What Robinhood does well and where it falls short
Robinhood is a solid choice if you want to trade stocks, options, and cryptocurrencies without paying per-trade commissions and with a straightforward mobile app. It is not a good choice if you need research tools, live customer support by phone, or access to certain investment types like bonds or mutual funds. Whether Robinhood is right for you depends on what you actually trade, how much research you do before you trade, and whether you can solve problems through the app or email alone.
The broker has real strengths: zero commission on stocks and options, fractional shares (you can buy $1 worth of a $200 stock), and an interface designed for phone trading. It also has real limits: no access to IPOs, no options trading for new accounts until you meet experience requirements, and customer service that does not include phone support. This guide walks through what Robinhood offers, what it does not, and what to consider before you open an account.
Key Takeaways
- Robinhood charges no commission on stock and options trades, but you pay the same bid-ask spread that other brokers charge.
- The app is designed for mobile trading and works well for straightforward buy-and-hold or frequent trading, but lacks research tools and market data that other brokers offer.
- Customer support is email and in-app chat only — there is no phone line, which matters if you have a time-sensitive problem.
- Robinhood does not offer bonds, mutual funds, or IPO access, so if you need those products you will need a second broker or a different one.
- Your cash and stocks are protected the same way at Robinhood as at other brokers through SIPC insurance, but Robinhood's own business model relies on payment for order flow, which some traders view as a conflict of interest.
Zero commissions and fractional shares
Robinhood's main draw is that it does not charge per-trade commissions on stocks, options, or ETFs. This matters most if you trade frequently or with small amounts of money. A $5 commission on a $50 trade costs 10 percent; at Robinhood, that same trade costs nothing in commission.
Fractional shares mean you can invest any dollar amount, not just whole shares. If Apple stock costs $200 per share and you have $50, you can buy 0.25 shares instead of waiting to save $200. This is useful for building a diversified portfolio with a small account, though it also makes it easier to trade impulsively.
The catch is that Robinhood still makes money on every trade through the bid-ask spread — the difference between what buyers will pay and what sellers will accept. You do not see this as a line item, but it is real. On liquid stocks like Apple or Tesla, the spread is tiny (a few cents). On less-traded stocks, the spread can be wider, and you lose money to it whether you use Robinhood or another broker.
What research and data tools Robinhood does and does not have
Robinhood's app includes basic charting, a stock screener, and news headlines. You can see a stock's price history, volume, and a few technical indicators. For most casual investors, this is enough to make a decision.
If you need deeper research — earnings call transcripts, detailed analyst reports, options flow data, or real-time Level 2 market depth — you will not find it in Robinhood. Brokers like TD Ameritrade (now part of Charles Schwab) and Interactive Brokers offer far more research built in. Some traders use Robinhood to trade but subscribe to a separate research platform like TradingView or pay for Bloomberg Terminal access.
Robinhood also does not offer paper trading (a practice account with fake money), which is useful if you are learning options or testing a strategy before risking real cash. Other brokers include this feature.
Customer support and account issues
Robinhood does not have phone support. If you have a problem, you contact them through the app, email, or web chat. Response times vary from hours to days depending on how busy they are. For routine questions — how to change your password, how to transfer money out — this works fine. For urgent problems — a trade that did not execute, a deposit that disappeared, a security concern — the lack of a phone line is a real drawback.
Other brokers like Fidelity and Charles Schwab have phone support during market hours and sometimes after hours. If you are the type of person who wants to talk to a human when something goes wrong, Robinhood is not for you.
Robinhood has also faced regulatory fines and criticism for how it handles certain situations — for example, restricting trading during the GameStop event in 2021, or how it displays options approval levels. These are not reasons to avoid the broker, but they are reasons to read the terms of service and understand what you are agreeing to.
What you cannot trade on Robinhood
Robinhood does not offer bonds, mutual funds, or access to IPOs. If you want to buy Treasury bonds or a low-cost index mutual fund, you need another broker. This is a significant limit if you are building a diversified portfolio that includes fixed income.
Options trading requires you to be approved for it, and new accounts do not get approval automatically. You have to request it and meet Robinhood's experience requirements. Once approved, you can trade options, but the approval process can take days.
Robinhood also does not offer margin accounts (borrowing money to trade) for new users. You can only trade with cash you have deposited. This is actually a safety feature — margin amplifies both gains and losses — but it is a limit if you want that option.
How Robinhood makes money and what that means for you
Robinhood makes most of its money through payment for order flow (PFOF). When you place a trade, Robinhood sends it to a market maker — a firm that buys and sells stocks constantly. The market maker pays Robinhood for the right to fill your order. This is legal and common, but it creates a potential conflict of interest: Robinhood has an incentive to route your order to whoever pays the most, not necessarily whoever gives you the best price.
In practice, the difference is usually small. Robinhood publishes data on execution quality, and independent research suggests that Robinhood's execution is competitive with other brokers. But if you are trading illiquid stocks or large quantities, you might get a better price elsewhere.
Robinhood also makes money from Robinhood Gold, a paid subscription that offers margin, extra research, and other features. This is optional.
Account safety and insurance
Your cash and stocks at Robinhood are protected by SIPC insurance up to $500,000 per account (cash up to $250,000). This is the same protection you get at any other broker. If Robinhood goes out of business, your money and shares are returned to you. This is not a reason to prefer Robinhood, but it is a reason not to worry about it.
Robinhood also uses encryption and two-factor authentication to protect your login. Like any online account, your security depends partly on you — use a strong password, enable two-factor authentication, and do not share your login.
Robinhood versus other brokers at a glance
| Feature | Robinhood | Fidelity | Charles Schwab | Interactive Brokers |
|---|---|---|---|---|
| Stock commissions | $0 | $0 | $0 | $0 |
| Options commissions | $0 | $0 to $0.65 per contract | $0 to $0.65 per contract | $0.65 per contract |
| Phone support | No | Yes | Yes | Yes |
| Research tools | Basic | Extensive | Extensive | Extensive |
| Bonds and mutual funds | No | Yes | Yes | Yes |
| Fractional shares | Yes | Yes | Yes | No |
| Mobile app quality | Excellent | Good | Good | Fair |
Who Robinhood is and is not a good fit for
Robinhood is a good fit if you trade stocks or options frequently, prefer to trade on your phone, have a small to medium account, and do not need extensive research or phone support. It is also good if you want to start investing with a small amount of money and like the simplicity of the app.
Robinhood is not a good fit if you need phone support, want to trade bonds or mutual funds, prefer desktop-based research tools, or trade illiquid or very small stocks where execution quality matters more. It is also not ideal if you are a beginner who wants guidance — Robinhood does not offer financial information or educational content the way some other brokers do.
The best way to decide is to open a paper trading account (if another broker offers it) or to deposit a small amount and trade for a few weeks. You will quickly learn whether the app works for you and whether the lack of phone support is a problem.
Frequently Asked Questions
Can I transfer my stocks from another broker to Robinhood?
Yes. Robinhood accepts ACAT transfers (Automated Customer Account Transfer Service) from other brokers. The process usually takes three to five business days. You initiate the transfer from Robinhood's side, and your old broker sends your positions over. Some brokers charge a transfer fee ($25 to $75), which Robinhood may reimburse if you ask.
Does Robinhood report my trades to the IRS?
Yes. Robinhood sends Form 1099 to the IRS and to you at tax time, reporting your gains, losses, and dividends. You are responsible for reporting this on your tax return. Robinhood does not do your taxes for you, but other brokers like Fidelity and Charles Schwab offer tax-loss harvesting tools and integration with tax software.
What happens if I day trade on Robinhood?
If you make more than three day trades in five business days and your account is under $25,000, Robinhood will restrict your account from day trading for 90 days. This is a SEC rule, not a Robinhood rule, and applies at every broker. You can still buy and hold; you just cannot make rapid trades. If your account is $25,000 or more, there is no limit.
Is Robinhood safe for beginners?
Robinhood is safe in the sense that your money is insured and the app does not have bugs that lose your shares. But it is risky for beginners because the straightforward interface makes it straightforward to trade impulsively, and there is no built-in guidance or warnings. If you are new to investing, consider starting with a broker that offers educational content or financial information, like Fidelity or Schwab.
Can I use Robinhood for retirement accounts like an IRA?
Yes. Robinhood offers both traditional and Roth IRAs. The same zero-commission structure applies. However, Robinhood does not offer IRAs with custodian features or special retirement planning tools that some other brokers do, so if you need those features, look elsewhere.