8 Reasons Why You Shouldn’t Invest With the Robinhood App
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Since its launch in 2013, Robinhood has become a popular way of investing in stocks and exchange-traded funds (ETFs). The app’s big selling point is its commission-free structure: you don’t have to pay a fee to execute trades with Robinhood.

But while free trades are great in theory, they come with several downsides. Here are several reasons why you may not want to invest with Robinhood despite its enticing commission structure.

1. Lack of Integration With Other Apps

We’ve consistently extolled the virtues of using personal financial management apps 6 Easy Tools for People Who Hate Managing Finances 6 Easy Tools for People Who Hate Managing Finances Do you hate managing your finances? Does writing out a budget fill you with dread? Check out these easy tools that make the process much easier and more enjoyable. Read More like Mint, Quicken, and Personal Capital. They help you keep a better handle on your financial life. You can use them to pay down debt, track spending, and budget for future expenses.

The apps will sync with your banks, credit cards, brokerages, and other financial services; you never need to enter a transaction manually.

Unfortunately, Robinhood does not integrate with any of them. Given how much your portfolio can fluctuate in value, entering the figures yourself is inefficient and time-consuming.

2. Unshared Interest Profits

Modern brokerages double as giant lending organizations. They use the cash balances in clients’ accounts to fund margin accounts and buy low-risk bonds.

Most mainstream brokers (think TD Ameritrade, Interactive Brokers, Charles Schwab, et al.) pass on some of the profits made using those cash balances to their customers in the form of interest payments.

Robinhood doesn’t—it keeps all the money for itself. It’s one of the ways the company covers the cost of offering free trades. With interest rates expected to rise over the coming months and years, you could be missing out on a significant revenue stream if you have a sizeable portfolio.

3. Delayed Stock Quotes

If you read Robinhood’s FAQs or independent reviews of the service, you will see that the app has real-time quotes.

That’s only half true. Yes, your orders will always be completed at the real-time price, but the charts and data you see on screen are often delayed. This will prevent you from getting in and out of trades in the most efficient manner.

There are a few factors at play. Most notably, Robinhood uses the same provider as sites like The Motley Fool, Seeking Alpha, and StockTwits for its quotes. It’s cheap, barebones, and limited to a handful of exchanges. Robinhood does this to save money.

If you have an account with another broker, open the same stock on both apps and you’ll see the differences for yourself.

4. Poor Customer Service

Robinhood’s customer support is notoriously bad. Users complain of waiting weeks for an answer in the app’s Help section, lengthy queues to speak to someone on the phone, no responses to emails, and a general lack of urgency to responding to important issues.

In ordinary circumstances, poor customer service might be forgivable in a free app. However, when vast sums of money are involved, clients deserve better. A recent round of funding valued Robinhood at $5.6 billion; we’re sure they could hire a few extra reps easily enough.

5. Unimpressive Watchlist Options

A watchlist is a customizable list of stocks that you want to keep an eye on. They are an essential part of planning your investments; they let you quickly see whether specific parameters have been hit, and consequently, whether it’s a good time to buy your desired asset.

Most brokerages’ watchlists are feature-rich. For example, you can create multiple lists for different stocks, opportunities, or ideas. Normally, you can also sort your watchlist in various ways such as by price, volume, bid price, and other key indicators.

Robinhood doesn’t offer any of those features. You can’t even sort your list alphabetically (though at least you can reorder your list manually). The lack of watchlist features makes the app unsuitable for serious stock research.

Instead, it’s advisable to use free watchlist tools from companies like Yahoo Finance, MarketWatch, or other financial sites 10 Financial Websites That Help You Stay On Top Of The Market 10 Financial Websites That Help You Stay On Top Of The Market If you want to make the most of your money, you're going to need to stay on top of financial news. Here are 10 sites that make it easy. Read More .

6. Basic Charts and Reports

The Robinhood app falls flat in a few other ways when compared to other major brokers.

Charts

bollinger bands example chart

Until September 2018, Robinhood only offered simple line charts for each stock. For serious investors, they are inadequate; line charts only show the closing price for each set time period.

Now, you can also access candlestick charts. It’s an improvement—they show opening prices, closing prices, and session highs and lows.

But you still can’t customize the charts. Nor can you overlay key technical analysis indicators such as moving averages, Relative Strength Index (RSI), On-Balance Volume (OBV), or Bollinger Bands.

Reports

Again, in recent months, Robinhood has increased the number of reports available to users. Now you can read buy/sell/hold commentary on various stocks from Wall Street analysts, and you’ll also be able to see Morningstar’s buy and sell summaries.

However, the reports and analysis still falls far short of what you’d find on regular discount brokerages. They will typically provide access to a range of third-party content such as free subscriptions to paid newsletters, CFRA Morning Briefings, Market Edge, and more.

Note: Remember, if you don’t research stocks thoroughly before purchasing, you’re not investing. You’re gambling.

7. Lack of Account Types

Robinhood only offers standard, individual investing accounts. You cannot open a joint account, trust account, custodial account, Individual Retirement Account (IRA), or any other type of tax-efficient savings account.

Therefore, it’s not a good option if you’re investing for long-term goals, for a child, or as a couple.

Note: If you’re approaching retirement, there are many web apps The 7 Best Web Apps For People Approaching Retirement The 7 Best Web Apps For People Approaching Retirement There's more to retirement planning than just a financial savings plan. Yes, money is important, but don't forget that there are other important things too. Here are seven apps to help you plan. Read More you will find useful.

8. Lack of Investment Types

Robinhood only lets you invest in four types of assets: US exchange-listed stocks and ETFs, options contracts for US exchange-listed Stocks and ETFs, four cryptocurrencies (Bitcoin, Ether, Litecoin, and Bitcoin Cash), and American Depository Receipts (ADRs) for 250 global companies.

It might sound like a lot, but you’re missing out on access to many other types of investments, including: over-the-counter equities, foreign stocks, mutual funds, bonds, fixed-income assets, and foreign exchanges.

Perhaps most concerning is the lack of bonds. Spreading your investment across multiple asset categories is one of the best ways to reduce risk to your portfolio, but at the very least you should hold a mix of equities and bonds.

Should You Avoid Robinhood?

To be fair, Robinhood is definitely a great way for new investors to get their feet wet in the stock market.

However, it’s important to know that Robinhood’s free trades come at a price, and in a lot of situations Robinhood is an unsuitable investment broker. Once you’ve built up some knowledge and feel confident, it’s worth opening an account with a traditional discount brokerage elsewhere.

If you’d like to learn more about investing, check out our articles on the best investment apps for absolute beginners The 5 Best Investment Apps for Absolute Beginners The 5 Best Investment Apps for Absolute Beginners Want to start investing but have no idea where to begin? Check out these investment apps perfect for beginners. Read More and virtual stock market games that will teach you the basics 5 Virtual Stock Market Games That Help You Learn How to Invest 5 Virtual Stock Market Games That Help You Learn How to Invest Looking to practice and learn about investing? From simulators that feel incredibly realistic to user-friendly games, here are five stock market games that will prepare you for the real thing. Read More .

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  1. dragonmouth
    October 23, 2018 at 2:16 pm

    An uninformed article.

    Robinhood is designed for those that dabble in the market, not for serious traders/investors. The latter use sophisticated software which often costs hundreds of dollars. For what and who it is designed, Robinhood does a good job.

  2. James
    October 21, 2018 at 5:17 am

    Did someone from eTrade write this article? Half of it is completely false. Robinhood does actually give you interest. Do your research next time before you spew nonsense and slander.

  3. Joe
    October 20, 2018 at 4:33 pm

    Robinhood is much worse. They say they are fee free but they charge a mysterious extra on each quote. I inquired about it twice, said they would get back to me but never did.

  4. Sw
    October 19, 2018 at 3:39 pm

    Wow this article is horrible! Tsssk tsssk for posting such a poorly educated review! BTW do your homework before u provide such advice. Personal Capital works just fine and there are tons of tools available if someone really needs advanced charting ect... You really missed the boat on how to properly review this app and company. After reading this I really hope u don't provide trading advice!

  5. JP
    October 19, 2018 at 11:16 am

    How recently have you done any research for this article? Robinhood has been linked to my Personal Capitol account and automatically updates itself for the past several months with no issues. Maybe you should investigate things a bit further and ensure you are not providing false information?

    • Jason
      October 19, 2018 at 2:24 pm

      Also, it isn't Robinhood job to integrate with mint, etc. They provide a very easy to integrate set of API's, if financial trackers don't support it then it is because the financial trackers doesn't have good developers. ?