Opening an account and funding it

To start investing on Robinhood, you first create an account through the Robinhood app or website, provide your Social Security number and basic identity information, and wait for approval — usually a few minutes to a few hours. Once approved, you link a bank account by entering your routing and account numbers, or by connecting through your bank's login if your bank supports it.

After your bank account is linked, you can transfer money into your Robinhood account. Robinhood offers both standard transfers (which take three to five business days to settle) and when ready transfers for amounts up to $1,000 per day if you have a Robinhood Gold subscription. Until the money settles, you cannot use it to buy stocks or funds, though you can place orders that will execute once the funds arrive.

Your account comes with a cash management feature that lets your uninvested cash earn interest at a rate that changes with market conditions. You do not have to use it, but money sitting idle in your account will not earn anything if you do not turn it on.

Key Takeaways

  • You can open a Robinhood account in minutes with your Social Security number and a linked bank account, and start trading once your first deposit settles.
  • Robinhood charges no commission on stock or fund trades, but you pay the bid-ask spread — the difference between what buyers offer and what sellers ask.
  • You can buy fractional shares of stocks and funds, meaning you can invest any dollar amount rather than waiting to afford a whole share.
  • Robinhood offers stocks, exchange-traded funds (ETFs), options, and cryptocurrencies, but not bonds or mutual funds.
  • Selling a stock within five business days of buying it counts as a day trade, and making four or more day trades in five business days triggers a 90-day restriction unless your account has $25,000.

Finding and buying stocks

Once your money settles, tap the search icon in the Robinhood app or use the search bar on the website and type the company name or stock ticker symbol. Robinhood shows you the current price, a chart of recent price movement, company information, and news headlines. Scroll down to see the bid price (what buyers are offering) and the ask price (what sellers are asking).

Tap or click "Buy" and enter the dollar amount you want to invest or the number of shares. Robinhood will show you a preview of the order — the price, the number of shares you will receive (including fractional shares), and any fees. Confirm the order, and it executes when ready if the market is open, or at the market open the next trading day if you order after hours or on a weekend.

You own the shares the moment the order fills. Robinhood sends you a confirmation and adds the position to your portfolio. You can hold the shares as long as you want, or sell them anytime the market is open by tapping "Sell" and following the same process in reverse.

Understanding bid-ask spreads and why they matter

Robinhood advertises zero-commission trading, which is true — you pay nothing to Robinhood for buying or selling. However, you still pay a cost called the bid-ask spread. This is the gap between the price someone is willing to pay for a stock (the bid) and the price someone is willing to sell it for (the ask). When you buy, you pay the ask price. When you sell, you receive the bid price. That difference is your cost.

For large, heavily traded stocks like Apple or Microsoft, the spread is often just a penny or two per share. For smaller or less popular stocks, the spread can be much wider — sometimes 10 cents, 50 cents, or more per share. On a $100 investment in a stock with a wide spread, you might lose $5 or $10 just entering and exiting the position.

You cannot avoid the spread, but you can minimize it by buying stocks that trade frequently and have tight spreads. Robinhood shows you the current bid and ask prices before you confirm any order, so you can see exactly what you will pay.

Buying funds instead of individual stocks

If you do not want to pick individual stocks, Robinhood lets you buy exchange-traded funds (ETFs), which are baskets of many stocks bundled together. For example, the Vanguard S&P 500 ETF (ticker VOO) holds shares in 500 large U.S. companies, so buying one share of VOO gives you exposure to all 500 without picking them yourself.

ETFs work exactly like stocks on Robinhood: search for the ticker, see the price and bid-ask spread, enter a dollar amount or share count, and confirm. You can buy fractional shares of ETFs too, so you can invest $50 or $500 or any amount you choose. ETFs typically have lower spreads than individual stocks because they trade in high volume.

Robinhood does not offer traditional mutual funds, which are similar to ETFs but trade only once per day and often carry higher fees. If you want mutual funds, you would need to use a different brokerage.

What happens when you sell and how taxes work

When you sell a stock or fund for more than you paid, you have a capital gain. When you sell for less, you have a capital loss. Robinhood tracks these automatically and reports them to the IRS on a form called a 1099-B at the end of the year if you sold anything.

Capital gains are taxed differently depending on how long you held the investment. If you held it for more than one year, it is taxed as a long-term capital gain, which has lower tax rates than ordinary income. If you held it for one year or less, it is taxed as a short-term capital gain, which is taxed at your regular income tax rate.

Robinhood does not withhold taxes from your sales, so you owe the tax when you file your return. If you made large gains, you may want to set money aside or make estimated tax payments to the IRS during the year. Robinhood provides a tax report in your account that shows your gains and losses, which you can use when filing.

The day-trading rule and account restrictions

If you buy and sell the same stock within five business days, the SEC counts it as a day trade. If you make four or more day trades in a rolling five-business-day window, you trigger the Pattern Day Trader rule, which requires your account to hold at least $25,000 in cash and securities. If your account falls below $25,000, you cannot day trade for 90 days.

This rule applies to all brokerages, not just Robinhood. Many new investors hit this limit by accident — for example, buying a stock on Monday, selling it Wednesday, buying it again Friday, and selling it the following Monday counts as four day trades. Robinhood warns you before you place a trade that would trigger the rule, so you can cancel if you want.

If you have less than $25,000 and want to avoid this restriction, buy stocks or funds and hold them for at least five business days before selling. This is not a rule you have to follow; it is a consequence if you do not.

Options and other investments Robinhood offers

Beyond stocks and ETFs, Robinhood lets you trade options (contracts that give you the right to buy or sell a stock at a set price by a certain date), cryptocurrencies like Bitcoin and Ethereum, and fractional shares of expensive stocks. Options are complex and carry higher risk than buying stocks outright. Cryptocurrency is highly volatile and unregulated. Both require separate approval in your account settings before you can trade them.

For most new investors, stocks and ETFs are the right place to start. Options and crypto are tools for investors with more experience and a higher risk tolerance. Robinhood does not offer bonds or traditional mutual funds.

Frequently Asked Questions

Can I buy stocks before my deposit settles?

No. Your money must settle before you can use it to buy stocks. Standard transfers take three to five business days. If you have Robinhood Gold, you can use when ready transfers up to $1,000 per day while waiting for a standard transfer to settle, but you still cannot trade with money that has not arrived at all.

What if I want to sell a stock but the market is closed?

You can place an order anytime, but it will not execute until the market opens the next trading day. Robinhood shows you a preview of the price based on after-hours trading, but the actual sale price may be different when the market opens. If you want to sell when ready, you have to wait for market hours (9:30 a.m. to 4 p.m. Eastern, Monday through Friday).

Do I have to pay taxes on stocks I own but have not sold?

No. You owe taxes only when you sell and realize a gain or loss. Stocks you hold indefinitely are not taxed until you sell them. If your stocks pay dividends, those are taxed in the year you receive them, whether or not you sell the stock.

What is the minimum amount I need to start investing?

Robinhood has no account minimum. You can open an account with $1 and buy fractional shares of any stock or ETF. However, your bank may have a minimum transfer amount, so check with your bank before linking it.

Can I set up automatic investments?

Robinhood does not offer automatic recurring investments or dividend reinvestment. You have to manually transfer money and place orders each time you want to invest. Some other brokerages offer automatic investing, which may be easier if you want to invest the same amount every month.