Robinhood is a brokerage app, not a financial advisor
Robinhood lets you buy and sell stocks, options, cryptocurrencies, and some other securities through your phone or computer. It charges no commission on stock trades — meaning you don't pay a per-trade fee — and has low account minimums. Whether that makes it "good" depends entirely on what you're trying to do, how much experience you have, and what features matter to you.
Robinhood is not a bank, not a financial advisor, and not a robo-advisor that picks investments for you. You make all the decisions about what to buy and sell. The app is designed to make trading fast and simple, which appeals to people who want to move quickly — but speed and simplicity are not the same as safety or profit.
Key Takeaways
- Robinhood charges no commission on stock trades, but you still pay the bid-ask spread (the difference between what you pay and what you sell for), which is a real cost.
- The app is built for active trading and quick decisions, not for long-term buy-and-hold investing, though you can use it that way.
- Robinhood has had outages during high-volume trading days, which means you may not be able to buy or sell when you want to.
- Your cash and securities are protected by SIPC insurance up to $500,000 per account type, but that does not protect you from your own trading losses.
- Robinhood makes money partly from payment for order flow, meaning it sells information about your trades to other firms, which can create conflicts of interest.
What Robinhood charges and what it doesn't
Robinhood does not charge a commission per trade on stocks, ETFs, or options. That was unusual when Robinhood launched in 2015, but most major brokerages have since dropped commissions too. So the "no commission" feature is no longer a competitive advantage — it's now standard.
You still pay costs that are less visible. Every time you buy a stock, there is a gap between the price someone is willing to pay (the bid) and the price someone is willing to sell at (the ask). That gap is called the spread, and it's a real cost to you. Robinhood does not control the spread — the market does — but some brokerages execute trades in ways that get you better prices on average. You can't see the spread clearly in the Robinhood app the way you can in other platforms.
Robinhood also offers a paid subscription called Robinhood Gold, which costs $5 per month and gives you access to margin (borrowed money to trade with) and some research tools. Most beginners don't need this.
How Robinhood makes money from you
If Robinhood doesn't charge commissions, how does it make money? Partly through payment for order flow. When you place a trade on Robinhood, the company sells information about that trade to market makers and other firms. Those firms pay Robinhood for the right to see your order before it hits the public market. This is legal, but it creates a conflict of interest: Robinhood has an incentive to route your trades in ways that make it money, not necessarily in ways that get you the best price.
Robinhood also makes money from interest on cash you hold in your account and from margin interest if you borrow to trade. The company is transparent about payment for order flow in its disclosures, but most users don't read those disclosures and don't understand what it means for their trades.
Robinhood's track record with outages and reliability
Robinhood has experienced multiple outages during high-volume trading days, most notably in March 2020 during the COVID-19 market crash and in January 2021 during the GameStop trading surge. During these outages, users could not place trades for hours. If you had wanted to sell a position to cut losses, you couldn't. If you had wanted to buy a dip, you couldn't.
Robinhood has invested in its infrastructure since then, and outages are less frequent. But the company is still smaller than competitors like Fidelity or Charles Schwab, which have more robust systems. If you plan to trade during volatile market periods, you should know that Robinhood's platform has failed when users needed it most.
Who Robinhood works well for and who it doesn't
Robinhood works well for people who want to make their own trading decisions, don't need research or advice, and are comfortable with a simple interface. It's popular with younger traders and people making frequent trades because the app is fast and the zero-commission structure removes friction.
Robinhood does not work well for people who want detailed research, educational resources, or customer support. The app has minimal educational content. Customer support is available only through email and in-app chat, not by phone. If you have a problem during market hours, you may not get a response until after the market closes.
Robinhood is also not ideal for long-term buy-and-hold investors. The app's design encourages frequent trading and quick decisions. If you're planning to buy index funds and check back in five years, you'd be better served by a platform like Fidelity or Vanguard, which have lower costs for long-term holding and more educational resources.
Robinhood versus other brokerages
Most major brokerages now offer zero-commission stock trading, so Robinhood's main advantage is its interface and speed, not its pricing. Fidelity, Charles Schwab, E*TRADE, and others all charge no commission and offer more research, education, and customer support. They also have better track records for reliability during volatile markets.
Some traders prefer Robinhood because it feels faster and less cluttered than competitors. Others prefer brokerages with more tools and data. The choice depends on whether you value simplicity over features, and whether you're comfortable with Robinhood's history of outages and its payment-for-order-flow model.
SIPC protection and what it covers
Robinhood is a member of SIPC (Securities Investor Protection Corporation), which means your cash and securities are protected up to $500,000 per account type if Robinhood fails or goes out of business. This is important: SIPC does not protect you from trading losses. If you buy a stock at $100 and it drops to $50, SIPC doesn't reimburse you. SIPC only protects you if the brokerage itself fails and your assets disappear.
Robinhood also carries additional insurance beyond SIPC through Lloyd's of London, which covers up to an additional $149.5 million per customer for cash and securities. This extra layer is reassuring, but again, it only protects you if Robinhood fails — not if your trades lose money.
Frequently Asked Questions
Can I lose more money than I invest on Robinhood?
Yes, if you use margin (borrowed money). With margin, you can lose more than your account balance. If you trade options, you can also lose more than you invested, because options are leveraged. If you only buy stocks with cash you have, your maximum loss is the amount you invested.
Is Robinhood safe to use?
Robinhood is regulated by the SEC and FINRA, and your assets are insured by SIPC. The company has had security breaches in the past, but no customer funds were stolen. Your account is as safe as any major brokerage, though the platform's history of outages means you may not be able to trade when you want to.
Does Robinhood report my trades to the IRS?
Yes. Robinhood reports all your trades to the IRS through Form 1099-B. You are responsible for reporting capital gains and losses on your tax return. Robinhood does not calculate your tax liability for you, though it does provide a tax document download tool.
Can I transfer my stocks out of Robinhood?
Yes. You can transfer securities to another brokerage through an ACAT (Automated Customer Account Transfer) transfer. The process usually takes three to five business days. Some brokerages charge a transfer fee, though many now waive it to attract new customers.
What's the minimum amount I need to start investing on Robinhood?
There is no account minimum. You can open an account with $1 and start buying fractional shares of stocks. However, if you plan to day trade (buy and sell the same security on the same day), you need at least $25,000 in your account under SEC rules.