You’ve probably heard of brokerage companies such as; Charles Schwab, Fidelity, MerrillEdge, TD Ameritrade, the list goes on… But there is a new kid on the block (definitely a millennial) that is trying to scoop up their fair share of the stock brokerage service game. This service is called Robinhood. This isn’t a new service, it was founded in 2013 by Baiju Bhatt & Vladimir Tenev as a way for younger & less wealthy investors get into trading. Today, just 4 years later the company is valued at $1.3 Billion dollars. Yup, billion with a “B.” Way to go guys! Not only have they become a serious competitor in the brokerage industry, they have forced the hands of multiple larger firms to lower their fees on trade transactions.
Which brings me the next point. Robinhood offers completely FREE buying and selling of stocks, mutual funds, ETF’s, and more. I want to say that again. They offer FREE trades!
Just take a look at the other guys’ fees, minimum balances required, etc.
Most investors will tell you to aim for fees to equal 1% or less of your capital invested. This makes sense because if you have 5% in fees added to every transaction you make, you are already 5% in-the-hole before you even make the purchase! Robinhood allows you to avoid all fees with all purchases. So you can buy just 1 stock worth say, $5/share, and you won’t have to pay the $4.95 or more charged by other firms.
There are a couple downsides to Robinhood.
- You cannot invest in any retirement accounts such as a Roth IRA or 401k
- You must have an extra 5% of available funds in your account to make a purchase. So if a stock is $100, you must have at least $105 funded in your account.
- No researching is available in-app.
- No Stock Re-purchasing through Dividend payouts. Dividends are paid and deposited into your account and you don’t yet have the ability to automatically reinvest them. This isn’t a huge deal since trades are fee-free, but it does require a little more work on your end.
Overall, Robinhood is a fantastic investment vehicle, especially for the younger generation or those who are just dipping their toe in for the first time.
*Recently, I received an offer from Robinhood to transfer any stocks I own in a regular investment account (meaning not a retirement account) for ZERO fees and they even offered to refund any fees charged by the original brokerage firm. I am seriously considering it and will make an update if I decide to move forward. The only gripe I have is that all of my stocks won’t be in one place anymore. But, to save on $5 fees for every stock purchase I make, it could be very lucrative.
If you are interested in getting started with Robinhood, please click the link below! It is a referral link, but you’ll get a free stock to start your investing journey, just for signing up!