What is Robinhood?

Check out this guide to learn everything there is to know about this company.

Updated: May 20, 2024
Matt Crabtree

Written By

Matt Crabtree

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In the world of investments and banking, there are many different names out there. It seems as though we hear of new ones every day.

One such company that seems to have taken the world by storm is Robinhood. This company is unique, and has some interesting offerings that have really attracted the masses to them. 

But what exactly is Robinhood? Check out this guide to learn everything there is to know about this company, including pros and cons, account offerings, and just what they have to give the world. 

What Exactly is Robinhood?

You’ve heard of the hero Robin Hood, who used to take money from the rich and distribute it to the poor. There are many fairy tales and stories tied to Robin Hood, and he was quite the hero to his class and community, but definitely a villain to the elite of the area.

Well, Robinhood the app doesn’t take money from the rich, but they do have a heavy focus on helping the poor be a little less poor. Their philosophy is that anyone should be able to invest, even if you can only put in small increments.

This is what they built their entire vision on, and they’ve taken the market by storm in that capacity. This American company is headquartered in California, USA. At this time, you cannot open an account in the UK, but they say they are working towards that capability. 

Robinhood is regulated by FINRA, and they have been around since 2015.

What started as a purely digital investment app has grown into not only stocks and ETFs but also cryptocurrency, with their own crypto wallet available as well. 

Did we mention that you can trade with no commissions on Robinhood? This is one major attraction factor to them. 

Top Advantages of Robinhood

Every investment app out there has some sort of niche, as well as places where they could fall short. It’s simply the way of the business. Every business is much the same. They have their strengths and weaknesses, often directly related to their niche in the industry. 

Robinhood is much the same. There are some major areas where they stand out in the investment industry specifically. This includes these things. 

  • IRA matching up to 1%
  • True discount broker
  • Streamlining Details
  • Free trading 
  • Cryptocurrency
  • IPO availability

These are their top advantages in the industry, so let’s look at each one more closely. 

IRA Matching

Most investment apps will allow you to create IRAs and manage them, or pay to have them managed. Robinhood does this, but they don’t just stop at giving you an IRA account to work with. Instead, they match your IRA contributions up to 1%. This is relatively unheard of unless you’re contributing to an IRA or investment account with your employer. 

IRA accounts are still fairly new with Robinhood, which might be why they are offering the match. However, if you want to take advantage of having someone else contribute to your retirement, this is a great way to do it. 

Robinhood is the first in this industry to ever offer such a reward, and it’s bound to really take off.

There are certain requirements in order to qualify for the match, but it doesn’t work much differently than a match done by an employer in a retirement account. And in this case, there is no employer required to take advantage. 

Considering the ground breaking offering, this is one detail that really gives Robinhood a huge advantage compared to its competitors. 

Discount Broker

All too often, you see brokers and online platforms that make great promises of things that are free and discounted. But just as often, those discount providers have hidden fees or stringent requirements to qualify for those discounts. 

When you drill down into it, what you find is they are discounted on the surface, but then their hidden tactics make them far more expensive than if you had just paid for a regular broker to begin with. 

But that is not the case here with Robinhood.  When they say free and discount, they actually mean it, and any fees they do have are very clear and easy to find. How do they do it? Ultimately, they are smart about investing your funds that are available to them on the backend. 

If you’re looking for true low costs, Robinhood has them. They have made a name for themselves on this platform, and they mean it when they say discount brokerage. They are actually one of the most affordable brokerage platforms you will find. 

Streamlining

Don’t you hate it when you log into an app, or an online login, and everything is complicated? You have to click 12 times to get to one spot, or you can’t find what you’re looking for. It makes it such a pain to use. It might even make you regret ever doing business with that company to begin with in some cases. 

Robinhood has streamlined the user experience on its platform down to a science. The entire thing is user-friendly, and it’s an enjoyable experience even from your mobile device. Everything is simple, even when you want to trade some of the more complicated things on the market (like options). 

If you want something simple that makes trading easy, Robinhood gives you just that.

Whether you’re piddling around in your retirement account, trading options, or maybe even doing some day trading, Robinhood lets you do it all. One type of approach is just as simple as the next, making every single aspect simple from start to finish. 

Free Trading

We talked about Robinhood being one of the most affordable investment platforms available, but we really want to drill down into the free trading aspect of their platform. Where most brokerage platforms would charge you commissions for trades, spreads for options and CFDs, and fees for things like crypto, Robinhood does none of that. 

Their trading fees are nonexistent when it comes to basic commissions and things along that line. Even trading options is completely free of added fees, which is practically unheard of. On most platforms, you would pay a contract fee for options, but not here. 

In addition, Robinhood is known for their free crypto trading abilities too. Most brokers charge you exchange and wallet fees, but Robinhood still allows you to trade cryptocurrencies at no added charges or fees. This is again a concept that is very rare when you compare Robinhood to their competitors. 

That being said, you can’t trade crypto or options in Robinhood IRAs, so there are some limitations in putting those free trades to use. 

Cryptocurrency

It’s not every day that you find an investment app that lets you trade crypto and investments all in one place. What’s even better is the fact that Robinhood also has a crypto wallet, so you truly can do everything here and it’s simple. 

You can buy and sell crypto in a standard account with no commissions or fees, but you can’t put them in your IRA so keep that in mind. The crypto wallet gives you plenty of advantage to be able to make exchanges or look for certain types of crypto if you want to. 

You can start small, investing as little as £1 and making your mark. The nice thing here is you don’t have to buy a whole coin in order to invest. You have the ability to get fractional shares thanks to Robinhood’s design. 

There are multiple different crypto offerings so you can find the ones you’re interested in and take it from there. 

IPO Availability

Finally, Robinhood provides all of their users access to IPOs for purchase. This is one more place where they really show a unique standing point in comparison to other providers out there. It can be exceptionally challenging to get into an IPO without a specific financial institution working on your behalf. 

Not everyone is interested in IPOs, and many beginning investors don’t even know what to look for. But this is one of the details that make Robinhood suitable for traders of all statuses. IPO availability is a perk that they should be proud of. 

Top Disadvantages of Robinhood

As we mentioned before, no investment broker is perfect. No business is perfect. They all have their strong suits, and they all have their weaknesses. While Robinhood is certainly impressive in these areas, there are some things that are also disadvantages. 

Take a peek at a few of these things below. 

Available Investments

Robinhood does have a wide variety of investment choices. They have things like cryptocurrencies and options, as well as some rare finds on the market. But some of the things they are missing are items that are popular with investment accounts and beginning investors. 

Not every investor is interested in stocks, options, crypto, and investments like these. Many prefer to be more conservative, or take an approach that requires less moderation. Unfortunately, many of those aren’t available at Robinhood. 

One of the biggest downfalls of this company is that you cannot invest in mutual funds or bonds through Robinhood. These are often top choices for the conservative investors. They are also popular in IRAs and retirement accounts. But you will have to look elsewhere for those particular offerings. 

Does this mean you won’t have enough investment choices? Absolutely not. But it does mean that you may not have some of the things that you really want for diversification within your portfolio. 

Customer Service 

It pains us to put this one here, but Robinhood has a long way to go in terms of customer service. While they have a lot to offer their customers, they simply don’t have much support for their clients. 

That being said, Robinhood seems to be paying attention to feedback and working towards improvements. From the beginning, they had terrible customer support feedback. But as they continue to grow and advance, they have taken strides to improve this standing. 

While they still have a way to go, it’s nice to see that they have made changes to improve customer service. It’s still not awesome, which is why it falls into a disadvantage in regard to Robinhood as a whole. 

In order to be successful and stay at the top, they will have to get the customer service aspect ironed out to provide for their customer base. Eventually, customers will fail to join or stick around because of this detail. 

On that same note, their ratings with the Better Business Bureau are absolutely awful. There have even been some lawsuits in place based on complaints and misleading details from Robinhood that have occurred in the past. 

Research & Analysis

While Robinhood is designed to be easy to use and intuitive, they don’t provide their users with enough tools to be advancing in ways that they are. One of the top complaints for this platform is that it’s almost too easy to trade in more complicated places – like options. 

Unfortunately, when you allow extensive trading capabilities, it’s incredibly important that your customers have access to research and analysis on the platform as well. This is how traders can make the most educated decisions without having to juggle between different sources. 

While research and analysis don’t have to be broad, it’s an important part of any investment platform, and one that requires some thought on Robinhood’s part as they continue to move forward. 

Robinhood’s Account Choices

When you use Robinhood, you have access to several different types of accounts on their platform. You can use one, or you can use them all and access them in a convenient single location. This is one of the things a lot of customers really appreciate about Robinhood.

Having multiple accounts at your fingertips is a plus. 

They were initially known for investments, but have since advanced into crypto, retirement, and even cash card choices. We’re going to look more in depth at each of these things below. 

Invest with Robinhood

Robinhood takes a concept that is all too often challenging and overwhelming, and turns it into something useful and reliable. Investing is a scary place to be, especially for people who are unfamiliar with the territory. But the world of investments doesn’t have to be so complicated. 

That being said, investing always has associated risks, so it’s important to be aware of that and be informed with your investment choices. They just make the art of investing so much simpler than many brokerages do. 

One of the most striking details about investing is that you can invest any dollar amount, and still get into the holdings that you want. For example, stocks like Apple can be pretty expensive on the per share price. But Robinhood accumulates these stocks in their holdings, and then allows you to hold fractional shares. 

You can invest with just £1, rather than trying to buy a single share, or multiple shares of a stock that you simply can’t afford. The idea is that over time, these small investments are going to add up to your benefit, and you will build up your savings in a different capacity. 

You can purchase stocks, ETFs, options, and more in this manner. And if you aren’t comfortable with just individual stocks, ETFs can be a great choice. While you can’t purchase mutual funds, this might be a suitable alternative when it comes to investing. 

These details make Robinhood great for beginners. But then there are many details that make them suitable for experienced users too. If you’re an investor who wants to be able to day trade, short sell, invest in options, and more, then you can do all of that with Robinhood too. 

Crypto with Robinhood

In addition to investing in the stock market, Robinhood gives you access to crypto accounts, including their own crypto wallet. Just like stocks, you can buy crypto without paying commissions and fees, which is a great opportunity. 

With the wallet, you have access to all of the most popular crypto varieties, and then some. You can purchase, swap, and do anything else you might need to do thanks to the wallet built into their crypto system. 

It’s very inconvenient to have to have a crypto account and then a separate wallet, so it’s nice that Robinhood doesn’t make you do that here. Crypto is protected, and the platform is easy to use for your needs. You take full ownership and have everything you need right at your fingertips. 

It’s also quick and easy to use, which is certainly a plus. 

Retirement with Robinhood

As we mentioned earlier, retirement accounts are something new with Robinhood. They’ve just recently begun to offer them, and they are taking off quickly. Robinhood has offered something no investment app outside of an employer has ever done. They are matching your retirement investments up to 1%. 

Of course, there are terms and conditions to that, but why wouldn’t you invest for the long-term with a company that is giving back and adding to your investment? The match is a substantial benefit and one that is likely going to draw in a lot of new retirement customers. 

Whether this will be an ongoing perk, or something they are using to attract business, we simply don’t know yet. 

The retirement platform is nice, and from there you can purchase stocks or ETFs. Unfortunately, they don’t have mutual funds and bonds in these accounts at this time. You’re limited to just stocks and ETFs, as they don’t allow some of the other investments in their retirement accounts to date. 

Cash Card with Robinhood

Finally, Robinhood has their Cash Card account, which is much like a bank account and an investment account all wrapped into one. You make purchases using your cash card, and at the same time, you can be investing through Robinhood. 

This was an approach that Robinhood is notorious for, and then many other brokers and online platforms have followed suit and come up with similar offerings. You get a debit card, and access to the mobile banking side of the app. You can make deposits there, and spend just like you would with your bank debit card. 

Robinhood also offers a variety of bonuses on the cash card, so you can make money just by using it. The rewards they offer are typically stock and crypto, so it’s also beneficial to building your portfolio. 

One unique aspect is the ability to round up on all of your expenditures. For example, if you make a purchase at a store and the total is £ 12.45, you can set Robinhood to round up your purchases, and invest the difference. So here, your purchase would be rounded up to £13 and the remaining £.55 into the stock or crypto of your choice. 

Who is Robinhood Good For?

When it comes to choosing your trading platforms, it’s always a matter of personal preference. What types of qualities are you looking for? Remember that Robinhood isn’t available in the UK right now, although it’s a global company. They continue to build their available access and currently have a high capability.

If you open an account in the US, you can access this account in several countries outside of the US as well, but there are some limitations. 

Determining whether it is the right fit depends on several things though. Robinhood could be a good choice for beginner investors that can only put in small amounts at a time. It’s nice to be able to invest, even if it’s only a very small amount. 

With the addition of retirement accounts, Robinhood is great for those who want to start contributing to their retirement, and who are willing to invest for the long-term to get that 1% matching perk. 

In addition, if you want quick access to things like options and crypto, it can be a great fit for those investors too. 

Final Thoughts

In answer to what is Robinhood, this is an intuitive app that continues to add new and interesting things to build their brand.

While they have certainly had some challenging times in their history, you can see the very real effort to make a reliable and trustworthy platform for investors of all stages.

Robinhood is a company that is built on low cost and providing niche options to their clients.

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