Choosing the right broker can seem quite overwhelming, especially since there are so many different options. I will review a few from personal experience. I will review the following: Robinhood, Webull, SoFi, Public, Schwab, and Firstrade. In this first post I will begin with a review of Robinhood.
Robinhood is a brokerage firm that I believe most people have heard of and has been in the news a lot. Robinhood was one of the first brokers I started using on my investment journey. It has the appeal of being very easy to use which is nice for beginners. The interface is very intuitive so it doesn't take long at all to place your first trade. Robinhood is also accessible via both a website and an app, although in my opinion the app is much better.
Robinhood offers 0 commission trades on stocks, ETFs (Exchange Traded Funds), and options making it an affordable options for trading. Robinhood does not offer access to mutual funds which I found to be somewhat annoying. Robinhood also offers only very limited access to OTC (over-the-counter) traded stocks, which can be frustrating to advanced traders.
Regarding information about each company and stock, Robinhood gives somewhat limited information compared to Webull. Robinhood presents some basic information such as open, high, low, volume, average volume, current price, market cap, 52 week high, 52 week low, P/E ratio, and dividend yield. Robinhood will also sometimes show relevant new stories for stocks. Recently information around company earnings has improved by allowing direct access to live earnings call and recorded earnings calls. In the app it will also display the last 5 quarters of earnings. What is disappointing is that it does not display annual earnings and also does not display more detailed information about earnings other than the EPS (earnings per share).
Robinhood offers several types of orders: limit, market (collared), trailing stop, stop, and stop limit orders. Robinhood also allows access to fractional share trading where you can purchase using either a dollar amount or an amount represented as a fraction of a share (example: Buy 0.01 shares of Apple stock). Access to fractional share trading makes it appealing to first time investors that don't want to invest large amounts of money.
Robinhood also offers access to options trading. There are different tiers of options trading which allow different types of strategies. For beginning investors they can likely apply for level 2 access which will give them access to buying calls, selling covered-calls, buying puts, and selling cash-secured puts. It is very easy to place options trades, but in two areas does Robinhood lack in options trading. First, you can only view the trading history of a certain option if you add it to a watchlist, which can lead to annoyingly large watchlists if you want to look at the history of many different options. Second, the price at which options are presented if you hold one is the mean between the bid and ask. This can potentially lead to presenting wildly inaccurate representations of value for an inactively traded options since the bid and ask spread can be quite large at times.
IPO access: Robinhood last year launched the IPO access feature which allows investors to purchase shares of stock at the IPO price. Robinhood does select rather stringently which IPOs to give their users access to which can be frustrating since as of recent there have not been any IPOs in the app. As well, looking at their selection of IPOs since beginning their IPO access, if an investor was to purchase all of the IPOs and continue holding as of today, they would have lost money on every single one. This is likely in part due to the tough market conditions, but also could be a sign that their selection process needs work.
Robinhood currently only offers cash and margin accounts, but intends to offer retirement accounts in early 2023. So if you are interested in retirement accounts right now, they don't yet seem like a good option. By default Robinhood gives users a margin account with margin trading turned off. This gives users the ability to trade with money that has not yet settled. Although, this does mean users have to be aware of day trading restrictions if they open and close too many positions within the same day in a rolling 5 day period.
Robinhood Gold: Robinhood offers a subscription service that allows traders access to advanced market data, as well as research reports from Morningstar, access to larger instant deposits, increased interest on uninvested cash, and access to margin. The cost of this service is currently $5 a month. As of yet I have not found this service to be worthwhile since level two market data is only useful to frequent traders, and I haven't found a Morningstar report to be terribly useful. Often you can find all you need in freely available 10Qs and annual reports released by the companies through the SEC website. The increased interest on uninvested cash could make the service worthwhile if you have enough cash in your account for the increased interest payments to more than offset the $5 cost. Personally, I don't find the increase in instant deposits to be useful since I do not require instant access to large sums of money in my account. I envision this only being useful to very active traders with large sums of money accessible to deposit in their accounts.
Other features: Robinhood also offers access to their cash sweep program which allows uninvested cash to earn interest, currently offering 1.5% without paying for Gold. They also offer a checking account which allows users to access funds from a separate account using their debit card. This account does not offer interest on the cash though. The debit card does offer rewards. The debit card when used will round-up transactions over a dollar to the next nearest whole dollar amount and allow you to automatically invest the rounded amount. The reward is in the form of a round up match, where they will randomly match 10-100% of the round up amount Monday of each week. They also occasionally have cash-back rewards on specific brands.
Tax lots: Robinhood does not allow users to control the way that tax lots are handled. They only use the method of first-in-first-out (FIFO). Where cost basis is calculated on the earliest shares first when an investment is sold for the purposes of computing taxable returns. This can lead to potentially less than ideal tax situations.
Overview: My overall rating of Robinhood is a 9/10. It is a really easy to use broker with many user-friendly features. They have begun offering learning tools to help advance the education of their users and are constantly bringing new features that are requested by their users. They do lack features that could be desirable to advanced traders though, such as advanced data and charting tools. Their subscription service is also not yet worthwhile for the beginning investor. If you decide that Robinhood is the right broker for you and would like to create an account you can use this referral link (https://join.robinhood.com/nathanh2597), which will get you a bonus for signing up and will also support me by granting me a bonus for sending you their way.
*This review is my own personal opinion. As well, information here is accurate to the best of my knowledge as of December 6, 2022. Brokers may change their offerings over time so information presented here may become inaccurate. Updated to include new information regarding retirement account offerings on December 6, 2022.