(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!)
It is no secret that innovation in financial technology is having a major impact on the traditional financial services industry. Think about the many investment apps, savings apps, robo investing plans, budgeting apps, cryptocurrencies, and new online brokerages.
The leader in a lot of this innovation in the financial services industry is Robinhood.
They set the trend a few years ago and really forced the major brokerage firms to drop their commission rates to zero, something that Robinhood started.
Now, with over 22,000,000 users as of February 2023, many people are starting to ask the question ‘is Robinhood safe?‘
My Quick Answer
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 safe. 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:
- You no longer need a $1,000 or more to open a brokerage account. Just $10 is enough to get started.
- You no longer need to pay commissions.
- They pay interest on cash (most of brokerage apps don’t)
- You can now buy a half of a share or some other fraction of you favorite stocks like Apple or Amazon or Netflix.
- Best of all, when you open a new Robinhood account and fund it with just $10 you will instantly receive FREE money in your Robinhood account for you to pick your own share of stock from a list (valued at $5 to $200).
- 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) !
Click this image to see how you can get the maximum, up to $1,700, in free stock when you open an account:
With these innovations in investing (especially being commission free 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:
- About Robinhood
- Why Choose Robinhood?
- Is Robinhood Safe?
- Can Robinhood be Trusted?
- Is Robinhood Good for Beginners?
- The Robinhood App Features
- How Does Robinhood Make Money?
- 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 FREE, 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 safe.
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!
All of this is great…
…but…
Is Robinhood Safe to Use?
YES–Robinhood is absolutely safe. 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). Also, 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 free!
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 is safe 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 ABSOLUTELY SAFE TO USE–UP TO $500,000.
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.
Is Robinhood Good for Beginners?
Robinhood is EXACTLY what new investors needs. If you are a beginner investor, Robinhood is the best place to start and learn about investing. They make it quick to register and create an account, and they make it easy to start and learn about investing. And now, because they give you free stock when you open an account, they have a lot of loyal users (22,000,000).
Robinhood, because it does NOT charge commission and because it allows users to open an account with as little as $10, has been accused of posing a threat to the new and inexperienced investor.
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.
The safer options include mutual funds, exchange-traded funds, and bonds.
Robinhood App Features
Robinhood likes when you make trades on their app.
In fact, when you execute trades, the app “celebrates” by throwing virtual confetti at you.
Who isn’t a sucker for confetti?
The app also sends you push notifications when there are changes in stock price.
These features are fine but steadily encourage frequent stock trades.
The confetti and notifications can lead investors to believe they are doing something good.
But is that always the case?
Of course not.
Moral of the story: If you don’t know what you’re doing, don’t get excited about the confetti (because everyone gets it).
Robinhood is not the easiest to maintain a diversified portfolio (which is hard to do without mutual funds, in the first place).
The overall lack of diversification poses risks to many investors.
And, finally, Robinhood does not emphasize education as much as other apps.
The company promotes “learning by doing.”
Learning by doing is an excellent way to learn but may come at a high price!
The Great Banking Controversy
In addition to the above, Robinhood has not always maintained smooth sailing.
Back in the day, Robinhood announced its plans to launch Robinhood Checking & Savings.
These accounts promised an outstanding 3% interest rate.
According to a Robinhood spokesperson, cash in the accounts was insured by up to $250,000 by SIPC (Securities Investor Protection Corporation).
But there was one problem…
…the accounts were not FDIC-insured.
The controversy swiftly ended the bank account idea – for now.
However, the legal implications remain and have many investors concerned.
Why?
Because there should be no uncertainty when it comes to regulatory protection.
Could you imagine waking up to the money in your bank simply gone?
Yes, Robinhood is SIPC-insured. Insurance from the Securities Investor Protection Corporation is great, but checking and savings accounts must be FDIC-insured.
From there, Robinhood quickly admitted fault in its ways through the company blog.
The company also announced a re-branding and re-working of the new product.
The new product promised to work closely with regulators and “revamp its marketing materials, including the name.”
Regardless, the controversy has many investors on their toes.
Is the company willing to bend the rules to acquire new business and make money?
That question is undoubtedly a legit one, at this point.
However, one may ask…
…if Robinhood is free, how does the company make money?
Furthermore, how would the company rip anyone off?
These questions are all valid.
Pro Tip: if you sign up for Robinhood today, you’ll get FREE MONEY in your Robinhood account ($5-$200) to use to buy stocks of your choosing from a list of 20 companies! Then, if you refer friends, you can get up to $1500 in free stock per year!
How Does Robinhood Make Money?
It is no secret that Robinhood does not collect fees or commissions on trades, and does not require account minimums.
Why do you think the company is SO popular?
Instead, the company makes money in other ways.
What are these “other” ways?
Glad you asked.
Robinhood makes money on interest, lending, premium subscriptions, and rebates.
Robinhood does not pay interest on your uninvested cash.
However, they DO offer an optional brokerage cash sweep program.
When you opt in to the program, Robinhood takes your uninvested cash and deposits it with different banks that will pay you interest.
The APY for the brokerage cash sweep program is 1.5% for free users, and 4% for Gold members.
The most widely-used Robinhood services are the free ones…
…but the app offers Robinhood Gold for $5 per month.
Robinhood Gold gives users access to $1000 of margin for FREE, and margin investing with a lower interest rate for amounts borrowed over $1000.
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.
According to Robinhood:
“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.”
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 with Robinhood is just as safe as investing with Etrade, TD Ameritrade, Schwab or any other US bank.
The question is, do you know how to invest your money? Because if you make bad investments, you will lose your money.
So, what can you do to stay safe while investing on Robinhood?
You need to arm yourself with knowledge.
Otherwise, Robinhood has the infrastructure and regulations in place to keep your money safe.
Oh, and Robinhood will keep your data safe, too.
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!
