We mention on our Application and Performance pages that we use Robinhood to trade live with our own capital and buy/sell signals from our beta release for private investors. However we have noticed that Robinhood is still relatively unkown among our user community – even with glowing articles like this one in the New York Times. Therefore and in this blogpost we thought that it would be a good idea to introduce you to Robinhood through the lens of our trading experiences over the past months.
However before we begin please note the following important point. Namely we have no business relationship with Robinhood – or any other brokerage. Therefore our views are unbiased and based purely on our experiences with our own capital and buy/sell signals from our application over the past months.
Quick Introduction
Robinhood is a relatively new, online brokerage that no charges no fees to trade in US-based equities. Yes, you read the last sentence correctly – no fees to trade stocks! Of course there are caveats associated with its no-fee service (see details below). Nonetheless the fact remains that Robinhood is the only no-fee brokerage available today.
The ability to offer brokerage services at no cost is groundbreaking. For the first time private investors have direct access to markets in the United States without paying a "gatekeeper". In turn the elimination of fees presents investors new opportunities to trade actively instead of resigning themselves to buy-and-hold strategies that minimize turnover and hence trading costs.
We take advantage of this new no-fee environment and offer private investors a low-cost and automated approach to actively trading in equities. Indeed if not for no-fee brokerages like Robinhood our ambition to democratize investing would be much more challenging indeed.
And how does Robinhood earn money, if it does not charge fees? Well Robinhood invests any cash from customers' accounts in risk-free and liquid US Treasury securities. Now these risk-free investments do not yield much return. Therefore Robinhood relies on customer volume because its margins are rather thin.
Account Set-Up
The process for creating an account is easy and starts on Robinhood's website. Simply click the "Sign Up" button. Afterwards Robinhood walks you through the entire procedure for US residents including approval, downloading the application to your mobile device (IOS or Android), and ultimately transferring funds from your bank to your new Robinhood account.
Note that Robinhood requires no minimum deposit – the minimum deposit is only limited by the price of the stock(s) that you wish to buy. Moreover one can begin trading immediately for deposits up to US$1000. However for transfers greater than US$1000 allow about five business-days until the full amount of your deposit is available for trading. In Robinhood parlance any cash amount actually available to buy stocks is called "buying power".
Buying and Selling
To purchase a stock you simply search for the stock symbol – for example JNJ for Johnson & Johnson. Then you enter the amount of shares that you wish to buy – say thirteen shares per our lastest buy signal for JNJ (from our standard portfolio composition for private investors on 3 March). Next click "Done" and swipe downward to initiate the trade. Robinhood informs you from the application as well as via email that the order has been received and then executed. After you buy a stock you can track your performance in real-time via Robinhood's application.
To sell a stock is just as easy. You select the position – again JNJ – and click the "Sell" button. You then select the number of shares to sell and swipe downward to initiate the trade. As when you buy, you receive confirmation of your sale from the application as well as via email.
However there is one large caveat when you sell. Namely you must wait about five business-days to access cash from your sale – either to transfer back into your bank account or buy additional stocks. Of course though any gains (or losses) are booked immediately on our account.
For many investors the time restriction on access to cash from any sales is frustrating. However one should always remember that trading with Robinhood is free. Instead Robinhood earns money from its short-term risk-free investments in US Treasury securities. So this is the true price of trading with Robinhood – you essentially give Robinhood a one-week free loan with any sales. Furthermore you can always upgrade to Robinhood Gold, which charges fees but also allows immediate access to cash from sales.
Overall Experience
So what is our overall experience using Robinhood over the past months? Well we are happy to report that we are quite pleased with Robinhood. Sure there are time restrictions associated with deposits and sales but these restrictions are not blocking factors for typical investors. Moreover we can absolutely state that trading via Robinhood's mobile application is both quick and easy.
However before we begin please note the following important point. Namely we have no business relationship with Robinhood – or any other brokerage. Therefore our views are unbiased and based purely on our experiences with our own capital and buy/sell signals from our application over the past months.
Quick Introduction
Robinhood is a relatively new, online brokerage that no charges no fees to trade in US-based equities. Yes, you read the last sentence correctly – no fees to trade stocks! Of course there are caveats associated with its no-fee service (see details below). Nonetheless the fact remains that Robinhood is the only no-fee brokerage available today.
The ability to offer brokerage services at no cost is groundbreaking. For the first time private investors have direct access to markets in the United States without paying a "gatekeeper". In turn the elimination of fees presents investors new opportunities to trade actively instead of resigning themselves to buy-and-hold strategies that minimize turnover and hence trading costs.
We take advantage of this new no-fee environment and offer private investors a low-cost and automated approach to actively trading in equities. Indeed if not for no-fee brokerages like Robinhood our ambition to democratize investing would be much more challenging indeed.
And how does Robinhood earn money, if it does not charge fees? Well Robinhood invests any cash from customers' accounts in risk-free and liquid US Treasury securities. Now these risk-free investments do not yield much return. Therefore Robinhood relies on customer volume because its margins are rather thin.
Account Set-Up
The process for creating an account is easy and starts on Robinhood's website. Simply click the "Sign Up" button. Afterwards Robinhood walks you through the entire procedure for US residents including approval, downloading the application to your mobile device (IOS or Android), and ultimately transferring funds from your bank to your new Robinhood account.
Note that Robinhood requires no minimum deposit – the minimum deposit is only limited by the price of the stock(s) that you wish to buy. Moreover one can begin trading immediately for deposits up to US$1000. However for transfers greater than US$1000 allow about five business-days until the full amount of your deposit is available for trading. In Robinhood parlance any cash amount actually available to buy stocks is called "buying power".
Buying and Selling
To purchase a stock you simply search for the stock symbol – for example JNJ for Johnson & Johnson. Then you enter the amount of shares that you wish to buy – say thirteen shares per our lastest buy signal for JNJ (from our standard portfolio composition for private investors on 3 March). Next click "Done" and swipe downward to initiate the trade. Robinhood informs you from the application as well as via email that the order has been received and then executed. After you buy a stock you can track your performance in real-time via Robinhood's application.
To sell a stock is just as easy. You select the position – again JNJ – and click the "Sell" button. You then select the number of shares to sell and swipe downward to initiate the trade. As when you buy, you receive confirmation of your sale from the application as well as via email.
However there is one large caveat when you sell. Namely you must wait about five business-days to access cash from your sale – either to transfer back into your bank account or buy additional stocks. Of course though any gains (or losses) are booked immediately on our account.
For many investors the time restriction on access to cash from any sales is frustrating. However one should always remember that trading with Robinhood is free. Instead Robinhood earns money from its short-term risk-free investments in US Treasury securities. So this is the true price of trading with Robinhood – you essentially give Robinhood a one-week free loan with any sales. Furthermore you can always upgrade to Robinhood Gold, which charges fees but also allows immediate access to cash from sales.
Overall Experience
So what is our overall experience using Robinhood over the past months? Well we are happy to report that we are quite pleased with Robinhood. Sure there are time restrictions associated with deposits and sales but these restrictions are not blocking factors for typical investors. Moreover we can absolutely state that trading via Robinhood's mobile application is both quick and easy.
New Markets and Potential Competitors
For now Robinhood is restricted to the United States. However Robinhood soon plans to roll-out a similar no-fee service in Australia and eventually China. Unfortunately Robinhood has no current plans for Europe.
Nonetheless there is a potential competitor to Robinhood in Europe called DEZIRO. According to its website DEZIRO soon plans to offer no-fee trading in Europe but the exact availability date is unknown.
However DEZIRO's parent company DEGIRO offers no-fee access to US markets from Europe. Therefore and like investors in the United States with Robinhood, European investors can trade in US markets without fees via DEGIRO. In the meantime DEGIRO offers traditional fee-based brokerage services throughout Europe.
If you have any questions about Robinhood, how we use Robinhood to trade in the United States with our buy/sell signals, or DEGIRO in Europe, please do not hesitate to contact us anytime at contact@stats4trade.com. We look forward to hearing from you!
For now Robinhood is restricted to the United States. However Robinhood soon plans to roll-out a similar no-fee service in Australia and eventually China. Unfortunately Robinhood has no current plans for Europe.
Nonetheless there is a potential competitor to Robinhood in Europe called DEZIRO. According to its website DEZIRO soon plans to offer no-fee trading in Europe but the exact availability date is unknown.
However DEZIRO's parent company DEGIRO offers no-fee access to US markets from Europe. Therefore and like investors in the United States with Robinhood, European investors can trade in US markets without fees via DEGIRO. In the meantime DEGIRO offers traditional fee-based brokerage services throughout Europe.
If you have any questions about Robinhood, how we use Robinhood to trade in the United States with our buy/sell signals, or DEGIRO in Europe, please do not hesitate to contact us anytime at contact@stats4trade.com. We look forward to hearing from you!