With the increasing number of investors out there, the demand for swift and innovative mobile solutions continues to thrive. A myriad of mobile applications surfaced to aid in investment management for both individual investors and market makers.
One such trading app is Robinhood, which allows new investors to trade stocks, exchange-traded funds, options, and cryptocurrency without charging a penny! You can even trade from your smartphone using this popular application. However, if the app does not charge a penny, it raises the two most important questions,
How does Robinhood work, and how does it make money?
Robinhood: An Overview
Introduced in 2013, Robinhood is the first-ever free investment app. Since then, it has played a prominent role in making the financial markets reachable to everyone and encouraging youth to start investing.
In its early years, the Robinhood app became widespread for being one of the only brokers allowing free trades. To date, it continues to be one of the few brokers that offer wall street investors the chance to trade hassle-free cryptocurrency.
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Robinhood financial abides by organizations’ rules, including the securities and exchange commission-free trade of the USA. Due to its commission-free nature, Robinhood’s stock options have made it one of the most popular apps for investors out there.
Simply put, they have 0$ account minimums; besides, they don’t demand any trading charges!
To reel you in, let’s find out some advantages and disadvantages of this app.
Advantages
- No account minimum
- Cryptocurrency trading
- Streamlined interface
Disadvantages
- Partial customer support
- No mutual bonds or funds
- No retirement accounts
The question, however, remains, how does Robinhood work for investors? Let’s find out!
How Can Investors Use Robinhood?
To be exact, it’s no rocket science!
Robinhood works just like any other investment platform. The only difference is that it works without fees, which means it’s free! As per the latest market data, the targeted Robinhood markets demanded free investment applications to purchase and sell stocks through the strategy they preferred for any recurring investments.
To begin using the Robinhood app, follow the following steps:
- You are required to sign up for Robinhood by providing basic info, which is a matter of few moments. The best part is that they do not require any deposit to open an account.
- Once signed up, you can use this service on both web and mobile applications. Both of these options offer the best user interface, but most users prefer to use mobile.
- After creating your account, your application will be up for approval. You will then be eligible to use the app in no time if everything checks out.
- You will then have to transfer money into your account to start trading on Robinhood. Once it’s all done, you will be off to the races.
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How to Trade Stocks Using Robinhood
If you are inexperienced in trading stocks, it can be overwhelming. But buying and selling on the stock market using Robinhood is also as simple as the steps mentioned above:
- Load up the Robinhood App.
- Explore your preferred stock in the search bar, cryptocurrency, or ETF.
- Tap the option “Trade.”
- The next page will suggest two options: buy or sell. Tap the “Buy” button.
- Pick your Order Type from the correct order and the number of shares you want to purchase.
- Verify your order.
- Lastly, swipe up to submit the order.
One of the top features of Robinhood is the fast deposits. When you credit your account, you will have direct access to up to $1,000 without waiting for the cash to transfer. It means you can begin investing as soon as your account clears. Unlike other online broker-dealers, it can take more than 5 days just for your funds to arrive!
Though Robinhood offers various ways to buy stocks, getting started and learning investing basics could be complicated initially.
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Achieve Your Stock Goals With Robinhood
Let’s look at some features of the Robinhood app that have made them the investing marvel in the post-Covid world.
The choice is yours. You can surely keep it simple and trade commission-free. Even Robinhood makes money by free trading through its mobile app and website. Feel free to discover some of their bonus offerings, including their restricted trading.
Furthermore, Robinhood enables real-time equity investments, including exchange-traded funds ETFs listed on the US exchanges.
Streamlined Process
Beginners mostly appreciate simplicity. It’s a precisely customized application for long-term investors.
There is nothing to sidetrack you from your goal with Robinhood. How does Robinhood work? Their user-friendly app doesn’t make you feel like you require multiple computer screens to keep up with all the information offered.
Robinhood has the most streamlined process, which makes it easier for the new investors to buy stocks. Even if you are new to the platform, their user interface will guide you through the entire procedure.
It can ease the overwhelming feeling of new investors as they join their first online platform.
Stock Trading Cost
Many other brokerages don’t allow their operators to buy fractional shares, but such isn’t the case with this app.
If your stock’s current value is $1,000, mostly you have to pay the total amount.
However, with Robinhood, you can invest an insufficient amount of $1 at a time in stocks that trade execution for hundreds if not thousands each share. It’s incredible for newer investors and individuals who want a more expanded portfolio. Meaning you can invest in it at all times.
Moreover, whenever you decide to buy a stock, you get to choose to purchase in terms of dollars or shares.
Free of Tax Stock Exchanges
There is no need to pay even a dime to use this trading system unless you subscribe to Robinhood Gold. The only cash that will go in will be what you use to invest in your deposits.
Additionally, as mentioned above, they have zero account minimum; it’s the same for brokerage accounts. You can even start an account with $5 if you desire to.
FDIC Insured
Robinhood also offers a product for those looking to build up an emergency fund.
Robinhood Cash Management is an FDIC insured, high-interest online savings account. It includes a checking account and debit card where you can obtain an above-average interest amount on your currency.
You can also keep your money voluntarily available on the sidelines to earn interest on your uninvested cash. That is because you can transfer money instantly between your investing account and Cash Management account.
This account comes with no minimum money requirement, and FDIC insurance can go up to $1.25 million.
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Margin Trading
Robinhood Gold allows investors the ability to trade on margin, also recognized as borrowed money. This opt-in service requires a monthly fee of $5.
Margin trading can be risky for new investors. It’s vital to keep in mind that you are trading borrowed money taken from the broker, which intends that the chances of losing are higher than investing.
The Bottom Line
So, how does Robinhood work? Robinhood is a relatively easy-to-use app with the best user interface that has helped generate an influential subculture.
The Robinhood App can be a great stock trading app for a specific type of stock trader. Nevertheless, just because the barricade to open a Robinhood account is minimal, it’s advisable to conduct your research.
However, rest assured your funds are secure with this app, and you can trade stocks through a reliable trading platform.
So, if you like the convenience of trading stocks through your smartphone, wait no more and take your free stock trades today!
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