What is the Robinhood app?
The Robinhood app is one of the best and most revolutionary products in the stock trading world. Like the mythical Robin Hood of English literature, this app takes from the rich and gives to the poor. Only this time around the “rich” isn’t a prince, it’s the collection of stock brokers that charge as much as $30 bucks a trade. And the poor aren’t necessarily poor, they’re just people looking to save some cash. What are we getting at? With the Robinhood app you can actually trade for free!
Robinhood is one of the few services that you can use to execute trades for free. How is the app able to offer trades for free? Robinhood focuses on efficiency above all else, and leveraging technology to automate trading as much as possible, allowing them to cut overhead costs.
does away with all of the store fronts and most of the physical account managers. This means there is no huge, fat and flabby sales team. There will also be fewer people to bug you with upsells and all the rest. Of course, there is a trade off to cutting costs and staff: there will be fewer people to turn to for questions and professional advice. For many traders, however, that’s a great trade off when trading comes for free.
Most of Robinhood’s staff consists of tech developers and business operations specialists, not professional wealth managers. Hiring a professional wealth manager isn’t cheap, and by cutting these “pros” out, the Robinhood app is able to offer much lower prices to end-users.
Fact is, an increasing number of traders are managing their own wealth anyways. Thirty years ago it was hard for the average person to conduct trading at all. Before the invention of computers and the Internet, most traders were professional traders. If you were trying to manage your own wealth, you’d have to call a broker to execute a trade. Often, this involved going through a wealth manager.
The process was long and arduous, and often by the time you got your trade executed, market conditions had changed significantly. Then the personal computer came along, and later the Internet. Suddenly, people had very powerful computing tools and easy connections to the rest of the world through the web. Now we have mobile phone apps like Robin Hood that mean you can trade pretty much any time, anywhere.
Robinhood is a great option
Robinhood is a great option for people looking to get their toes in the water. Besides offering free trading services, Robinhood does not have an account minimum. Most other brokers require at least $500 dollars to get started. So if you just want to invest $100 bucks and see how stock markets work, Robinhood is a great option.
How Robinhood Make Money
There’s a good chance that you’re wondering how Robinhood manages to make money. After all, most brokerages make money off of charging fees. When it comes to making money, Robinhood is a lot more like a traditional bank than a broker. They make money off of charging interest on margin accounts and interest on cash held in the company’s accounts. So when you leave money uninvested in your account, Robinhood is able to make money through interest off of it.
The company is still young and outside of trading, it doesn’t offer many other services, such as research and analysis. That being said, we wouldn’t be shocked if Robinhood eventually starts offering premium services as an upsell, value added service. This is pure speculation, however, and if you’re looking for a broker that provides value-added services, you might want to look elsewhere.
Robinhood has already raised $66 million dollars in funding from a variety of investing and venture capital firms. Big time investors are taking the company seriously, to say the least, so you can be assured that this company is serious, not a scam. Of course, the app is relatively new, and bugs and short-comings should be expected.
So if you’re looking for a free stock trading app, make sure you give Robin Hood a close, long look. This free stock trading app is available on both Android and Apple devices. As of right now you have to be a U.S. citizen* to use the app, but the company is expanding globally. If you are not a U.S. citizen, make sure you check back soon because the App may be available in your country in the near future.
*A U.S. residential address is also required to sign up for the app. If you are an American military member living abroad, however, the company may be able to grant you an exception.