In the dark ages of investing and trading, guys in suits would pass goofy hand signals across a trading room floor to execute trades. Then came the internet, and with it a smorgasbord of online trading houses, each offering trades for up to $10. Then came Robinhood, the disruptive app that’s changing the landscape for anyone looking to invest their money in companies they follow and care about. With zero ($0) commissions and no minimum balances, our curiosity got the best of us and we tried the app out for ourselves.
We were always interested in investing, but with minimum balances and $7-$10 trades, it was always a barrier for us. That’s why we were excited when Robinhood came along. Robinhood is, admittedly, simple in execution. The app doesn’t offer much in the way of breaking news or advanced trading metrics that some investors might be used to. But, honestly, that’s what we love about it. The app allows us to do our own research and then make the trade on their platform in a simple, easy way. Notifications about bank transfers and updates when orders have been executed are helpful, but we’re most excited about the market data notification coming out later this year. We expect to use this information for alerts on when to sell if our stock price drops too high or too low.
A lot of people have been asking, how does Robinhood make money? What’s the catch? We like their answer found on the FAQ page of their website:
Robinhood makes money in many of the same ways as traditional online brokerages. Robinhood collects interest from customers who choose to upgrade to a margin account. We are testing margin in beta and will offer margin accounts later this year. Robinhood also accrues interest off of customers’ uninvested cash balances. It is important to note that our customers are not charged. Robinhood is well-funded by notable investors such as Index Ventures, Google Ventures & Andreessen Horowitz which gives us the freedom to focus on building an outstanding experience rather than short-term profits.
But is this model sustainable? Since their launch, Robinhood recently reported more than $212 million has been traded through their platform. That adds up to roughly $5 million in saved commissions. With those sort of numbers, yeah, you could say we’re bullish on Robinhood.
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