You make money on Robinhood by buying investments at a lower price and selling them at a higher price, or by holding investments that pay dividends

Robinhood is a brokerage platform — it lets you buy and sell stocks, exchange-traded funds (ETFs), options, and cryptocurrencies. The money you make comes from the difference between what you pay for an investment and what you sell it for, or from dividends paid by companies whose stock you own. Robinhood itself makes money from you through other means (like payment for order flow), but your profit comes directly from the investments you choose and how they perform.

This is not a path to quick money. Most people who trade frequently lose money, especially beginners. The longer you hold quality investments, the more likely you are to see gains. Understanding what you are actually buying, why you are buying it, and how much you can afford to lose is the real foundation of making money through any brokerage.

Key Takeaways

  • You profit when you sell an investment for more than you paid for it, or when you receive dividend payments from stocks you own.
  • Robinhood charges no commission on stock and ETF trades, but you still pay the bid-ask spread (the difference between what buyers and sellers will pay).
  • Day trading — buying and selling the same stock within a single day — requires at least $25,000 in your account and carries high risk of loss.
  • Most long-term investors make money by buying and holding diversified investments like index ETFs rather than picking individual stocks.
  • Robinhood's features like fractional shares and options trading can amplify both gains and losses, and options are especially risky for new traders.

Buying and Selling Stocks for a Profit

The simplest way to make money is to buy a stock at one price and sell it at a higher price. If you buy 10 shares of a company at $50 per share ($500 total) and sell them at $60 per share ($600 total), you keep the $100 difference. Robinhood charges no commission on these trades, so you do not lose money to trading fees.

The catch is that stock prices move based on company performance, market conditions, and investor sentiment — none of which you control. A stock can also fall below what you paid for it. Many new traders buy a stock expecting it to rise, watch it fall instead, and sell at a loss to avoid losing more. This happens constantly, even to experienced investors.

Robinhood does charge you the bid-ask spread, which is the gap between what buyers will pay and what sellers will accept. This spread is built into every trade and goes to market makers, not to Robinhood. On a liquid stock like Apple, the spread might be a penny or two per share. On a less-traded stock, it could be much wider, eating into your profit before you even start.

Earning Dividends From Stock Ownership

Some companies pay dividends — regular cash payments to shareholders — usually quarterly. If you own 100 shares of a company that pays a $0.50 quarterly dividend, you receive $50 every three months, whether the stock price goes up or down. You do not have to sell the stock to collect the dividend; it simply appears in your Robinhood account.

Dividend-paying stocks tend to be from established, profitable companies rather than fast-growing startups. They are often less volatile than growth stocks, meaning the price does not swing as wildly. Many long-term investors build wealth by holding dividend stocks and reinvesting the dividends to buy more shares over time.

Robinhood allows you to set dividends to reinvest automatically, which means new shares are bought with your dividend payments without you having to do anything. This compounds your returns over years and decades, though the effect is small in the first few years.

Trading ETFs and Index Funds

An exchange-traded fund (ETF) is a basket of many stocks bundled into one investment. An index ETF tracks a specific market index — for example, the S&P 500 ETF holds shares in 500 large U.S. companies. You buy and sell ETFs the same way you buy individual stocks, and many ETFs also pay dividends.

ETFs are less risky than picking individual stocks because your money is spread across many companies. If one company in the ETF performs poorly, it does not sink your entire investment. Most financial advisors recommend that beginners start with low-cost index ETFs rather than individual stocks, because the odds of long-term profit are much higher.

On Robinhood, you can buy fractional shares of ETFs, meaning you can invest $50 in an ETF that costs $400 per full share. This lowers the barrier to entry but does not change the underlying risk or return of the investment itself.

Understanding Options Trading and Its Risks

An option is a contract that gives you the right to buy or sell a stock at a set price by a certain date. Options can amplify gains — a small move in the stock price can result in a large percentage gain in the option. They can also amplify losses just as quickly. Most options expire worthless, meaning you lose your entire investment in that option.

Robinhood allows options trading, but it requires you to apply and be approved for an options level. The platform restricts beginners to basic covered calls and cash-secured puts, which are less risky than other option strategies. Even so, options are not a path to quick money — they are a tool for experienced investors managing specific risks.

If you are new to investing, avoid options entirely until you have spent at least a year learning how stocks and ETFs work. The math on options is complex, the risks are real, and the cost of learning through losses is high.

Day Trading and the Pattern Day Trader Rule

If you buy and sell the same stock within a single trading day, that is called a day trade. Robinhood allows day trading, but the U.S. Securities and Exchange Commission (SEC) requires that you maintain at least $25,000 in your account to day trade. If your account falls below $25,000, you cannot open new day trades until you deposit more money.

Day trading is extremely difficult to profit from. You are competing against professional traders with better tools and faster computers. Studies show that most day traders lose money, especially in their first year. The bid-ask spread, which you pay on every trade, eats into small gains. Taxes on short-term gains (stocks held less than a year) are also higher than taxes on long-term gains.

Unless you have significant experience and capital you can afford to lose, day trading is not a realistic path to making money. The time investment is also enormous — successful day traders spend hours every day watching markets and executing trades.

Cryptocurrency Trading on Robinhood

Robinhood allows you to buy and sell cryptocurrencies like Bitcoin and Ethereum. You profit the same way as with stocks — by selling at a higher price than you bought. Cryptocurrency is far more volatile than stocks, meaning prices can swing 10, 20, or 30 percent in a single day.

This volatility creates opportunity for large gains, but also for large losses. Many people who buy cryptocurrency lose money because they buy near the peak of a price surge and sell during a crash. Cryptocurrency also does not pay dividends, so your only path to profit is selling at a higher price than you paid.

If you are considering cryptocurrency, treat it as a small, speculative part of your portfolio — something you can afford to lose entirely. Do not put money into cryptocurrency that you need for rent, emergencies, or other essential expenses.

Building a Strategy That Actually Works

Most people who make money through Robinhood do so by following a simple strategy: invest in low-cost index ETFs, add money regularly (even small amounts), and hold for years without trading frequently. This approach requires almost no skill, no timing, and no luck — just patience and discipline.

The math works because the U.S. stock market has historically returned about 10 percent per year on average over long periods. If you invest $500 per month in an S&P 500 index ETF and do nothing else for 30 years, you will likely have far more money than you put in, even accounting for inflation and market downturns.

The opposite approach — picking individual stocks, day trading, or trading options — requires skill you probably do not have yet, costs you money in spreads and taxes, and exposes you to the risk of losing your entire investment in a single bad decision. Some people do make money this way, but they are the exception, not the rule.

Frequently Asked Questions

Can I make money on Robinhood without buying stocks?

No. Robinhood is a brokerage for buying and selling investments. You make money by owning investments that increase in value or pay dividends. You cannot earn money simply by having a Robinhood account or keeping cash in it.

How much money do I need to start on Robinhood?

Robinhood has no minimum account balance to open an account or buy stocks and ETFs. You can start with $1, $10, or $100 — fractional shares let you buy partial ownership of expensive stocks. Day trading requires $25,000 minimum, but regular investing does not.

Why do I lose money even when the stock price goes up?

The bid-ask spread costs you money on every trade. If you buy a stock and the price rises but not enough to cover the spread you paid, you still lose. Taxes and any fees also reduce your profit. This is why holding for years works better than frequent trading.

Is Robinhood safe for my money?

Robinhood is a licensed brokerage regulated by the SEC. Your cash and stocks are protected up to $500,000 through SIPC insurance. The risk is not that Robinhood will disappear — it is that the investments you choose will fall in value.

What is the difference between a Robinhood regular account and a retirement account?

A regular account has no contribution limits but you pay taxes on gains every year. A Roth IRA or Traditional IRA through Robinhood lets you invest up to $7,000 per year (for 2024) but you do not pay taxes on gains until you withdraw in retirement. For most people, a retirement account is the better choice.