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Robinhood Review

Robinhood is a glimpse into what every bro­ker­age should be in a mobile first world. It’s got a nice clear inter­face that makes invest­ing fun, in a way that look­ing at bank state­ments is the oppo­site of fun.

It’s bewil­der­ing that every bro­ker­age hasn’t yet down­loaded the app and copied it to improve their own mobile trad­ing offer­ings. I’m lit­er­al­ly shak­ing my head in dis­be­lief at my own banks as I write this.

The only chal­lenge I have per­son­al­ly, and for the Elephant’s Paycheck com­mu­ni­ty, is that Robinhood doesn’t yet sup­port div­i­dend rein­vest­ing. That miss­ing fea­ture unfor­tu­nate­ly makes Robinhood a shiny bauble for me (pret­ty, but not good for much), at least until they ship a div­i­dend rein­vest­ing fea­ture (which they say is com­ing).

TL;DR

Robinhood is the app that every mobile bro­ker­age should have writ­ten. If you invest in the stock mar­ket, you should stop read­ing this and go down­load it. It’s legit, it’s free, and it’ll give you a glimpse of the future of trad­ing.

There is some real inno­va­tion in what Robinhood has done (inte­gra­tion with StockTwits &Robinhood Instant), and more com­ing.

Because they don’t charge trad­ing com­mis­sions, it’s easy to invest small amounts and get start­ed finan­cial­ly. Unfortunately, cre­at­ing a long term invest­ing habit is a bit hard­er and they don’t do any­thing to encour­age long-term habit changes for new investors who want to do more. This is so crit­i­cal, not for a trad­ing app but for the ‘peo­ple’. Building lega­cy wealth doesn’t hap­pen eas­i­ly. Robinhood helps any­one take their first steps towards cre­at­ing a bet­ter finan­cial life and I hope they do more to help cre­ate healthy long-term invest­ing habits.

The biggest ques­tion you’ll prob­a­bly have is how they make mon­ey — and they answer that right up front on their FAQ.

As I men­tioned above, the lack of div­i­dend rein­vest­ing makes it a non-starter for peo­ple using the Elephant’s Paycheck Blueprint to build long term wealth. While it is easy to rein­vest div­i­dends man­u­al­ly (because there aren’t any com­mis­sions for trad­ing), the prob­lem for mod­est investors will come in if you don’t get enough div­i­dends to buy a whole share. You’d have to wait for mul­ti­ple div­i­dend pay­ments until you save up enough to buy one extra share. All that time, it’s too easy to miss the oppor­tu­ni­ty to appre­ci­ate how your pay­check grows with each invest­ment.

While small div­i­dends don’t mat­ter so much from an absolute val­ue, each pen­ny rein­vest­ed has a big rel­a­tive impact (per­cent­age increase to your Elephant’s Paycheck). The Elephant’s Paycheck Blueprint takes a human approach to invest­ing. Using the metaphor of a port­fo­lio ‘pay­check’ and track­ing how it grows as an alter­na­tive track­ing the total port­fo­lio val­ue (which makes gut-wrench­ing adjust­ments accord­ing to mar­ket volatil­i­ty) max­i­mizes the pos­i­tive rewards that help to rein­force good invest­ing habits.

Robinhood pros

I love div­i­dends, so I’m putting this first. In the his­to­ry tab, you see upcom­ing div­i­dend amounts and the dates you’ll receive them. Simple, clean, and inex­plic­a­bly hard to find on a reg­u­lar bro­ker­age site.

Free trad­ing means you can get start­ed mod­est­ly. Small invest­ments don’t neces­si­tate big returns just to over­come the trans­ac­tion cost. With a tra­di­tion­al bro­ker­age, if you buy a $30 share, and pay $8 for the priv­i­lege, at a reg­u­lar bro­ker­age you need about a 25% return just to break even.

Robinhood Instant means that mon­ey trans­fers into Robinhood are avail­able to trade right away (with lim­its), no three day ACH delays. This is a seri­ous inno­va­tion, and they’re work­ing on sim­i­lar ease of use around mar­gin trad­ing as well.

You can buy indi­vid­ual stocks, and aren’t lim­it­ed to ETFs or Funds (like with Stash). I like indi­vid­ual stocks, many do not. I like the way it’s easy to find out a lot about indi­vid­ual com­pa­nies, where­as I find funds/ETFs to be opaque.

No min­i­mums to get start­ed. Amazing. They real­ly under­stand the impor­tance of remov­ing bar­ri­ers and help­ing peo­ple get start­ed. And since the UI is quite nice, it’s easy to get start­ed tech­ni­cal­ly as well as finan­cial­ly. What’s lack­ing is any­thing that helps moti­vate peo­ple to stick with invest­ing over the long-term.

If you’re an expe­ri­enced trad­er, Robinhood will res­onate. It’s exact­ly what you’d think a bro­ker­age trad­ing app should be in the mobile age.

Integration with StockTwits is like­ly a pre­view of what you’ll see more of in the future (in StockTwits sim­ply hit “add port­fo­lio” and it’s updat­ed so you can track your port­fo­lio. Really easy.) As I was tak­ing notes, mul­ti­ple times I wrote “great exam­ple of their tra­jec­to­ry”. I think Robinhood is real­ly inter­est­ing and very excit­ing. The oth­er com­pa­ny that comes to mind as a par­al­lel on the inno­vat­ing things they’re doing to help peo­ple get start­ed invest­ing is SparkGift.

It’s on both iOS and Android.

Robinhood cons

No div­i­dend rein­vest­ing.

They’re not doing any­thing to make invest­ing more moti­vat­ing; so I don’t know if this will attract peo­ple who don’t trust banks, or who are “scared” of invest­ing. They’re not low­er­ing the emo­tion­al bar­ri­er to entry (the same way they have low­ered the finan­cial bar­ri­er to entry). They’re also not moti­vat­ing con­tin­ued par­tic­i­pa­tion (the way I think I am here with Elephant’s Paycheck and the way Stash does with auto-Stash).

You have to buy whole shares of stock, you can’t just buy $50 of a com­pa­ny. And, you can’t auto­mate the process to invest $50/month as a way to build wealth.

Email sup­port was a bit hit-or-miss, but they answered the phone right away.

Phone sup­port didn’t give me the “con­fi­dence” I get from my bro­ker­age. This is a very per­son­al and sub­jec­tive thing. I’m old­er which affects my per­cep­tion and expec­ta­tions as well. I do trust Robinhood 100%, but if you’re an old­er investor you may have to put aside some uneasy feel­ings if you call sup­port (and I sug­gest that you do put them aside).

I’m not a fan of some of the UI ele­ments and design choic­es. The card-based news items nev­er seem rel­e­vant or inter­est­ing, and it doesn’t feel very iOS-like.

Doesn’t sup­port 1Password, which them means pass­words are going to be weak­er than they could be oth­er­wise.

What I bought

I bought 5 shares of $AFL (Aflac) and 19 of $ADM (Archer Daniels Midland), both of which pay div­i­dends this month (June)!

In closing

Pay atten­tion to the small details of what Robinhood are doing. The details are inno­v­a­tive in a sub­tle way. They seem to be designed to min­i­mize fric­tion. Minimizing fric­tion is what’s going to make it impos­si­ble for big banks to com­pete, and it’s going to be a fun fight to watch over time. (My money’s on Robinhood not the tra­di­tion­al bro­ker­ages.)

Also, I’m real­ly inter­est­ed in the inte­gra­tion with StockTwits and how they com­bine what they know you’ve done in your bro­ker­age (such as own­ing a spe­cif­ic com­pa­ny) with your social clout on the site. It’s going to change social invest­ing over the longer arc of time in ways that will deep­en Robinhood’s rela­tion­ship with mil­len­ni­als.

It’s free, it’s mobile, it’s fric­tion­less. what more do I need to say?

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About David

David Bressler is a tech executive who began offering financial coaching after noticing how little people know about investing. Since then he has made it his mission to help as many people as he can learn how to build sustainable wealth and gain financial flexibility.

Bressler, who earned his MBA at New York University’s Stern School of Business, writes and speaks about how adopting a few simple habits can dramatically improve your financial future. He lives in New York City with his wife and two children. The Elephant in the Room has a Paycheck is his first book.