Investing: Robinhood

Today we’re going to talk about using the Robinhood Trading Platform to invest. The Pro’s, Con’s, Features and just my general opinion of it. That being said, let’s get started.

Robinhood, what is it?

Robinhood is a brokerage that came out a few years ago specifically tailored to the average person who wants to trade stocks. When it came out it was actually only available as a mobile app for iPhones and Androids but since has transitioned into having a Desktop presence as well. Robinhood’s big selling point when it first came out (and still is) is that it doesn’t charge you anything to make a trade. Those of us who remember the time before Robinhood know that most brokerages would charge anywhere from $5 to $20 for executing a trade. This pretty much eliminated people from trading stocks in small amounts. Why would I buy $20 in US Steel when it’s going to cost me $10 to do it? Robinhood has come a long way since it’s inception, adding a plethora of features, expanding it’s footprint and becoming one of the most talked about mobile trading apps in the world.

The Pro’s:

  1. Free Trades
  2. Options Trading
  3. Fractional Share Investing
  4. Mobile Optimization

The Cons:

  1. Limited Research Information
  2. Less Competitive Options Pricing
  3. Slow Trade Speeds
  4. No Financial Advisor Presence

The Pro’s: Free Trades

This one is pretty self explanatory, buying and selling stocks or options on Robinhood costs you nothing. This has become a normal part of stock trading in the last few years whereas in the past trades could cost up to $25 in some cases. Overall the free trades is the biggest pro to Robinhood and a big reason a lot of us decided to use it. Keep up the Free Trading and KON will continue using you Robinhood.

The Pro’s: Options Trading

Options Trading is something that everyday people historically haven’t been able to participate in, which made it a pretty big deal when Robinhood decided to make it available on their platform. All you have to do to unlock this feature is answer a few simple questions, wait for the team at Robinhood to review it and voila, you’re officially an options trader. Although it’s easily accessible we don’t recommend playing with it until you get a good understanding of what Options are and how to use them. You can get yourself into some trouble pretty quickly without understanding them.

The Pro’s: Fractional Share Investing

Fractional Share Investing has been around for a while but until recently was only available through managed funds or large order quantities. This is another one of the Pioneer ideas that has helped to make Robinhood the average joe’s trading platform of choice. Although Robinhood has only recently released this it has already helped make the market more accessible to the average investor. For those of you who don’t know what Fractional Share Investing is I’ll break it down really fast. Fractional Share Investing basically means that if you don’t have enough money to purchase a full share in a company you can purchase a portion of the share instead. For example: A share of Berkshire Hathaway runs around $3,000 (This isn’t accurate, just used as an example) but you can only afford to invest $100. So instead of purchasing a full share you then use the $100 you have to purchase approximately 3.3% of a share instead. Fractional Share Investing won’t necessarily make you rich but it’s a great way for individuals with low funds invest in High Cost stocks and for that we applaud you Robinhood.

The Pro’s: Mobile Optimization

Even though in today’s age mobile optimization is a must, we’re listing it as a Pro for Robinhood since they were the first to really pioneer it. Their mobile platform operates smoothly, is user friendly and looks great. We’re giving Robinhood an A+ for their work on this front. It makes it easy to trade on the go which most of us always are.

The Cons: Limited Research Information

Researching stocks is a crucial part in picking them unless you’re somebody who just fly’s by the seat of your pants. (We all have that one Uncle who buys whatever his buddies down at the Club tell him his the next “Apple”) but for those of us who like to know what we’re buying into researching the stock is a must. Overall Robinhood does an OK job on highlighting any news articles that have recently come out on the Company that you’re buying but doesn’t really highlight a lot of the more technical information that more informed investors like to see. I personally like to use Robinhood to make the purchases for most of my Day Trades/ Swing Trades but will use other platforms to do the research on them.

The Cons: Options Pricing

Even though it’s great that Robinhood added the options trading feature to their platform it isn’t exactly designed for the more sophisticated Options Trader. They set the price based on a market average and offer that to you. It’s fun to play with and try to make some money by Shorting a stock but overall we wouldn’t recommend using the Robinhood Options platform to do any serious options trading. You’d be much better off using a Legacy Broker or going through your financial advisor. Again, fun to play with in small amounts but definitely not sophisticated enough to be dropping large sums of money on.

The Cons: Slower Trading Speeds

Robinhood allows you to make trades commission free and that’s great but it does come at a price. Part of that price is Trading Speed. When you place a buy or sell order in Robinhood it’s not instantly executed. It can take up to several minutes to go through. For the average person that’s not a big deal but for people that are Day Trading those seconds or minutes can mean thousands of dollars depending on how fast a price is trending. We certainly don’t recommend using RH for quick trades where seconds matter. You’ll be disappointed.

The Cons: Lack of Financial Advisor

Robinhood opened up the door to everyone to trade stocks on the market and that was a great thing but it also came with it’s downfalls. Allowing everyone access to the market with limited restrictions made for a lot of poor trades being made. Not having access to a Financial advisor has certainly allowed some people to make trades resulting in thousands of dollars lost. Here at KON we think it’s awesome that everyone has unrestricted access now, but maybe throw in a bigger disclaimer for the people who think they are the next Jordan Belford and tell them to seek some professional advice before they lose their life savings.

In Summary:

Overall, we give Robinhood a 8/10. It’s free, allows great access to the market for the average Joe and works great. If you’re just getting into investing, Robinhood is a great place to start. If you’re a more seasoned investor, we recommend using it for the quick buys while out and about. We don’t recommend using it as your main investment account or as a retirement account. Go with something a little more established and professional. The options trading, commission free trades and mobile accessibility have made Robinhood a major player in the market and we continue to see that trend rise. For the want to be day trader, the average Joe and the weekend warrior Robinhood is a great place to start. Keep up the good work Robinhood, we here at KON look forward to see what you’re going to do next.

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