Last updated on September 18th, 2022 at 07:41 pm
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Robinhood is one of the most popular stock trading brokerages in the world, but it’s often shrouded in debate. Some people swear it’s the best app for beginners and experts alike, while many others claim there’s not enough access, some limitations are overwhelming, and more.
So, is Robinhood worse than the competition?
Robinhood really isn’t that bad because it lets everyone have a free account for trading stocks without any fees. It’s trustworthy and follows every US stock exchange rule.
However, Robinhood doesn’t offer mutual funds, 401(k)’s, IRAs and more so there are some limits to how you can use it.
Personally, I use Robinhood for my normal stock/option strategy and then I use FirsTrade for my IRA. Both offer free stock trades but the Robinhood interface and app is much better than Firstrade’s.
In this article, I will dive into many of the pros and cons of using Robinhood to help you find out why it really isn’t that bad. In fact, I will try to explain why thousands of investors believe it’s one of the most convenient stock exchange services available.
What Are the Downsides of Robinhood?
The downsides of Robinhood are primarily based on its lack of assistance, which ranges from poor customer service to very little company insight. Robinhood doesn’t let users create a retirement fund via a 401(k), IRA, mutual funds, and other services.
You also won’t have access to a financial advisor with Robinhood.
Here’s a detailed breakdown of why some people think Robinhood is bad:
- Robinhood doesn’t let you buy and sell mutual funds or have a 401(k)/IRA. According to Clark, those looking for in-depth investment features wouldn’t prefer Robinhood over most other brokerage companies. You can’t short stocks, have joint accounts, or partake in future trading.
- You won’t receive much stock insight, which could make it difficult to make well-informed investment decisions. Robinhood is fairly barebones, so you’ll have to do all of the research off-platform. You could get the Robinhood Gold subscription plan, but its fluctuating price isn’t cheap.
- You won’t find many financial experts to help you with your personal investment issues on Robinhood. Edward Jones, Fidelity, and other well-known brands offer personal advisors, none of which you’ll find when using Robinhood. This problem could make it easy to follow poor investment strategies.
- Robinhood doesn’t offer every cryptocurrency. Its crypto exchange offers many of the top currencies (Bitcoin, Dogecoin, Litecoin, Ethereum, etc.), but you won’t have access to the up-and-coming cryptos. Unfortunately, the lack of options could make it difficult to strike gold in the ever-changing crypto market.
As you can see, there are many reasons people think Robinhood is too bad to use. From the lack of information to a limited crypto market, it’s not the most extensive investment service by a long shot.
However, the service’s simplification is often the primary reason so many people try it out.
Read on to learn more about Robinhood’s advantages.
Why Is Robinhood a Great Choice for Investors?
Robinhood is a great choice for investors because the accounts are free, you can buy and sell as soon as you’d like to, and it creates a beginner-friendly atmosphere with a high-quality, simple user interface.
Furthermore, Robinhood’s tax filing system is as straightforward as it gets, thanks to its partnership with Turbotax.
Below are four reasons why Robinhood is a top-notch selection:
- Getting a Robinhood account is free. The company entices many investors because they don’t have to pay a monthly service fee for instant access to thousands of stocks (unless you choose Robinhood Gold). Nobody’s complaining about a free service, especially with the opportunities provided by the stock market.
- You can buy and sell stocks without worrying about massive commission fees. They don’t take a portion of regular trades unless you trade options and puts (and even those are tiny fees paid to the government). Most people invest in crypto or stocks, making Robinhood a top solution as a freebie service.
- It has the best mobile user experience in the world (currently). Nerd Wallet explains that Robinhood’s mobile interface is likely what drove it to become one of the top brokerage companies worldwide. You can check any stock ticker, monitor your investments, and follow news updates in one location.
- They connect with Turbotax to make filing your taxes easily. Instead of hiring a tax professional to sort through all of your trades, you can copy-paste your Robinhood code (provided by the company) to Turbotax. All of your transactions are included, making it the quickest way to file taxes with Robinhood.
Robinhood is complained about quite frequently by online forums and stock professionals, but that doesn’t mean it’s useless.
In fact, quite the contrary is true; Robinhood can be the go-to stock investment app (or website) for people who want to buy and sell right away without any outside distractions or complications.
Can I Trust Robinhood?
You can trust Robinhood because they back up to $500,000 in investments, making them a great selection for almost anyone. They comply with every US government law, including day trading regulations.
You don’t have to worry about losing your investments, profile, or breaking the rules because Robinhood handles all of its security matters.
Wall Street Survivor shows one of the main reasons you should trust Robinhood is because they’re bound by every stock market compliance rule in existence. They’ll safeguard your investments more than a bank since a brick and mortar bank location doesn’t house all of your money, which means they can’t transfer it and guard it like Robinhood.
Furthermore, Robinhood creates and updates your tax profile with every transaction. As mentioned earlier, you can sign up through Turbotax to have a seamless transition when tax season rolls around.
Whether you’re worried about losing your account, breaking stock market rules, or forgetting to file your investment taxes, Robinhood has you covered. Safety shouldn’t be a concern when you’re using Robinhood, which is another reason so many stock market beginners love using it.
Robinhood is an excellent tool for people who enjoy basic stock trading. While you might not have access to retirement-building profiles and similar accounts, you can buy and sell stocks from your favorite companies whenever you want to.
The user-friendly interface makes it easy for everyone to try out!