Is The Robinhood App a Scam? Can You Make Money With This App?
If you are looking to make commission-free trades then the Robinhood app is one of the newest choices out there. But is this app any good? Or is the Robinhood App a scam that is going to be a waste of you time?
This was a question that I wanted answered too. So I embarked on a mission to test this app out and see if it lived up to all the hype surrounding it. Here is my review…
Robinhood Trading App Review
- Website: robinhood.com
- App Availability: App Store & Google Play
- Cost: Free
- Recommended?: Yes, more on this
Overview of the App
The Robinhood App was developed by a company called Robinhood Financial, which is based out of Delaware and has been around since 2012.
The app’s claim to fame is that it allows users to make free trades. They take no commissions when you trade and they say this is possible due to their extremely low overhead costs (not having storefront locations, manual account management etc.)
For those you worried about the trustworthiness of this company you will be happy to know that they are a regulated broker in all 50 (+2) states in the US and are a member of FINRA as well as SIPC, which means a lot. SIPC, by the way for those who may not know, protects securities customers up to $500k.
By looking into the company they have everything that I was looking for. They have all the right regulations and everything is legitimate. The app sounds very good on paper but of course this doesn’t necessarily mean that it is any good and worth your time, which is what I am reporting on.
How It Works
Everything is done through the app. You need the app to be able to trade. It is possible to sign up and create an account on their website (robinhood.com), but you will still need the app to make trades.
Creating your account and getting the app is very simple and they promote it as it “only takes 4 minutes”, which is somewhat accurate. I would say it takes more like 5-15 minutes though.
All you have to do get started is create your profile, enter some personal contact info, enter your SSN and confirm your identity, download the app, and fund your account. This process probably only takes 5-15 minutes of your time but you will have to wait a bit for them to approve your account before you can fund it.
You will also have to wait 2-3 days after you hook up your bank account for them to verify it.
Going Inside The App
When you first get the app you will be prompted to create a “watchlist”. The app asks you to choose 3 stocks to put on your watchlist to start. You can add as many as you want to but you need to add 3. If you aren’t sure what 3 stocks you want to keep an eye on then just pick randomly and move on.
There are also a series of questions that you are asked as far as what your financial goals are. Your options to choose from are…
- preserve my savings
- a source of income
- speculative trading
- something else
You will also be asked random questions like “what would you do (in certain financial situations)”.
I guess these questions are to customize your experience with the app and determine what type of advice it gives you.
How To Use It
After you get all the initial stuff out of the way using the app is pretty simple.
You can search for any stock you want by using the search bar and typing in the particular stock’s symbol.
You can then click on the stock and view a graph of its performance filtered by day, week, month, year, or all-time. There will also be a bit of statistics regarding the stock’s performance listed beneath it. It will give you stats including…
- 52 week high
- 52 week low
- average volume
- market cap
- P/E ratio
What I Like About This App
First off, its very simple to use. Anyone could easily use this app to trade and not have any problems. It also performs well and I haven’t had any glitch problems or other tech problems that could potentially be a disaster.
But what I like most obviously is that there are no trading fees. This is a ZERO commissions trading app. This alone can save you a good bit of money in some situations.
The thing is though…. how can they let people use this app and charge no fees? I was suspicious of this so I did a bit of research and found that they actually explain how this all works right on their website.
How They Make Money
They make money in 2 ways. 1) they collect interest on funds that are in members’ accounts, just like banks and other places do, and 2) they have a Robinhood Gold paid membership
This Robinhood Gold membership gives you 2x margin on your account, the ability to make before and after hours trades, and instant access to money so that you can reinvest instantly.
This Gold membership can cost you anywhere from $6/mo to $200/mo depending on how big your account is and how much buying power you want. The different prices along with the features are shown below…
Overall I like this app but I do not recommend it for everyone. It is more geared towards people that are making lots of trades on the daily in a more speculative way. The app makes it very easy to trade and you can buy stocks with 3 simple taps on your phone. Its and easy platform to use and not a hassle by any means.
However, if you are making well though out and researched trades this probably isn’t for you. The stats and charts they provide are rather basic and don’t give too much detail.
This app is definitely a legitimate and trustworthy app but its just not a good fit for all investors out there.
Do you have any questions, comments, concerns??? Leave them below in the comment section and I’ll get back to you soon 🙂