Robinhood - Investing

Background - I have been helping my son (age 26) with saving, investing, retirement, etc. Between a savings account, a taxable brokerage account, a Roth IRA, a Roth 401k plan, and a ESPP account, he has $117,000 right now. He is a saving monster. He wants to be at $200,000 by age 30. We are working on a plan that will get him there. He is operating under the FIRE movement and I did not even realize it. He is only spending 15% of what he earns. The other 85% is saved. He lives at home so he has no rent or food expenses. All the more power to him, right? I lived at home until age 28 and I did not turn out that bad. He wants to move some savings to the taxable account to invest.

Question - The other day he says Blakester (that is what he calls me) I want to open a Robinhood account and invest through that platform. I started asking questions; like how does it work, what are the fees, what can you invest in, what does it cost to get out, etc., etc. No reply. Absolute silence.

Project - As a result of that no reply, I took to educating myself (and eventually him) about Robinhood. I put together the attached. This is what I found interesting and it is merely a cut/paste job from my readings to learn more about Robinhood. I like to leverage my work. I include it here as some may find it of value. Enjoy. Blake

Song of the day.

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Thanks for sharing, Blakester! :laughing: - maybe you need to change your community name :stuck_out_tongue_winking_eye:

The connection with Yodlee<>Robinhood has definitely been flaky in the past too as another con.

I’ve used Robinhood for about a year. Some of these don’t match my experience.

1 - I’ve never found anything lacking in the trading experience. They have all sorts of order options, some that I can’t do on some of the other platforms I use, such as Vanguard. It’s quick and easy to enter trades and they execute as quickly as on other platforms, though I very rarely use market orders.

2 - True, though you get access to Morningstar research with Robinhood Gold.

3 - Not accurate

4 - Robinhood Gold is a flat $5 fee which includes the interest on the first $2000 of margin used. Interest beyond that is 2.5%, far below Vanguard and Fidelity.

5 - Also no access to CEFs anymore

6 - This is pretty standard in my experience. I’m currently transferring my account away, in the processing of consolidating almost everything under one roof, and they seem to be dragging their feet with it. If that’s common, definitely another for the con list.

11 - They offer interest on your uninvested cash, currently 0.3%, I believe. Far more than most savings accounts. It’s unlikely that they are making any money here. (I see you covered this in #26, which negates #11.)

19 - Probably too easy. The pricing is the same as Fidelity, Vanguard, and (I think) ETrade.

23 - They have quite a bit of educational material, including some of the easiest to understand explanations of options trading that I’ve seen anywhere.

28 - solid advice

I actually do not recommend Robinhood and when my son asked about it I directed him back to his Vanguard account and mutual fund strategy. I think it’s far too easy to trade and that they actually encourage active trading. No good, especially for the inexperienced who may lack discipline.

The absolute number #1 pro, imho, is fractional trading. But other brokerages are catching on that people want this now so at some point it just becomes a “fact.”

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@aronos , You are awesome. This is great. Very helpful. Appreciate the clarifications and going through it line by line. Honestly, I knew nothing about Robinhood until yesterday. This is not for my son, nor me for that matter. We will stay with our index ETF strategy over at Etrade. Its working for us and we are in it for the long-term. There is a lot of value here for other users. Thanks again. Blake

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@heather The main problem I’ve had with the connection is that they disallow updates during market hours. I may not have noticed other issues though as if you have 2FA enabled, all updates have to be done manually. PITA

I use ETRADE. Robinhood is risky IMO because they are a tech company which likes to rapidly launch features. When it comes to storing wealth, rapid feature development to me is not a great idea. I prefer a slow moving, secure, and traditional bank that just works like steel. It’s not as fragile and it wouldn’t have frequent bugs or pauses on asset purchases because of trading volatility on Gamestop.