Opening Your Account and Funding It

To invest through Robinhood, you first read the app or visit the website, then create an account by providing your name, date of birth, email address, and Social Security number. Robinhood will verify your identity through a process that typically takes a few minutes, though sometimes it can take longer if additional information is needed.

Once your account is open, you link a bank account to fund it. You can transfer money from your checking or savings account, and Robinhood will hold that cash in your account until you decide to buy stocks, exchange-traded funds (ETFs), options, or cryptocurrencies. The time it takes for money to settle varies: some transfers arrive within one business day, while others take three to five business days depending on your bank.

Robinhood does not charge account opening fees or monthly maintenance fees. You pay nothing to hold cash in the account or to place trades, though you may pay fees if you use certain features like margin trading or if you trade options.

Key Takeaways

  • You need a Social Security number, valid ID, and a linked bank account to open a Robinhood account, and the process takes minutes to complete.
  • Robinhood charges no commission on stock, ETF, or cryptocurrency trades, but does charge fees for margin accounts and certain options strategies.
  • You can start with any amount of money, though some investments have minimum purchase prices that vary by security.
  • Your cash and investments are held by Robinhood Financial, which is a member of the Securities Investor Protection Corporation (SIPC), meaning your account has protection up to $500,000 if Robinhood fails.
  • You can place trades during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays) and during extended hours (4 p.m. to 8 p.m. and 8 a.m. to 9:30 a.m.) if you have a Gold subscription.

Choosing What to Buy: Stocks, ETFs, and Other Investments

Robinhood lets you buy individual stocks, which means you own a share of a specific company. You can search for a company by name or ticker symbol (for example, AAPL for Apple), see the current price, and decide how many shares to buy. The price you pay depends on the current market price at the moment you place the order.

You can also buy exchange-traded funds (ETFs), which are baskets of many stocks bundled together. An ETF might hold 500 different company stocks, so buying one ETF share gives you exposure to all 500 without having to buy each one separately. ETFs typically charge an annual fee (called an expense ratio) that ranges from nearly 0% to over 1% per year, depending on the fund.

Robinhood also offers fractional shares, meaning you can buy a portion of a stock even if you do not have enough money for a full share. For example, if a stock costs $1,000 per share and you have $100, you can buy 0.1 shares. This makes it possible to invest in expensive stocks with smaller amounts of money.

If you want to trade options or cryptocurrencies, you will need to turn on those features in your account settings. Options trading requires additional approval from Robinhood, and you must meet certain account requirements. Cryptocurrency is available to most users but carries higher risk than stocks or ETFs.

Placing Your First Trade

To buy an investment, search for it by company name or ticker symbol in the Robinhood app or website. Once you find it, you will see the current price, a chart showing price history, and basic information about the company or fund. Tap or click "Buy" to open the order screen.

You then choose how many shares or dollars you want to buy. If you choose "shares," you enter a number (for example, 5 shares). If you choose "dollars," you enter an amount (for example, $500), and Robinhood calculates how many shares that buys at the current price. You can also set a limit order, which means you tell Robinhood the maximum price you are willing to pay, and it will only buy if the price drops to that level or lower.

After you review the order details, you confirm the trade. The order goes to the market when ready if you are trading during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order outside market hours, it will execute when the market opens the next trading day, unless you have Robinhood Gold, which lets you trade during extended hours.

Once the trade is complete, the investment appears in your portfolio, and you own it. You can hold it as long as you want, sell it whenever you choose, or set up automatic investments to buy the same security on a schedule you pick.

Understanding Fees and Costs

Robinhood charges zero commission on stock, ETF, and cryptocurrency trades, which means you do not pay a per-trade fee. However, other costs do exist. If you buy an ETF, you pay the fund's annual expense ratio, which is deducted automatically from the fund's value each year. A fund with a 0.03% expense ratio on a $10,000 investment costs $3 per year; a fund with a 1% expense ratio costs $100 per year on the same investment.

If you use margin (borrowed money to invest), Robinhood charges interest on the borrowed amount. The interest rate varies based on how much you borrow and whether you have a Gold subscription. Robinhood Gold itself costs $5 per month and gives you access to extended-hours trading, larger margin borrowing limits, and other features.

Options trading involves additional fees depending on the strategy. Selling covered calls or cash-secured puts typically costs $0.65 per contract. Other options strategies may have different fees. Robinhood displays all fees before you confirm a trade, so you can see exactly what you will pay.

How Your Money Is Protected

Robinhood Financial is a registered broker-dealer and a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). This means your account has protection if Robinhood fails or goes out of business. SIPC protects up to $500,000 per account, with a maximum of $250,000 in cash.

Your cash and securities are held in your name, not Robinhood's name. If Robinhood were to fail, your investments would be returned to you or transferred to another broker. This is different from keeping money in a bank account, where the Federal Deposit Insurance Corporation (FDIC) provides protection up to $250,000 per depositor per bank.

Robinhood uses encryption and two-factor authentication to protect your account from unauthorized access. You can enable two-factor authentication in your account settings, which requires you to enter a code from your phone or email every time you log in from a new device.

Tracking Your Investments and Making Changes

Your Robinhood portfolio shows all the stocks, ETFs, and other investments you own, along with how much you paid for them and what they are worth now. The app displays your total account value, your total gain or loss, and the percentage return on your investment. You can see this information updated in real time during market hours.

If you want to sell an investment, open your portfolio, find the security, and tap or click "Sell." You choose how many shares to sell and whether you want to place a market order (sell when ready at the current price) or a limit order (sell only if the price reaches a certain level). After you confirm, the sale is complete and the money goes back into your cash balance.

You can also set up automatic investments through Robinhood's recurring investment feature. You choose a security, an amount of money, and a frequency (daily, weekly, or monthly), and Robinhood will automatically buy that investment on your schedule. This is useful if you want to invest a fixed amount regularly without having to remember to place trades manually.

Tax Reporting and Record-Keeping

Robinhood tracks all your trades and sends you tax documents at the end of the year. If you sold any investments at a profit or loss, you will receive a Form 8949 (Sales of Capital Assets) and a Schedule D, which you use to report capital gains and losses on your tax return. If you earned dividends (payments companies make to shareholders), you will receive a Form 1099-DIV.

You can read your trade history from Robinhood at any time, which is useful for your own records and for tax planning. The app shows the date you bought or sold, the price, the number of shares, and the total amount. Keep these records for at least three years in case the IRS asks questions about your returns.

If you hold an investment for less than one year before selling it, any profit is taxed as a short-term capital gain, which is taxed at your ordinary income tax rate. If you hold it for more than one year, it is taxed as a long-term capital gain, which typically has a lower tax rate. This is one reason some investors hold investments longer rather than trading frequently.

Frequently Asked Questions

Do I need a minimum amount of money to start investing on Robinhood?

No minimum deposit is required to open a Robinhood account. However, individual stocks and ETFs have different minimum purchase prices. With fractional shares, you can invest as little as $1 in most stocks, though some securities may have higher minimums depending on their price.

Can I trade stocks before the market opens or after it closes?

Robinhood offers extended-hours trading from 4 p.m. to 8 p.m. Eastern time and 8 a.m. to 9:30 a.m. Eastern time, but only if you have a Robinhood Gold subscription ($5 per month). During regular market hours (9:30 a.m. to 4 p.m.), all users can trade without a subscription.

What happens if I sell a stock at a loss?

You can report the loss on your tax return to offset capital gains from other investments or up to $3,000 of ordinary income in a single year. Any losses beyond that can be carried forward to future years. Keep your trade records to document the loss when you file your taxes.

Can I use Robinhood if I am under 18?

Robinhood does not allow accounts for users under 18. However, some brokers offer custodial accounts for minors, where a parent or guardian controls the account. Check with other brokers if you want to invest for someone under 18.

What is the difference between a market order and a limit order?

A market order buys or sells when ready at the current market price. A limit order sets a maximum price you are willing to pay (when buying) or a minimum price you are willing to accept (when selling), and the trade only executes if the price reaches that level. Limit orders give you more control but may not execute if the price never reaches your target.