Buying stock online has been around for over 28 years when E*Trade allowed consumers to buy stocks over the internet without having to speak to a broker. Things have come a long way from there. It was amazing and empowering to buy stock from E-Trade or Ameritrade for $8.00 a trade. In 2019 enter Robinhood
Today, something even more amazing has come to fruition, the ability to buy stock commission free right through an app on your smartphone. A company called Robinhood Robinhood says, they had the idea that a technology-driven brokerage could operate with significantly less overhead. by cutting out the fat that makes other brokerage firms costly like having to have hundreds of storefront locations nationwide with the overhead that comes along with it.
But one might still ask,”how does Robinhood make money?” That’s a good question. Rather than charging commission on individual trades Robinhood sells additional services to interested customers (there is no requirement to enroll in this or any other service) like their Robinhood Gold program which is a margin trading service that starts at $5.00. It also makes money like banks do, by collecting interest from customer cash and stocks and Robinhood gets money from rebates from market makers and trading venues.
Another interesting thing about Robinhood is anyone who opens an account gets a free share of stock selected randomly with a value anywhere from $2.50 to $200.00. Just a little excitement added to your portfolio. Additionally, Robinhood has a referral program where if you invite friends BOTH of you get a share of stock. There is a limit though, any one account can only receive $500.00 in free stock. But who would complain, that’s an automatic 100% profit because its FREE STOCK!
Full disclosure for this article, The writer opened a Robinhood account by first downloading the App through App Store also available on Google Play. Went through all the motions of funding and purchasing 1 share of Upland Software (UPLD) for $46.25 and after that the writer received 1 free share of Groupon (GRPN) valued at $3.50. The process was pretty easy and nearly anyone could do it.
A few thoughts. The writer is not a professional investor and referrals to stocks in this article were merely examples and not recommendations or a solicitation to purchase anything. That out of the way. the writer likes the idea of doing ones own research and investing wherever one can take a smart phone. The app is easy to use but could use some work. But we take it that things free usually have drawbacks and we are sure that millions of dollars were not wasted on application development.
Our trade went through quickly and the app provides all the basics one needs for a small portfolio. With Sharebuilder gone, Robinhood is probably the most inexpensive way to trade stocks. Oh, and for you high techies out there, Robinhood does trade cryptocurrency (that probably did it for half of you right there) There is another company, FirstTrade (which I am researching right now) also has the ‘no commission’ strategy as well. It has some interesting options and we will look at it in another article.