Written by: FrankNez Team
Robinhood is an online investing platform that offers commission-free stocks with high-yield cash management offerings.
This popular stock market trading app does not charge commission for stocks and cryptocurrency trading.
Robinhood, the financial technology company offers trading in stocks, ETFs, other options, and cryptocurrency.
Moreover, this online brokerage provides web and mobile-based services which will allow you to invest and trade easily.
Additionally, the mobile-based services of this platform have made it stand out from its other competitors.
You may be wondering about many questions arising in your head about Robinhood & Robinhood stock.
Here in this article, you’ll find the answers to your queries and get to know all the details about this popular online brokerage like- How does it make money, the pros & cons of Robinhood, Robinhood stock price, the behavior of Robinhood in cryptocurrency & its future, and benefits of long-term investing in stocks & cryptos.
Keep scrolling to read more.
Overall Rating: 3 / 5 OPEN AN ACCOUNT Account Minimum: $0 Fees: $0
With more than 13 million users, Robinhood is the best platform for active investors or younger investors who want commission-free trading and investing on mobile.
If you want to invest in cryptocurrencies like Bitcoin, Ethereum, Dogecoin, you can use this mobile and web trading platform to invest long term.
Apart from it, Robinhood (a popular stock trading app) went public in July 2021 and its share price was set at $38 for IPO (Initial Public Offering).
Also, Robinhood was listed on the Nasdaq stock exchange under the symbol “HOOD.”
Recently, Robinhood’s CEO Vlad Tenev said that the company is planning to release the feature that allows customers to trade stocks outside of market hours.
The company named this feature, “Hyper-extended hours.”
According to Bloomberg, Robinhood stock is the favorite stock of Cathie Wood’s ARK funds and they’re purchasing the stocks every week since October 2021.
Last week, ARK Funds have bought about 2.45 million shares of Robinhood markets.
Robinhood Business Model- How the company generates income
With no minimum and no fees for trading in stocks, cryptos, and ETFs, the company has to generate income as a business to be sustainable.
This online brokerage makes money from market makers and some other ways.
Here are the ways through which the company generates revenue.
Payment for Order Flow
In 2021, the company generated 75% revenue through the process payment for order flow (PFOF), in which the company directs their customer’s orders equity and options to a particular market maker and the company receives payment for this compensation.
Hence, PFOF is the major income stream for the company.
Payment for order flow unfortunately plays against retail investors.
The SEC has talked about banning the practice since it allows market makers to manipulate the stock prices.
Stock Loan Income
Robinhood generates revenue by lending margin securities to counterparties.
Furthermore, the company keeps all money it generates from lending your stock and does not share it with you.
This is a big problem because large financial institutions make more money from the user while orders are processed through dark pools.
Borrowing Uninvested Cash
Robinhood generates income by borrowing uninvested cash and depositing this cash in interest-bearing accounts.
Membership Fees for Robinhood Gold
Robinhood Gold program is a paid subscription service that allows users to benefit from premium features like margin trading, Level II Market Data, professional research, and enhanced quick access to deposits.
It is also one of the income sources of the company.
Robinhood Gold costs $5 per month.
Also, it gives a free trial of 30 days.
What can you invest in on Robinhood?
Robinhood is a popular trading platform that allows the user to invest in stocks, cryptocurrencies, Exchange Traded Funds (ETFs), and options.
If you want to do commission-free trading in stocks, ETFs, and cryptocurrencies, then Robinhood is great for you.
Moreover, the company allows the investors to buy portions of stocks without paying the full share price.
It gives a free stock upon making referrals and opening the account.
When it comes to investing in cryptocurrencies, Robinhood allows to trade in several digital currencies including Bitcoin, BitcoinCash, Ethereum, Ethereum Classic, Litecoin, Bitcoin SV, and Dogecoin.
Most importantly, Robinhood has introduced IPO access for traders.
Besides, Robinhood does not offer the ability to invest in mutual funds, forex, bonds, and futures options.
The pros and cons
- Simple, Easy to Use, and Easy to navigate
- Free stock, ETFs, Cryptocurrency Trading
- No account minimum
- IPO access
- Cash management accounts
- Margin investing and Fractional shares
- Limited customer support
- No mutual funds and retirement accounts
- Limited investment offerings
- Limited investing research and trading tools
The Pros explained
Robinhood, the popular brokerage in the US, is extremely easy to use and accessible for people of any age and any income.
Robinhood is a mobile-first company that differentiates it from other companies.
Its trading app and web-based platform are well-designed and more than enough to trade.
The new investors or inexperienced users can easily trade on it due to its simple and user-friendly features.
When it comes to costs, Robinhood provides commission-less trading with no minimum fees.
You can invest in stocks, cryptos, options, and ETFs for free.
Furthermore, the company offers fractional share trading, and you can invest in expensive stocks without much capital.
Additionally, it gives quick access to deposited cash.
The account opening process in Robinhood is fully digital and free.
Rather you get free stock upon opening the account and by referring the new members.
Last but not least, the company offered IPO access in July 2021 to benefit its users.
If you trade often, the savings can be huge on this platform due to the lower cost.
The Cons explained
Along with plenty of advantages, there are a few cons of it.
Robinhood does not offer to trade in mutual funds, bonds, and futures trading.
The research, educational resources of this financial company is limited.
It provides basic tools for the services and users can access professional research by purchasing paid membership of Robinhood Gold.
The customer support available in this stock trading app is limited.
Although, the company had made necessary improvements to its customer service in the last year.
The Robinhood scandal has blown up after the freezing of buying ‘meme stocks’ in 2021.
The company lacks full trust from retail investors after restricting the rights to buy specific stocks from its users.
Recommended brokerage: Vanguard
Robinhood Stock Price and Recent Developments
Robinhood stock price has dropped significantly since its IPO and is currently trading around $15 per share.
Weeks back, Robinhood’s stock price dropped to 11.61 USD and the stock hit the lowest price of 11.15 on January 24.
In June 2021, the company’s funded accounts rose to above 22 million.
Besides, Robinhood’s stock price hit an all-time high of 85% on Aug 4 at 85.00.
On the other hand, the company stated Q4 results on January 27.
The company lost 49 cents per share on sales of 362.7 million in Q4.
In the current stock market, HOOD is one of the IPO stocks to watch.
The company is growing popular among young investors to trade stocks, cryptos, and NFTs.
Robinhood (HOOD) and Cryptocurrencies
Robinhood, one of the best online stockbrokers generated huge transaction-based revenue within cryptocurrencies in Q4 2021.
It has a fast-growing cryptocurrency business as the company launched crypto gifts.
Most importantly, the company has introduced cryptocurrency wallets to 1,000 users as a part of the beta test.
Crypto wallets will help the users to transfer digital currencies in and out of the Robinhood app.
The rollout of crypto wallets may be expanded to 10,000 users in March.
Adding a wallet will help the traders to transfer their digital assets out of the online platform to invest.
Moreover, the company is planning to test new crypto-related functionality on its stock trading app which will allow the user to get statistics, transactions on blockchain at a glance.
The introduction of crypto wallets closed the gap among Robinhood app and cryptocurrency exchanges which will increase the trading in crypto markets.
Most of the US brokers don’t offer crypto wallets, therefore the rollout of crypto wallets on Robinhood will have positive impacts on Robinhood accounts opening in the future.
When it comes to Coinbase vs Robinhood, our personal choice when it comes to investing in cryptocurrency is Coinbase.
Investing in stocks and cryptos is great in so many ways.
If you’re thinking, why should you invest in stocks and cryptos?
Here we’ve discussed the importance and benefits of long-term investing.
Read on to find ways to become financially independent.
Importance of Long-term Investing in Stocks & Cryptos
A long-term investment strategy is like holding assets such as stocks and cryptos for more than a full year.
Anything under a year is a short-term investment.
Long-term investment requires patience and discipline, but it gives incredible outcomes.
Market volatility is a prime matter in investment as the prices fluctuate regularly.
The higher the volatility, the higher the investment’s price fluctuation and the higher the risk.
Here is why you should go for long-term investment.
Long-term holdings in stocks and cryptos exhibit lower volatility, greater profits as compared to short-term.
Assets such as stocks & crypto give higher returns over a long time. It maximizes the growth potential of your savings.
Now, investment in US stocks and digital currencies is far better than bonds and gold investment.
When you watch your investment portfolio grow, your satisfaction increases more.
Stocks are long-term investments and generate better long-term returns.
The longer you invest in stocks, the longer your money will grow.
Among asset classes, the stocks have surpassed all other asset classes.
If you want to keep your money multiplying and become a better investor, it’s wise to go for long-term investment so that the market bump can’t knock you.
Because, when the prices go up and down, you can handle it by remaining patient.
Apart from making you financially strong, the investment makes you disciplined with your money.
It’s a necessary rule to succeed in your life financially.
Long-term holding means fewer trading fees because you will need to pay the fees every time you trade.
Also, it’s easy to do, you can start trading in Robinhood stock-trading app, just by implementing the strategy and patience to make the most of your returns.
Or through a more traditional broker like Vanguard.
Through investment in the stock market, you can benefit from various trading strategies.
Apart from stocks, cryptocurrency is an attractive investment and future of technology that gives high returns.
Long-term investment in cryptocurrency is good for investors to recover and get profits.
You can invest in crypto on Robinhood or cryptocurrency exchanges.
Long-term holding in popular cryptocurrencies such as Bitcoin, Ethereum can harvest good returns in 2022.
If you’re a new investor and can’t tolerate big risks, short-term investment cannot work for you, rather you must go with long-term holding.
Digital currencies are rising globally, and the number of investors is investing in them.
They provide a safe and long-term store of value.
Like other assets, cryptocurrency also exhibits volatility.
If you’ll invest in stocks & cryptos for the long term, there would be less fear, less risk, less trading cost, lower tax rates, and more returns.
Also, you’ll be able to buy the future house, vacation, and can save your education or retirement.
Along with your regular income, trading is the way by which your money keeps multiplying, and you can earn more and do more.
The Bottom Line
Robinhood, the US-regulated broker is best for active traders who want to invest in assets with no commission.
Whether you’re looking to invest in cryptocurrencies or stocks, Robinhood could be an option for you due to its minimalistic trading platform that has made it easy to buy and sell assets.
The biggest perk of trading on Robinhood is a lack of fees with no costs.
However, payment for order flow is affecting the entire stock market as a whole.
Retail investors are ditching the trading app.
Whether you’re in school or college or doing a corporate job, start investing today to achieve financial wellness.
Start with a positive mindset and stay flexible because your today’s decision can make a huge difference in your life.
Become financially literate and learn how to invest in the stock market and crypto, and how to start an online business here.
I’m committed to guiding you on your journey to achieve financial freedom.
In a nutshell, long-term investment and business allows you to become financially independent and follow your dreams.
Written by: FrankNez team