Before we get into the review, I'll go over important intevesting basics so that we're on the same page. Then, I'll breakdown the review into three categories and tell you if you should use Robinhood to invest.

Investing Basics

  • Index funds are a type of mutual fund that have several companies from many industries put into one group. The Dow Jones includes 30 companies. Apple, Nike, and Disney are a few notable ones. The Nasdaq includes 3,000 companies and skews more towards the tech sector.
  • The term ETF, which you’ll see in each of the apps, stands for exchange-traded funds. For our purposes, we’ll treat these similar to index funds. They’re vast groupings of individual stocks that are traded as a group. For example, the famous Vanguard S&P 500 ETF is a tradable fund that mimics the S&P 500 index.
  • The U.S. stock market has returned around 7% annually (when adjusted for inflation) and has bounced back from every downturn and collapse in its history. That doesn’t mean you’ll earn 7% every year, but if you’re confident in America’s long-term future (I am), index funds are a good bet. There will be bad years, but if you keep your money in the market without pulling out, you’ll be rewarded. Time is your friend.
  • You’re not as smart as you think you are. You’re not going to outsmart investors like Warren Buffet by buying individual stocks and day-trading them. Owning an ETF share that includes stocks from many industries helps diversify your portfolio.
  • A higher stock price does not indicate a higher company value. A company’s value is determined by the stock’s price per share multiplied by the number of shares outstanding. For example, while Apple’s share price is $170 and Google’s share price is $1,100. Apple’s value (or market capitalization) is $900 billion, while Google’s is $800 billion.
  • If you’re interested in learning more about investing and asset diversification, I recommend Tony Robbins’ book: MONEY Master the Game. In Robbins’ book, he interviews famous investors like Carl Icahn, Warren Buffett, Ray Dalio, and Steve Forbes. The book has the investors’ take on everything in the world of investing, then breaks it down into terms that regular people can understand.

Setup (B):

  • Robinhood (the company) doesn’t understand who its customers are. It positions itself as an app for beginners but doesn’t provide guidance or basic investing information.
  • You can buy Fractional Shares of individual stocks. Stocks like Google and Amazon have prices over $1,400 per share, so this makes it easier for beginners to purchase a portion of company that they want.
  • I’m not sure how competent their support staff is. Two years ago, my friend signed up and provided Robinhood with his information. Even after reaching out to them, his application is still pending. However, Robinhood is growing fast and that sort of issue is common with startups, and things might’ve changed.

Trading Options (A+):

  • You can trade cryptocurrencies like Bitcoin and Ethereum for free. For reference, the largest cryptocurrency exchange, Coinbase, charges between 1.5 to 4 percent per trade.
  • You have more freedom with over 5,000 stocks and ETFs listed on Robinhood. Unlike Acorns, you can buy individual stocks and see what you’re buying.
  • Robinhood Gold is an optional monthly service that lets you double your buying power, and give you instant funds on your deposits. Different fee tiers depend on how much money you have. For example, I have $2,000 in my account and to get my buying power doubled to $4,000 it’s $10/month.
  • You can transfer your stocks from your previous broker to Robinhood for free.

Fees (A+):

  • Robinhood was the first app or company to offer free trades to everyone. There are no monthly fees either. That’s huge considering most companies charge at least $8. How are regular people going to buy $100 in stock when there’s an $8 fee? You’d need an 8% return on your stock just to get your money back.

Quick Review (TL;DR)

Setup: It positions itself as an app for beginners but doesn't provide guidance or basic investing information.
Fees: Everything is free. There's a subscription if you want excess to more cash.
Trading Options: You can trade individual stocks, ETFs, options, and crypto currencies.

Who is this for?

Robinhood is best for you if you don't want to pay trading or monthly fees. You have the freedom to buy any individual company’s stock or ETFs. If you’re willing to do your own research and find the same popular ETFs that are in Acorns, you should go with Robinhood.