When it comes to stock market investing there are many brokerages to trade with. Often the commission cost is the deciding factor and here is where Robinhood shines with ZERO costs to buy or sell stocks.

Robinhood can do this because it was built from the ground up to run without this income. So how does it make money? It keeps the interest from any cash you have in your account and it has an optional monthly subscription service called Robinhood Gold that starts at $10/month.

Because they offer free trades it has led a few people to think that Robinhood is a scam. It definitely isn’t. They are regulated and each members account is insured through the SIPC for up to $500,000 in protection. In addition, your personal information is secured with bank level SSL and 128-bit encryption.

Currently, they only provide services only for U.S. residents. They are working to expand to Australia, but have no timeline as to when they will be open. You can get on the Australian waitlist by going here.

GET A FREE STOCK FOR SIGNING UP FOR ROBINHOOD THROUGH THIS LINK. CLICK HERE!

(Disclosure: I get one too)

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PROS of Robinhood:

1.) No commissions – This is the main reason to use this platform – by far. I am a very cost conscious person and never liked having to wait until I had $1000 or so to invest in order to keep the percentage of commission costs low. Now I can buy a single share of a $5 company if I wanted. I would never do that in my Scottrade account. More on why this is such a great thing later.

2.) Instant Deposit & Settlements (up to $1000) – Have you ever seen a market severely misprice a stock and want to get in on it? I have. Thing was I never had cash in my brokerage account. By the time the transfer went through the opportunity was lost. Not so with Robinhood, you submit a request to transfer in money and you instantly can trade with up to $1,000 of it. This also goes for any stock sales, you don’t have to wait the standard 3 days for the trade to clear. Perfect!

3.) Clean and easy to use app – They really nailed it when they created this app. It is simple and sleek, even a person brand new to investing can see what the stock is doing at a glance. You can re-arrange the stocks you hold by dragging and add any stock to your watchlist with just a click. Buying is just as simple. Find the stock you want, click buy, type how many shares you want and swipe up.

4.) New Features – I’ve been using Robinhood for almost two years. They have added new features every few months. They have added many nice features since I have been with them. Things like news feeds of interest based off what you own and watch and a chart showing the last 4 quarters of earnings are just a few. I also LOVE that it shows my average cost per share and any gain/loss in both dollar amounts and percentage. Such a simple thing that so many brokerage platforms don’t show.

CONS of Robinhood:

1.) No DRIP or partial shares – DRIP stands for dividend reinvestment program. It allows an individual to use any dividends to automatically purchase more shares in the company. If the dividend wasn’t enough for a full share it will buy a part of one. Robinhood doesn’t offer this capability, dividends are paid in cash in your account. This isn’t much of a negative with $0 trade costs though. You can just buy a full share once you have enough cash in your account.

2.) No advanced data – Robinhood only shows a few basic data points on each stock. P/E ratio, market cap, 52-week high/low, dividend yield, and a few other bits of info is all you get. No way to filter with parameters to find stocks of interest. This makes me research stocks using other ways, such as my IRA on Scottrade and free sites like Yahoo! Finance.

3.) App only – That’s right, once you sign up everything is on the app. No web based way to trade or check your account.

4.) No options, shorts, OTC, mutual funds, etc. – You can buy stocks and ETFs using market, limit, stop loss, and stop limit trades only. Sometimes I find a small interesting company that I might want to invest in only to see that it is not available through Robinhood. That makes me sad.

5.) Taxable account only - No IRAs, 529s, etc. They say they want to add IRAs to their offerings, but that hasn’t happened yet.

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What Do I Think of Robinhood?

As a very price conscious person, I got on board with them as soon as I could after they offered their app on Android (screw Apple). I have saved over $500 on commissions since then. (One particularly frequent trader has saved over $300,000!) I have made deposits and withdrawals with no problems. I am also confident that I have more money invested than I would have otherwise. Being able to invest even if I only have a few hundred dollars means that I did just that instead of possibly using it elsewhere.

Some might think that this will cause people to trade more frequently. That’s a fair point as they think a novice investor will sell out of fear when the stock is at a low point. But being charged a commission hasn’t stopped it from happening before either.

I think that $0 commissions is a wonderful thing. It allows for people to learn about investing without having to pay upwards of $10 every time they get into or out of a stock. I have seen people get started with just a few dollars in their account. These people would never have started to invest if it wasn’t for Robinhood. Because it doesn’t cost them anything extra they can buy a single share every payday. This will allow them to build up some wealth that would most likely have been spent on nothing of value. Even if they make a mistake and purchase a bad stock, they are learning without paying extra to the brokerage. To me, this is a great thing.

I’ve used a few different brokerages over the past 15 years. Some are crap, some are better, but none are perfect. Sure, Robinhood lacks in what it offers but at ZERO commissions and no account minimums how can you complain? You can use Robinhood for the all things it does right and, if you want more, you can use a brokerage that charges you for their services.

My Opinion: 4/5 Stars

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For a limited time Robinhood is offering people who sign up through this link a free stock valued anywhere between $3 and Facebook (1-in-20 chance, worth $164 as of today). You could even just sign up, get your free stock, sell it and take the money out.

At no cost to you and a free share to get started, I think it is a no-brainer. (Disclosure: I will also get a share too)

The Link: http://share.robinhood.com/justine1