Robinhood Review - Commission Free Sock Trades

Robinhood.com is a brokerage firm that offers free stock trades. They've made a big splash with their iPhone App a while back and now they just released the Android App. Since I'm not an iSheep I could never try Robinhood until now so here is my review of the app and service.

Application

Using Robinhood.com involves applying for an account. It's a pretty straight forward process that you can do on the app or on their website. It's a little scary because they ask for a lot of sensitive information. So get ready to provide contact information, your social security number, browser history, and so on. Okay, they won't ask for your browser history. But like I said, scary stuff. I was approved in just a few days.

Funding

You can then fund your account or wait for approval and fund it then. I chose to get approved first. Setting up the funding is also scary because it's not simple ACH account and routing numbers they want. No sir, they want the login and password information for your bank! That's right, this is some advanced stuff they're doing here but also very scary.

You then choose how much you want to transfer over. For my review I transfered $100. It took a few days and then I got an email and app notification (even though I turned them off!) telling me it was transfered.

Researching Stocks

In terms of research materials I'd say that Robinhood falls flat on its face. It's not a research tool. Sure, I can see a stock history graph but little else. It assumes you know what you want to buy and that's kind of okay for some people. I can research online on any number of sites. Still, I'm betting this will improve over time, and it really needs to.

Buying

It's way, way, way too easy to use this app! I decided to buy a share of Yahoo (YHOO) just for fun. I mean, people still use Yahoo.com right? It's still a site that's somehow relevant today, isn't it? Or maybe it will make a come back. Crap, I should have made a better choice.

I was going to buy a share of the S&P 500 (SPY) but at over $200 per share I didn't have enough to buy it. Robinhood wouldn't let me buy less than 1 share. So Yahoo it is!

Pick your stock, enter how much you want, swipe the screen up to trade, and ...BAM... you bought it! It's like the "buy with one click" inventor of Amazon designed this thing.

The best part, I only paid for the stock. There was no $6 to $10 fee for buying it like all of the big brokerage firms would charge. And this is where Robinhood makes sense. I can buy and sell all day long and never, ever pay a fee. Of course, the tax man will rob be blind on any gains I make but that's a whole different issue.

External Support

This is where Robinhood.com really lacks, in its external support. Want to download your Robinhood data into Quicken or Mint.com? Too bad, not possible. At least so far. I can track my stocks and buy/sell history in the app but that's it.

And speaking of that app, that's all they offer is an app. They're website (robinhood.com) will let you fill out the application but that's it. Everything else requires the app which is really annoying.

How Does Robinhood Make Money?

If they aren't charging for the app and aren't charging trade fees how do they make any money?

Simple: Any money you put into your Robinhood account is interest free. Meaning, it's sitting in their bank and they collect interest on it until you use it to buy a stock. It's still your money, but they'll profit from it while it sits.

If they get tens to hundreds of millions to signup and use this service they could easily have hundreds of millions of dollars sitting in their bank making them interest. It's a smart move and I'm okay with this, seems perfectly fair.

Should You Move Your Portfolio Over?

Probably not. First off, why go through that hassle if you have long term investments. Second, considering the lack of tools and integration with other software there isn't any point.

If you want to do some trading with it then go for it, there is no harm in having a second brokerage firm anyhow. But if you trade a lot then I don't know that this is a good option. Being stuck with a featured limited app would make dealing with dozens of stocks in a portfolio a pain.

They really need to get their website to do everything the app can do first. Then they need to expand what the website and app can do with more data, graphs, research tools, and integration into other software. Until that happens I think Robinhood.com is more of a novelty than a game changer. It can be great for getting people new to investing to dip their toes into the pool. It's so easy to start using so why not make a smart long term investment?