What You Can Do to Make Money on Robinhood

Robinhood is a brokerage platform where you buy and sell stocks, exchange-traded funds (ETFs), options, and cryptocurrencies. You make money by purchasing assets at a lower price and selling them at a higher price — the difference is your profit. You can also earn money through dividends, which are payments some companies make to shareholders, or through interest on cash held in your account.

The platform itself does not pay you. Instead, it gives you the tools to trade and invest. Your earnings depend entirely on the decisions you make about what to buy, when to sell, and how long you hold your positions. Robinhood charges no commission on stock or ETF trades, which means more of your money stays invested rather than going to fees.

Key Takeaways

  • You make money on Robinhood by buying assets at a lower price and selling them at a higher price, or by collecting dividends from stocks you own.
  • Robinhood offers commission-free trading on stocks, ETFs, options, and cryptocurrencies, so you keep more of your gains.
  • Buying and selling frequently (day trading) requires a minimum account balance of $25,000 and carries higher risk than holding investments long-term.
  • Robinhood Gold is a paid subscription that offers margin (borrowed money to invest) and other features, but borrowing money increases your risk of losing more than you invested.
  • All investment earnings are subject to taxes, and you are responsible for reporting them to the IRS.

Buying and Selling Stocks and ETFs for a Profit

The most straightforward way to make money on Robinhood is to buy a stock or ETF and sell it later at a higher price. You deposit cash into your account, search for the security you want to buy, enter the number of shares, and confirm the purchase. When you are ready to sell, you open the position and tap "Sell," then confirm the sale price.

Your profit is the sale price minus what you paid, minus any taxes owed. If you buy 10 shares of a stock at $50 per share ($500 total) and sell them at $60 per share ($600 total), your gain before taxes is $100. How long you hold the investment affects your tax rate: stocks held for less than one year are taxed as short-term capital gains (at your ordinary income tax rate), while stocks held for one year or longer may have access to for long-term capital gains rates, which are typically lower.

ETFs work the same way. An ETF is a bundle of many stocks or bonds in a single security, so you can own a diversified portfolio with one purchase. Popular ETFs on Robinhood include those that track the S&P 500 (like VOO or SPY) or the entire stock market (like VTI).

Collecting Dividends From Stocks You Own

Some companies pay dividends — regular cash payments to shareholders — usually quarterly or annually. If you own shares of a dividend-paying stock, Robinhood deposits the dividend directly into your account as cash. You can then reinvest that cash by buying more shares, or you can withdraw it.

Dividend income is taxable. may have access to dividends (from U.S. companies and held for at least 60 days around the payment date) are taxed at the long-term capital gains rate. Non-may have access to dividends are taxed as ordinary income. Robinhood shows you the dividend amount and the tax classification in your transaction history and on your year-end tax documents.

Dividend stocks tend to be from established, profitable companies — utilities, consumer staples, and financial services firms often pay dividends. Growth stocks (younger companies reinvesting profits to expand) typically do not pay dividends, so you make money only by selling at a higher price.

Day Trading and Frequent Buying and Selling

If you want to buy and sell the same security multiple times in a single week, you enter the category of day trader under U.S. securities rules. The Financial Industry Regulatory Authority (FINRA) requires day traders to maintain a minimum account balance of $25,000 at all times. If your balance drops below $25,000, you cannot place new trades until you deposit more cash.

Day trading is riskier than holding investments for months or years. You are betting on short-term price movements, which are harder to predict than long-term trends. Transaction costs add up — even though Robinhood charges no commission, you pay the bid-ask spread (the difference between the buy and sell price), and taxes on short-term gains are higher. Most day traders lose money.

If you have less than $25,000 in your account, you can still buy and sell stocks, but you are limited to three round-trip trades (a buy and a sell of the same security) per five business days. A fourth trade in that window triggers a "pattern day trader" flag, and your account is frozen for 90 days.

Using Margin to Borrow Money for Investing

Robinhood Gold is a paid subscription ($5 per month or $55 per year) that includes margin — the ability to borrow money from Robinhood to invest. If you have $10,000 in your account and use margin, you might borrow an additional $10,000 to invest $20,000 total. If your investments gain 10%, you make $2,000 instead of $1,000. But if they lose 10%, you lose $2,000 and still owe Robinhood the $10,000 you borrowed.

Robinhood charges interest on borrowed money — the rate varies and is shown in your account settings. You are also subject to a margin call: if your account value drops too far, Robinhood can force you to sell positions to repay the loan. Margin amplifies both gains and losses, and most investors should not use it until they have significant experience.

Robinhood Gold also includes other features like extended-hours trading (trading before 9:30 a.m. and after 4 p.m. Eastern Time) and Level II market data, which shows the orders other traders are placing.

Trading Options and Cryptocurrencies

Robinhood also offers options — contracts that give you the right to buy or sell a stock at a set price by a certain date. Options can produce large gains or losses on small upfront costs, but they are complex and risky. Most beginners should not trade options until they understand how they work and have money they can afford to lose.

Robinhood also allows you to buy and sell cryptocurrencies like Bitcoin and Ethereum. Cryptocurrency prices are highly volatile — they can swing 20% or more in a single day. You make money the same way as with stocks (buy low, sell high), but the risk is much higher. Cryptocurrency gains and losses are taxable, and you must report them to the IRS.

Understanding Taxes on Your Robinhood Earnings

All money you make on Robinhood is subject to federal income tax and, in most states, state income tax. Robinhood sends you a Form 1099 at the end of the year showing your capital gains, dividends, and interest. You must report this on your tax return. If you do not report it and the IRS discovers the discrepancy, you face penalties and interest.

Capital gains are taxed differently depending on how long you held the investment. Short-term gains (held less than one year) are taxed as ordinary income — at your marginal tax rate, which can be 10%, 12%, 22%, 24%, 32%, 35%, or 37% depending on your income. Long-term gains (held one year or longer) are taxed at 0%, 15%, or 20%, which is lower.

If you lose money on an investment, you can deduct up to $3,000 of losses against your ordinary income each year. Any losses beyond that carry forward to future years. Keep records of all your trades — Robinhood provides this data, but you are responsible for accurate reporting.

Frequently Asked Questions

Can I make money on Robinhood without buying and selling?

Yes. If you own dividend-paying stocks or hold cash in your account, you earn money without trading. Some Robinhood accounts also offer interest on uninvested cash, though the rate is typically low. Most of your earnings will come from buying and selling or from dividends, not from interest.

What is the minimum amount of money I need to start on Robinhood?

Robinhood has no account minimum to open an account or to start trading stocks and ETFs. However, if you want to day trade (buy and sell the same security multiple times per week), you must maintain a $25,000 minimum balance. Options and margin trading have their own requirements.

Do I pay taxes on money I make on Robinhood?

Yes. All capital gains, dividends, and interest are taxable. Robinhood sends you a 1099 form at year-end, and you must report these earnings on your tax return. Short-term gains are taxed as ordinary income; long-term gains are taxed at lower rates. You are responsible for paying taxes, even if Robinhood does not withhold them.

What happens if I lose money on Robinhood?

Your account balance decreases by the amount of your loss. You can deduct up to $3,000 of investment losses against your ordinary income each year on your tax return. If your losses exceed $3,000, you can carry the excess forward to future years. Losses do not trigger a tax bill, but they also do not generate a refund unless you have gains to offset them.

Is Robinhood a good way to make money?

Robinhood is a tool for investing and trading, not a way to make money may provide. Most individual investors underperform the stock market average, and most day traders lose money. Robinhood's low fees help, but success depends on your knowledge, discipline, and the time you spend researching investments. Consider your goals and risk tolerance before you start.