What’s the Catch With Robinhood?

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Robinhood - What’s the Catch With Robinhood?

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  • Robinhood is extremely popular and offers a variety of features for both new and experienced investors.
  • However, the idea that everything on Robinhood is free isn’t 100% accurate.
  • Be sure to weigh the potential benefits, and the possible pitfalls, before getting involved with Robinhood Markets (NASDAQ:HOOD) stock.

During the Covid-19 lockdowns, many people sought ways to pass the time — and ways to generate income — at home, on their smartphones.

Perhaps they heard that people can make money by investing in stocks, cryptocurrencies and options. The allure of potentially profiting from the financial markets, right from your phone, is undoubtedly hard to resist.

Oftentimes, the name Robinhood pops up when people talk about investing nowadays. Related to this, you might have heard that it’s possible to buy and sell stocks for free.

It’s definitely true that financial investing can be exciting, and even profitable. Nevertheless, you should know the essential facts before downloading any app — after all, your hard-earned money is at stake.

What Is Robinhood?

Robinhood Markets is a company that provides a zero-commission investing platform known as Robinhood. Nowadays, there are plenty of smartphone-based apps that allow people to buy and sell stocks without paying commissions. However, the Robinhood app popularized this phenomenon.

Robinhood has been a favorite among millennial and Generation Z financial market traders. Signing up for a basic account requires no special fees or minimum deposit size.

And, here’s the big selling point of the Robinhood app: for basic stock buying and selling transactions, you won’t be charged a commission (fee). Robinhood was among the first stock brokers to offer zero-commission basic stock trading.

If you’re ready to step up to the potentially riskier realms of options and cryptocurrency trading, you can also perform basic buying and selling transactions without paying commissions.

In some instances, you might even be able to get early access to an initial public offering (IPO) through the Robinhood app.

The Problems With Robinhood

Before signing up for any type of financial account, it’s necessary to read the fine print. It is true that Robinhood doesn’t charge commissions for certain basic types of financial transactions. However, this doesn’t mean that there are no fees at all.

For example, certain types of money transfers, statement issuances and mailing will incur a fee. Furthermore, some trades might involve regulatory trading fees, which are set by law and regulation.

Also, if you want access to margin (borrowing financial assets in order to place trades) on Robinhood, you’d need to sign up for Robinhood Gold.

There is a charge for this service, though it might be worthwhile as it allows access not only to margin trading, but also to research reports, bigger instant deposits and Level II (advanced) market data.

It has also been reported that Robinhood has restricted trading on certain stocks. Those restrictions were temporary, but it’s still important to regularly check for further developments on this matter.

So, What’s the Catch with Robinhood?

The Robinhood app started a revolution in simple, low-cost, app-based financial-market investing. If there’s any catch, it’s that certain features and transactions aren’t free on the Robinhood app.

This doesn’t mean that the app isn’t worthwhile. For basic stock investing, and even riskier assets like options and cryptocurrency, Robinhood is adequate and should serve the needs of most traders in most situations.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/whats-the-catch-with-robinhood/.

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