q Is Robinhood Safe? Is Robinhood Legit? (Here Are The Facts)
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Is Robinhood Safe? Is Robinhood Legit? (Here Are The Facts)

The transformative influence of financial technology on overday life cannot be overemphasized. From banking and investment apps to robo-investing and budgeting apps, as well as the rise of cryptocurrencies and new online brokerages, the fintech industry is witnessing significant changes. 

At the forefront of this innovation stands Robinhood. Robinhood has been the undisputed leader in eliminating commissions, allowing users to trade 24/7, and making it easy to trade crypto, options, and manage your IRA. But before you open a Robinhood account, you have to ask “is Robinhood safe?”

  • Robinhood is considered one of the largest and legitimate fintech platforms, with funds protected up to $500,000 for securities and $250,000 for cash claims, thanks to membership in the Securities Investor Protection Corporation (SIPC).
  • Known for its user-friendly platform, Robinhood has become popular, especially among new and young investors. Its commission-less model, low account minimums (as little as $10 to start), and the ability to buy fractional shares make it accessible for beginners.

Now boasting over 22 million users as of December 2023, many people still always question the safety and reliability of any type of investing platform.

ALERT: Are you a U.S. citizen, permanent resident or have a valid US visa? Then you can open a Robinhood account. If not, then you will not be able to sign up for a Robinhood account. See our eToro Review (and take advantage of their free stock offer to non-U.S. citizens!

Is Robinhood Safe?

I have had a Robinhood account since 2014 and I have made hundreds of trades, so I can assure you that Robinhood is definitely both legit and has the necessary policies (with federal regulations) to be a safe brokerage. I have never had a problem executing a trade. I have received the free stock Robinhood promised for opening an account and I have received more free stock for referring friends every year.

And in terms of their platform’s reliability, I have seen the app down for probably about a total of 5-15 minutes a couple of times over the years. But I have also seen Facebook/Meta and Amazon down from time to time so I don’t think that is a reason for concern.

In addition to my personal experience showing it is safe, you can rest assured that your first $500,000 of cash and stocks is insured by the SIPC. According to their website “Robinhood Financial LLC and Robinhood Securities, LLC are members of SIPC so securities in Robinhood accounts are protected up to $500,000. For details, please see www.sipc.org. Robinhood also makes additional coverage available.”

Robinhood has turned the investing world upside down.  Just like Uber changed the way people use taxis, Robinhood has changed the way people invest.  With Robinhood:

  1. You no longer need a $1,000 or more to open a brokerage account. Just $10 is enough to get started.
  2. You no longer need to pay commissions.
  3. They pay interest on cash (most of brokerage apps don’t)
  4. You can now buy a half of a share or some other fraction of you favorite stocks like Apple or Amazon or Netflix.
  5. Best of all, when you open a new Robinhood account and fund it with just $10 you receive a FREE stock in your Robinhood account (valued at $5 to $200).
  6. Once you have your account you will also get your own referral link. Then, when you refer your friends, both you and your friends will get more free stock (up to $1,500 per year)!

With these innovations in investing (especially being commission-less and their referral program), Robinhood has quickly become the fastest-growing brokerage service in the United States.

But we’re here to answer your questions about the overall safety of Robinhood. Is Robinhood legit? Is the Robinhood app safe?


Table of Contents:

  1. About Robinhood
  2. Why Choose Robinhood?
  3. Is Robinhood Safe?
  4. Can Robinhood be Trusted?
  5. Is Robinhood Good for Beginners?
  6. The Robinhood App Features
  7. How Does Robinhood Make Money?
  8. What Stocks Should I Buy?

About Robinhood’s History

Founded by Baiju Bhatt and Vladimir Tenev, Robinhood has seen significant growth since its inception in 2013.

The concept was quite simple:  Traditional brokerage firms were charging excessive commissions on every transaction and ripping off their customers.

The founders leveraged their experience on Wall Street, returned to Silicon Valley, raised some money and launched the first COMMISSION-LESS, APP-BASED brokerage.  They now have over 22 million users.  That’s proof positive of their product and their concept.  And it also should tell you that Robinhood is legit option for investors in the US looking for access to public markets.

In fact, Robinhood recently surpassed one of the most well-known brokerages, E*Trade, in terms of the number of active investment accounts.

But their explosive success begs the question:  is Robinhood a safe app to use?  What are the risks involved with Robinhood?

You will find the answers to all of this and more in this Robinhood Review. Simply read on…

Why Choose Robinhood?

Robinhood was the first stock brokerage app that did NOT CHARGE COMMISSIONS.

The other reason to choose Robinhood, is they give you free stock when you open an account; and they give you more free stock when you refer a friend that opens an account. Learn how to get up to $1,700 in free stock with Robinhood.

What that means is that users can open an account with literally just a few dollars and start buying shares without paying any commission with each trade.

The Robinhood app offers a commission-free trading model that provides users access to trade securities at no cost. Robinhood began exclusively as an iphone app but then quickly rolled out their Android versions, as well.  The app allows users to invest in U.S. stocks, ETFs, options, and cryptocurrencies.

One thing to know is that Robinhood is for the people–That is why there are no account minimums and no fees to trade with Robinhood.

Both features are a rarity in the fintech space.  You can trade several all U.S. listed stocks and ETFs. And now you can also trade cryptocurrency and even options.

Robinhood also recently unrolled their Retirement features. You can sign up and contribute to a traditional or Roth IRA, and Robinhood will match 1% of your contributions!

Robinhood also offers Robinhood Gold account which is a premium option that allows you to trade on margin at a lesser cost.  But beginning investors don’t need to worry about that or pay for that.

So, what makes Robinhood so popular?

Robinhood is famous for its commission-free trading, easy application process, and intuitive mobile platform. But best of all, they give you a free share of a stock when you open and fund your account!

ALERT: After the commotion caused by the Silicon Valley Bank collapse, many investors are left wondering whether their money is safe with the institutions they use.

  • When you open a Robinhood IRA, your money is protected by the SIPC up to $500k, including $250k coverage for cash. PLUS, when you open a Robinhood IRA and brokerage account, your IRA contributions are matched at 1% and you can earn up to $1700 a year in FREE STOCK by referring friends!

How Do I Get up to $1,700 in FREE STOCK with Robinhood?

To open a Robinhood account, all you need is your name, address, and email. If you want to fund your account immediately, you will also need your bank account routing and account number.

As its current promotion, Robinhood will immediately give you FREE MONEY (between $5 and $200) to invest in a set list of stocks when you open a new account if you click on the promo image below.  Then, once your account is open, you will be given your unique referral link. You will receive more free investing money (again valued at $5 to $200) for each person you refer. The more people you refer, the more you get up to a max of $1,500 a year. Click on this promo below to start your Robinhood account application and get your first stock for free.....

Bonus Tip:  Use this link to get free investing money ($5-$200) when you open and fund your account with at least $10:  sign up for Robinhood today, you'll get a deposit to your Robinhood account between $5 and $200. You can invest this money in stocks of your choosing from a list of 20 stocks. FURTHERMORE, for each friend that you refer, you will receive MORE free investing money up to $200. This is perfectly legit and you WILL get more free shares for every friend or family member you refer.

Why do they give away so much free stock? Because they spend their advertising dollars this way instead of buying TV, radio, print, or online ads! They WANT you to refer friends!


Is Robinhood Legit to Use?

Yes–Robinhood is considered a legit brokerage in the United States, while ensuring the necessary safety precautions being the SEC and FINRA regulated broker they are.

Your funds on Robinhood are protected up to $500,000 for securities and $250,000 for cash claims because they are a member of the SIPC (Securities Investor Protection Corporation).

Furthermore, Robinhood is a securities brokerage and as such, securities brokerages are regulated by the Securities and Exchange Commission (SEC).

Personally speaking, I was one of the first 100,000 to open a brokerage account in 2014. I put in a few $100 dollars and made some trades just to test it out.  I wanted to make sure that the stocks were priced correctly and that my orders were executed properly.  And yes, my trades were made properly and they were commission-less!

So, we’ve told you about what Robinhood is and how it works… but is Robinhood secure?

After a few months of successful trading, I sold everything and had Robinhood transfer my cash back to my checking account.  They did so immediately.  No problems.  No questions asked.  I even emailed them to check out their customer service and I got a reply within 4 hours.

I then transferred the money BACK INTO MY ROBINHOOD ACCOUNT and that is where I now save and invest on a monthly basis.  Over the last few years, I have made literally 200+ trades and never had any problems with orders executing or with my fill prices.  And yes, Robinhood is commission free!

In addition, the company has several other safety measures in place to protect your money and data and make Robinhood safe.  So, how is your MONEY protected?

You can sleep easy, knowing that your money and investments are protected with Robinhood.

As you can image, Robinhood operates under plenty of regulation and protection.

But remember, Robinhood is not subject to the scrutiny as a bank.

The imposed regulations and insurance make Robinhood a suitable brokerage for your investments — protecting your securities UP TO $500,000 and $250,000 for cash.

Can Robinhood be Trusted?

I have been using Robinhood for over 9 years now and have made nearly 1,000 trades. I have never had problem with any aspect of the app or the execution of trades. Furthermore, since Robinhood is a securities brokerage firm, the company is regulated by the Securities and Exchange Commission (SEC) just like every brokerage firm.

The company is also a voluntary member of the Financial Industry Regulatory Authority (FINRA).

FINRA is a self-regulatory body that many brokerages participate in.

As you may recall, your money in Robinhood is protected by the Securities Investor Protection Corporation (SIPC).

The SIPC protects up to $250,000 for cash claims and $500,000 for securities–so 99% of investors have NOTHING TO WORRY ABOUT.

Can I use Robinhood as a Beginner?

Robinhood is precisely tailored for novice investors, offering an ideal starting point for beginners to delve into the world of investing. The platform’s user-friendly registration process, low account minimum of $10, and commission-less trading make it particularly appealing to those with limited funds.

Despite facing criticism for potentially posing a threat to inexperienced investors, Robinhood has effectively democratized investing by eliminating the need for traditional brokers, allowing individuals to invest in small amounts without commission fees, thereby breaking down financial barriers for new investors.

But Robinhood has opened the door sot everyone can start investing. It is the old brokerage firms that put up the most resistance because now you don’t need a broker like you used to.

New investors typically don’t have a lot of money and they are just getting started.  So with Robinhood they can buy just 1 or 2 shares of their favorite stocks and companies and not lose money paying commissions.  You want 1 share of Apple–no problem!  You want to buy $100 of Starbucks?  No problem.  You can do that on Robinhood and not pay commissions.

Because Robinhood started as having ONLY an app and not a web page, they were quickly adopted by new and young investors.

What better way for new and young investors to start learning about the stock market and buying shares of their favorite companies than buy allowing them to buy just 1 share at a time and NOT charge commission.  THAT is exactly the encouragement that is needed to get young and new investors to start investing for the long term.

Who doesn’t want to own shares of their favorite, high-profile company?

But as a new investor, you may need safety over flash…and there are significantly “safer” investments on the financial markets.

Some of the consider safer options include mutual funds, exchange-traded funds, and bonds.

Robinhood App Features

Robinhood encourages user trades by showering virtual confetti during transactions, creating a celebratory atmosphere. 

While these features may be enticing, they inadvertently encourage frequent trading, potentially giving investors a false sense of accomplishment. The moral is clear: for those lacking investment knowledge, it’s crucial not to be swayed by confetti-induced excitement.

However, one of the downsides is that the platform doesn’t prioritize educational resources as much as its peers and can make maintaining a diversified portfolio challenging, particularly for those without access to mutual funds.

The Great Banking Controversy

Robinhood hasn’t always enjoyed smooth sailing. In the past, the platform unveiled plans to introduce Robinhood Checking & Savings, promising an impressive 3% interest rate. 

The accounts boasted insurance coverage of up to $250,000 by SIPC (Securities Investor Protection Corporation), as stated by a Robinhood spokesperson. However, a crucial issue arose—the accounts lacked FDIC insurance. 

This controversy promptly halted the bank account initiative, at least for the time being. Despite this pause, the legal implications persist, raising concerns among investors. The core issue revolves around the necessity for clear regulatory protection. The prospect of waking up to discover your bank funds vanished is unsettling. 

While Robinhood is SIPC-insured, the absence of FDIC insurance for checking and savings accounts remains a noteworthy consideration.

Subsequently, Robinhood promptly acknowledged its missteps through an official statement on the company blog. In response, the company not only admitted fault but also revealed plans for a comprehensive rebranding and restructuring of the new product. 

The revamped offering committed to working closely with regulators and undertaking a thorough overhaul of its marketing materials, including a reconsideration of the product’s name. Nevertheless, the controversy has left many investors vigilant. 

The key question looming is whether the company is willing to bend regulations to attract new business and generate profits.

How Does Robinhood Make Money?

Robinhood stands out by not charging fees or commissions on trades and imposing no account minimums. This approach has significantly contributed to the platform’s popularity. Instead of relying on traditional revenue streams, Robinhood adopts alternative methods to generate income. The company’s revenue sources include interest, lending, premium subscriptions, and rebates.

Robinhood offers interest rates of 1.5% APY for non-Gold members and an elevated 5.0% APY for Gold members on uninvested cash. Additionally, the optional brokerage cash sweep program provides users with the opportunity to earn interest on their uninvested cash. 

Upon opting into the program, Robinhood places uninvested funds with various banks, and users receive interest accordingly. The APY for this program is 1.5% for free users and 5% for Gold members.

While many users favor the free services, Robinhood also offers a subscription-based service called Robinhood Gold, priced at $5 per month. Subscribers to Robinhood Gold enjoy benefits such as access to $1,000 of margin at no extra cost and lower interest rates on margin investing amounts exceeding $1,000.

With Gold, you also earn more interest on your uninvested cash, get bigger instant deposits, and have access to higher-level research and stock data.

If you don’t know what margin entails, it is essentially “borrowed” money. That’s right – users can invest the brokerage’s money as well as their own.

“We generate income on cash, such as customers’ uninvested cash that isn’t swept to our network of program banks. We do this primarily by depositing cash in interest-bearing bank accounts outside of Robinhood Financial.”

According to Robinhood

Finally, Robinhood makes over 40% of revenue from high-frequency trading and payment from order flow.

This is a practice used by many online brokerages.

Robinhood makes money by processing trades with “behind-the-scenes” parties.

These parties provide the other end to the trade.

So, what is the difference?

Robinhood goes through third-parties rather than processing your order through an exchange.

The third parties that Robinhood uses include the “market makers,” Citadel Securities, Two Sigma, Wolverine, and Virtu.If you want the full breakdown on Robinhood’s fees, read our article here.

What Stocks Should I Buy?

Creating your account with Robinhood is the easy part. The hard part is now figuring out what stocks to buy.

Now to be clear, we are not registered advisor so we cannot tell you what to buy, but I can tell you what I tell my children to buy in their Robinhood accounts.

With one paycheck, move 5% to a savings account and save it as cash. Then move 10% of your take home pay to your Robinhood account and buy a stock or ETF that matches the overall market like an index fund.. They buy tickers “SPY”, “DIA” and “QQQ” which are index ETFs that match the S&P500, the Dow Jones Industrials, and the Nasdaq index respectively.

On their next paycheck, save some cash and then buy a recommended stock from one of the top stock newsletters. The current top performing newsletters are discussed here:

  • Seeking Alpha recently launched a new stock picking service that is beating the S&P500 and it is available for only $99 for the first year. Read this Alpha Picks Stock Review.
  • The Motley Fool is another stock service that has consistently beat the market. Read this Motley Fool Review.

Here’s some quick advice–don’t chase rumors and don’t start guessing at stocks.

It’s always best to follow the advice of professionals, especially when it comes to investing your hard earned cash.

At WallStreetSurvivor, one of the services we provide is that we help our users find the best stock picks.

For the last 20 years, we have subscribed to dozens of stock newsletters and tracked their recommendations.  We know, without a doubt, which stock newsletter has been the best for the last decade.  In fact, we trust this one stock service so much that for the last 5 years we have bought everyone one of this service’s stock picks in our real account.

This stock newsletter is the Motley Fool Stock Advisor.  

Follow this link to read our review the Motley Fool Stock Advisor newsletter.

The Risks You Should Know About Robinhood

Investing through Robinhood is equally secure as with Etrade, TD Ameritrade, Schwab, or any other U.S. bank. The crucial factor lies in your ability to make informed investment decisions, as poor choices can result in financial losses. 

To ensure safety while investing on Robinhood, the key is to equip yourself with knowledge, given that the platform has the necessary infrastructure and regulatory measures to safeguard your money. 

Additionally, Robinhood prioritizes data security, ensuring the protection of your personal information.

The risks on Robinhood lie more in “user error” than in the app itself.  Just because they don’t charge commissions doesn’t mean you will make money.  You STILL need to pick quality stocks and build a strong portfolio.  If you need stock advice, please read our Motley Fool Review since their stocks picks have been the best over the last 4 years and new subscribers can sign up for just $99 a year.

As the customer, you must always perform your own research on the brokerage firm, tools, and investments.Like any other service, Robinhood provides you the platform, but your results depend on YOU.

TAKE ADVANTAGE OF ROBINHOOD’S CURRENT PROMOTION AND CLAIM YOUR FREE STOCK…

After that, you are good to go with Robinhood.

Robinhood is safe, receives high safety ratings, and is safe for investing.

And when it comes to your money, just be sure that Robinhood is right for you.

Ask yourself the following questions:

  • What are your objectives?
  • How much money can you afford to invest?
  • Do you have an emergency fund?
  • Do you have debt that must be paid-off?
  • Is your retirement plan on track?

If you answered YES to all of these…

…you are ready to get started with Robinhood (or another brokerage).

The Conclusion

Okay, so we spent the last 5-10 minutes of your life telling you all we know about Robinhood.

From what we have seen so far, in the 3 years that we have had an account… Robinhood is SAFE.  And, it is probably the best brokerage app for new investors.  So if you are thinking of opening an account, you should NOT be worried about whether or not it is safe.  You should be thinking what will be the first stock you buy.

With that said, here is the verdict to answer the question “is Robinhood safe?”:

ROBINHOOD IS SAFE!

Keep in mind, Robinhood is currently offering you FREE shares of stock ($5-$200 in value) when you open an account and fund it with at least $10.

Furthermore, you get get up to $1,500 of free stock each year by referring your friends and they open investment accounts.

So don’t hesitate, CLICK HERE to open your account and get your FREE stock.

How Do I Get up to $1,700 in FREE STOCK with Robinhood?

To open a Robinhood account, all you need is your name, address, and email. If you want to fund your account immediately, you will also need your bank account routing and account number.

As its current promotion, Robinhood will immediately give you FREE MONEY (between $5 and $200) to invest in a set list of stocks when you open a new account if you click on the promo image below.  Then, once your account is open, you will be given your unique referral link. You will receive more free investing money (again valued at $5 to $200) for each person you refer. The more people you refer, the more you get up to a max of $1,500 a year. Click on this promo below to start your Robinhood account application and get your first stock for free.....

Bonus Tip:  Use this link to get free investing money ($5-$200) when you open and fund your account with at least $10:  sign up for Robinhood today, you'll get a deposit to your Robinhood account between $5 and $200. You can invest this money in stocks of your choosing from a list of 20 stocks. FURTHERMORE, for each friend that you refer, you will receive MORE free investing money up to $200. This is perfectly legit and you WILL get more free shares for every friend or family member you refer.

Why do they give away so much free stock? Because they spend their advertising dollars this way instead of buying TV, radio, print, or online ads! They WANT you to refer friends!


OPEN A ROBINHOOD ACCOUNT AND GET UP TO $200 IN FREE STOCK!