Robinhood pioneered the no-commission investment brokerage, and others have followed suit. In a way, Robinhood is still seeking to stand out from the crowd now that people have adopted parts of their business model, but they’re still a great platform, especially for beginners and those wanting to keep their fees low. So they’re still a good place to invest…but how much do you need to invest in Robinhood?
Robinhood still has some fees. After all, they make money somehow.
- So how much does Robinhood charge to sell?
- How much do you need to invest in Robinhood?
- How much should you invest in Robinhood?
Read on for our how-to guide to using the Robinhood platform.
This post has been written by our staff writer, Lindsey Smith.
Robinhood is a free trading app that lets investors trade stocks, options, ETFs, and cryptocurrency without paying commission or fees (and with no account minimums!).
It was a pioneer of commission-free trading, but with other big name brokerages eliminating their commissions and fees, Robinhood has had to try and find other ways to stand out.
As of right now, it’s still one of the few brokerages that allows users to trade cryptocurrency on its platform, though that’s beginning to change.
The Robinhood platform is pretty bare bones. Don’t expect all the bells and whistles and trading options that come with some of the more established brokerages. They’ve also been plagued with some unfortunate outages.
However the app is still really popular, and when it went public at the end of July last year, it began to be a tradable stock that you can purchase.
Is Robinhood a brokerage account?
Even though Robinhood is super simple and very trader-friendly (and therefore doesn’t seem like a brokerage account), it is still absolutely a brokerage account!
And actually, it’s an online discount brokerage account, and is considered a legal brokerage account. Your money is safe and it’s approved by the SEC.
How Does Robinhood Work?
Even though Robinhood advertises itself as a free app, it still generates revenue. But how? How does Robinhood work?
It does this by a process called payment for order flow.
When a person trades on the app, Robinhood sends that trade to a larger company, which is able to process thousands of orders at once. The larger company then compensates Robinhood for the orders.
This process has received some criticism. The process of payment for order flow incentivizes Robinhood to find the highest bidder for the larger companies it sells to, not the one who execute the trade the quickest.
Robinhood generates around half it’s money from order flow, and the other half comes from account interest from Robinhood Gold accounts, which allows users to make larger deposits and have access to more reports.
How Much Money Can You Invest in Robinhood?
People are asking, “How much do you need to invest in Robinhood?” And they’re also asking, “How much money can you invest in Robinhood?”, and “What is the minimum investment for Robinhood?”
The short answer…
Robinhood has no minimum investment requirement for its regular accounts.
For their Gold accounts, there is a $2,000 minimum investment, but you’ll get to trade higher amounts so it’s something to think about.
With their Gold accounts you can also apply for margin investing. This is where you can borrow funds from Robinhood to invest with. We do not recommend this, it’s risky, and you’re on the hook for it if the investment doesn’t realize the amount you thought it would.
They also do not charge deposit fees, so what you put in is what you have available to trade.
You can invest as much as you want, but you’re limited to 3 day trades in a 5 day period.
How Much Money Can You Have in Robinhood?
Wondering how much money you can have in Robinhood?
In theory, you can put as much money as you want into the Robinhood brokerage…hundreds of millions of dollars if you really want to.
But…if I were you, I’d think about how much of my money is Federally insured there – ie. FDIC insurance.
According to the Robinhood site, through Cash Management, you could be insured up to $1.25M (up to $250k per bank program). So personally, that would be my maximum investment in Robinhood.
How Much Should I Invest in Robinhood?
Wouldn’t it be nice if you had someone tell you how much you should invest in Robinhood, or any other stock for that matter?
Ah, the life.
We don’t give financial advice, so we won’t tell you what you should do. However, according to CNBC, the average investor on the Robinhood platform has around $5,000, while the mean customer account balance is $240.
So, certainly not everyone’s full nest egg, but some of it.
How much money should you invest in Robinhood? That’s up to you.
How to Buy Stocks on Robinhood: Step-by-Step
Buying stocks on the Robinhood app is really simple. As mentioned, it’s a pretty bare bones app, so there’s not much that will trip you up.
Here’s how to buy stocks on Robinhood, step-by-step:
- Set up your account on the Robinhood platform. This will include providing details such as your name, address, and employment information, as well as banking information.
- Search for the stock you’d like to purchase. If you know the ticker symbol you can put that in, but you can also search by name.
- Read the information provided about that company on the stock sheet.
- Click “buy”
- It will ask you how many shares you’d like to purchase. You can enter this number, or you can click to buy partial shares.
- If you don’t have enough money to cover the transaction, you’ll get a little popup that says you don’t have enough, however it has a button that allows you to deposit the amount needed to make the transaction happen. Robinhood allows instant deposits up to $1000.
- At the top right, you’ll also find a button called “order types”. This will allow you to set limits and other order details. It will also let you choose how long to set these order limits.
- Click to Execute the order
So…it may be free to buy stock on Robinhood, but what about selling? How much does Robinhood charge to sell stocks?
Robinhood charges a fee of $0.000119 per share to sell, and $0.002 per contract (for option sales). The fee is rounded up to the nearest penny, and is no higher than $5.95 per order.
How Much Margin Does Robinhood Give?
Want to trade on margin? (ie. borrow for your trading). You need to have a Robinhood Gold account to access margin, and this is $5 per month. However the margin is “only limited to 2x your buying power”, where most brokers are at around 4x or even 6x.
How Much Do You Need to Invest in Robinhood? (And Is It Wise?)
So what’s the answer here? How much do you need to invest in Robinhood?
You really don’t need anything to invest in Robinhood, as the platform offers zero minimums, or commission fees. That’s the beauty of Robinhood.
If you want to move up, and have access to margin and some better reporting, you can by purchasing a Robinhood Gold account for $5 per month.
Robinhood makes it easy to jump in with whatever you have to invest, and get started. I really like that about this platform. It’s very beginner friendly and has an easy to use system. I am a little cautious because of the way they make money, but overall it’s a good platform for the early investor.
What do you think? How much do you need to invest in Robinhood?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.