the platforms are purposely bare bones, and some investors may find the range of tradable securities and account options lacking. In the last year, the platform has also received criticism for untimely outages and trade restrictions amid market volatility.

» Want help managing your investments? See our top robo-advisors.

Robinhood is best for:

  •  Mobile users.

  • Individual taxable accounts.

  • Margin accounts.

  • Cryptocurrency.

Robinhood at a glance

Account minimum

$0 for brokerage account and for Robinhood Gold account; $2,000 for a margin account (regulatory minimum).

Stock trading costs

$0.

Options trades

$0.

Account fees (annual, transfer, closing, inactivity)

No annual, inactivity or ACH transfer fees. $75 ACAT outgoing transfer fee. (Robinhood Gold costs $5 a month.)

Tradable securities

• Stocks. • ETFs. • Options. • Cryptocurrency. • American Depositary Receipts for over 250 global companies. • Fractional shares

Number of commission-free ETFs

All available ETFs trade commission-free.

Number of no-transaction-fee mutual funds

None.

Trading platform

Web platform is purposely simple but meets basic investor needs.

Mobile app

Mobile trading platform includes customizable alerts, news feed, candlestick charts and ability to listen live to earnings calls.

Research and data

News available from WSJ Markets, Reuters, Barron's, CNBC Business and Cheddar. Gold members have access to research from Morningstar, Nasdaq, Nasdaq Totalview level II Market Data for an additional $5 per month.

Customer support options (includes website transparency)

Email and social media.

Where Robinhood shines

Commissions and fees: What’s better than free? Robinhood’s commitment to providing 100% commission-free stock, options, ETF and cryptocurrency trades is admirable, and the savings for investors who trade frequently is significant. This is especially true for options traders — Robinhood is among the handful of brokers that don’t charge a per-contract fee. Still, these days many big-name brokers also offer free trades, so it makes sense to compare other features when picking a broker.

» New to investing? Learn more about how to buy stocks.

Robinhood also seems committed to keeping other investor costs low. The Clearing by Robinhood service allows the company to operate on its own clearing system, which reduces some of the service's account fees.

One of the biggest fees Robinhood charges is the $75 outgoing account transfer fee, but that's not an unusual fee among brokers. (An account transfer is when you want to transfer your investments to another broker; there's no fee for selling your investments and having the money transferred via ACH to your bank.)

Account minimum: Robinhood doesn’t have one, which means investors can get started right away. Of course, in order to invest, you’ll need enough to purchase the investment you have your eye on. (Like other brokers, Robinhood requires a $2,000 minimum portfolio balance to open a margin account. This is a Financial Industry Regulatory Authority regulation.)

Fractional shares and recurring investments: Like some other brokers, including Interactive Brokers and Charles Schwab, Robinhood has introduced fractional shares. That means you can pay as little as $1 for a portion of a share, even if that share's full price is in the hundreds of dollars. This feature makes it much easier to build a diversified portfolio — you're able to buy many more companies, even if you don't have a lot of money to invest.

Fractional trading pairs perfectly with Robinhood’s newest feature: recurring investments. All you have to do is set a schedule (weekly, biweekly, monthly, etc.) and a dollar amount, and Robinhood will automatically invest the amount you want, when you want. While this isn’t an uncommon feature among brokers, using it alongside fractional shares is a standout benefit. When recurring investments are based on buying by-the-share (versus a dollar amount), you’ll inevitably end up with uninvested cash, but Robinhood has solved this problem.

Fractional shares has also given the company the opportunity to offer a dividend reinvestment program (known as a DRIP), which it didn’t previously. This is a very valuable strategy for building wealth over time, much like recurring investments. By offering the fractional shares/recurring investments/DRIP package, it seems Robinhood is working to stay competitive with the major brokers now that free trades are commonplace.

High-yield savings: Robinhood also offers a cash management account that currently pays 0.30%. The account comes with a debit card and free ATM withdrawals from more than 75,000 ATMs, and offers up to $1.25 million of FDIC insurance thanks to Robinhood's agreements with several banks.

Ease of use: If you’re accustomed to using a smartphone — and Robinhood's target user base obviously is — you’ll find the sign-up and account funding process quick and painless. It all happens within the app in a matter of minutes, with just a few quick questions that gather your personal information, contact details, Social Security number and means of funding your account. The company says approved customers are notified in less than an hour, at which point they can initiate bank transfers.

Robinhood uses instant verification with many major banks, sparing users the hassle of reporting micro-deposits to an account to verify information. Bank transfers of up to $1,000 are available instantly for investing, as are proceeds of up to $1,000 from selling stocks. Deposits larger than $1,000 will take four to five business days to process. We should note, however, that Robinhood has been the subject of complaints suggesting that signing up may be too easy. So while it’s true you can start investing with Robinhood in no time, users should be certain they understand the risks of investing before diving in.

Streamlined interface: This could be a negative, as the service doesn’t offer all the bells and whistles of a typical online stock broker. But for investors who know what they want, the Robinhood platform is more than enough to quickly place trades. It supports market orders, limit orders, stop limit orders and stop orders.

Both the mobile and web platforms also include a feature called collections, which are stocks organized by sector or category. Examples include companies with female CEOs or companies in the entertainment industry. On web, collections are sortable and allow investors to compare stocks side by side.

Robinhood also offers a tab bar at the bottom of the app, which offers quick access to portfolio values, watch lists, transaction history and account statements.

Robinhood Gold: Robinhood Gold offers investors the ability to trade on margin, also known as borrowed money. The opt-in service carries a flat monthly fee of $5.

New investors should be aware that margin trading is risky. You’re trading on money borrowed from the broker, which means you can lose more than you invest. (Here's more on how margin trading works.)

Improved research offerings: Though Robinhood's offerings still pale in comparison to other brokers, the company has made strides to increase the tools and research available for customers, offering analyst ratings, lists of top movers, earnings calendars and links to earnings calls. Candlestick charts are available on mobile, and the service resurfaces information from other Robinhood customers to create its own universe of data. For example, investors can view the 100 most popular stocks on the platform and sort them by various criteria, including analyst ratings, what’s rising over a given period (or what’s falling), market cap and price. They’ll also have access to a few great data sources, including Wall Street Journal Markets, Reuters, Barron’s and CNBC Business.

Where Robinhood falls short

Reliability and trustworthiness: Robinhood has been the subject of serious complaints and lawsuits over the years, which potential users shouldn’t ignore:

  • In December 2020, Robinhood was charged by the Securities and Exchange Commission for misleading customers. The SEC found that “Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices,” and that in aggregate, those inferior prices deprived customers of $34.1 million, even after accounting for savings from Robinhood’s commission-free trade offering. Robinhood agreed to pay $65 million to settle the charges.

  • Also in December 2020, the Commonwealth of Massachusetts accused Robinhood of aggressively attracting inexperienced investors to its platform and using gamification techniques to manipulate customers. The complaint also states that many Robinhood users were given access to advanced — and risky — options trading products, even when they identified as having no or limited investment experience. In August 2020, Robinhood announced plans to hire hundreds of new customer support representatives.

  • In January 2021, the app came under fire for its decision to restrict trading during the extreme market volatility surrounding GameStop and other heavily shorted stocks. And while the market conditions led other brokerages to take precautions, Robinhood’s restrictions were more expansive.

  • Throughout the surge of new investors during 2020 and into 2021, Robinhood — along with other brokers — experienced outages and other technical issues that disrupted service. Both the outages and the January 2021 restrictions led to class-action lawsuits.

Limited securities: Mutual funds and bonds — often included in well-diversified, long-term portfolios — aren't supported.

One account option: For investing, Robinhood supports only individual taxable accounts (often called brokerage accounts; you can learn more about these accounts here). For most investors, investing through a taxable brokerage account should come only after they have invested 10% to 15% of their income for retirement in a tax-advantaged account like a 401(k) or IRA. (Looking for a retirement account instead? See our roundup of best IRA account providers.)

Customer support: Many brokerage customers understandably expect phone support, and they won't find it here — Robinhood's customer support is almost exclusively done through email. The company does not publish a phone number, and even after becoming a member and logging in, you’ll still be routed through a series of FAQs before you can get in touch through email. It does have a useful and well-organized help center online, and the website is easy to navigate and transparent.

Is Robinhood right for you?

If a streamlined trading platform or the ability to trade cryptocurrency are important to you, Robinhood is a solid choice.

But now that plenty of online brokers have joined Robinhood in offering commission-free trades, casual investors can afford to shop for the broker that suits them best. Interested in other brokers that work well for new investors? See NerdWallet’s rankings of the best brokers for beginners.

Andrea Coombes contributed to this review. 

on Robinhood's website