Robinhood Review – Forbes Advisor
Robinhood appears to offer new investors a platform specifically designed to lower market barriers, thanks to its simple interface and low basic trading fees.
But here’s the problem with Robinhood: It makes trading so easy that it practically makes it a game. It tends to lead to active trading, or buying and selling stocks quickly to generate a quick profit. Due to the level of risk and the huge potential for loss involved in active trading, most experts instead recommend that almost all investors go with passive investing, or buy and hold index funds at. low cost in the long run to increase their wealth.
Robinhood also lacks many educational resources offered by the best online brokerage platforms for beginners. Taken together, these aspects of Robinhood can give new investors the wrong idea of how trading and investing should work.
There have been tragic results associated with Robinhood’s approach. In June 2020, a 20-year-old college student named Alexander E. Kearns committed suicide after seeing an unexpected negative balance of over $ 730,000 on his Robinhood app. It is believed that the negative balance was associated with a complicated options trading strategy deployed by Kearns that used margin – and that perhaps it was just temporary losses on paper that would have been corrected as soon as trades were traded. have been fixed, although this fact may have been unclear on the platform.
Robinhood has promised major changes to its interface after Kearns’ death, although reviews of their response have been mixed at best.
It hasn’t been Robinhood’s only high-profile controversy. In early 2021, Robinhood was a central player in the Gamestop saga, and CEO Vlad Tenev was called to testify before Congress on how Robinhood may have exacerbated the drama. Then, in November 2021, the company revealed that hackers had accessed the names and email addresses of millions of Robinhood customers, challenging the company’s security procedures. In addition, Robinhood has been fined more than $ 130 million by the Securities and Exchange Commission (SEC) and FINRA, a governing body of the brokerage, for deceptive and harmful client practices.
These facts, combined with the poor performance of its customer service and educational resources, lead us to not recommend Robinhood to first-time investors, although investors of all experience levels may also find the missing platform.
Intermediate and advanced investors will not find the types of tools and resources that they would want for more sophisticated trading strategies. Potential cryptocurrency investors may want to avoid Robinhood due to its limited list of available coins and the lack of a wallet feature that would allow users to transfer crypto offline to a more secure location.
Finally, retired investors won’t find much to like about Robinhood. The platform does not offer Individual Retirement Accounts (IRA), which offer tax benefits to people saving for retirement.