6 Reasons To Use Robinhood For Investing
With the great service they offer, the logical question on your mind is ‘how do they make money?’. Apart from its free service, Robinhood offers Robinhood Gold service where you get up to twice your buying power and access to after-hours trading.
Robinhood is a technology company that I trying to replace the traditional brokerage. The company offers a mobile app and website that offer people the ability to invest in stocks, ETFs, and options through Robinhood Financial and crypto trading through Robinhood Crypto.
1. No Charges Per Transaction
When compared to other platforms, Robinhood immediately stands out because there are no charges per transaction, although many companies are starting to adapt to this no fee no commission. Other platforms typically charge anything between $7 and $10 per transaction which will incentivize you to do less, higher amount transactions to make the fees make sense. If you wanted to invest using $100 on a platform that charges a $10 fee, you would have to hope that you get a profit plus the $10. Higher amounts may make this fee negligible, but not everyone is willing to invest higher amounts at a time.
2. Buy As Little As You Want
Depending on your investment strategy, Robinhood allows you to deal with smaller, broken-down transactions. This is also a perk of having no transnational costs.
For a beginner just getting into investing, Robinhood offers a very financially-friendly platform
3. Member of FINRA and SICP
Robinhood (Financial) is a member of the Financial Industry Regulation Authority (FINRA) and the Securities Investor Protection Corporation (SIPC) which protects securities customers of its members up to $500,000 in assets and up to $250,000 in cash. In this way, Robinhood ensures that its customer’s investments are protected.
4. Free + Premium Service
With the great service they offer, the logical question on your mind is ‘how do they make money?’. Apart from its free service, Robinhood offers Robinhood Gold service where you get up to twice your buying power and access to after-hours trading. This costs $5 per month. It is completely optional and remains the only product that Robinhood charges for. Trading remains commission-free.
The service is better suited for professionals or people with investing experience.
5. Ease of Diversification
With Robinhood, you can buy a lot of different stocks and not concern yourself with the cost. With $1000, you can buy many different stocks worth $100 each at no additional cost. On other platforms, it would make more sense to buy one or two stocks because of the costs pegged to every transaction. This diversification when trading stocks only makes sense on Robinhood.
Closely tied in with diversification is Dollar-Cost Averaging (DCA). This is essentially buying a certain amount of shares from one company over a longer span of time as opposed to one day. The main benefit with DCA is that it lowers the volatility of the market because you are buying over the course of, say, a month. This eliminates the need to ‘time’ the best time to buy, and you end up having your investment at the average stock coast over the month.
Practically, it is foregoing buying 3000 Apple shares in one day to buy 4 to 100 Apple shares each day over 30 days. Your holdings will essentially be at the average price for the whole month.
Please note that by using my Robinhood link, we both get a free stock, when your application is approved. This is not a sponsored post and I was not paid by Robinhood. This is not financial advice, please consult your financial adviser and invest responsibly.
Leave a comment