Online investment platforms are a dime a dozen nowadays. This has made finding an investment platform that fits your needs a bit more difficult. There are also a variety of different assets you can invest in today, such as stocks, bonds, gold, real estate and even cryptocurrency!
This can easily lead to "information overload." We are here to help!
Today, we are going to be looking at two very different investing platforms. We will compare and contrast the similarities and differences between both Robinhood and Fundrise.
Robinhood is a commission free brokerage that lets you trade stocks, ETFs, crypto and options commission free.
Fundrise is a crowdfunded real estate platform that allows you to invest in private real estate deals with as little as $10.
By the end of the article, you should have a clear understanding of which platform is best for you; Fundrise vs Robinhood.
Robinhood started out as the first commission-free online investment brokerages. They have zero commissions on their platform which has attracted over 6 million individual users. They are credited with changing the brokerage industry as we know it forever.
Robinhood revolutionized what it meant to be a broker-dealer in the modern world and many companies have changed their policies and practices to keep up with Robinhood. This effect on the industry has come to be known as the “Robinhood Effect."
Now, countless other brokerages have adopted this commission free investing model.
Robinhood’s user-friendly design targets the beginner investor and it has become one of the most popular investment platforms out there for millenials. They offer both a web service as well as a mobile app to utilize their service.
Though the company does not tailor as well to the more experienced investor or someone who wants a lot of analytics, Robinhood is still possibly the most highly recommended service out there for beginner investors.
Robinhood makes it very easy to begin investing.
Getting your account ready will take just a few minutes to complete and you can do it right from their mobile app if that’s what you prefer.
When you sign up you will need your basic info; name, address, social security number, the works. But once you have filled in all the required fields, you are good to go.
The process is made even easier with the fact that Robinhood has no account minimum. So you can open your account today with $0 if you choose to do so and fund it later on.
In addition, Robinhood offers instant verification with a lot of major banks. This means that you will be able to transfer up to $1,000 instantly. Anything over that amount will funnel in within the next few days after the initial deposit depending on your bank.
Regardless of what you choose to invest in with Robinhood, you will never pay a dime outside of the cost of your securities.
They offer totally free trades on stocks, ETFs, options and cryptocurrencies.
Robinhood does allow you to make use of options as well as traditional stock investing. This is a feature that is not always offered at all brokerages. And of course, like other assets offered with Robinhood, it is totally free to trade.
You do, however, have to get approval in order to take advantage of these features. They require you to have some experience in stock investing before you can take the plunge into options.
Even after you have gained approval, you will not have access to all kinds of options strategies. You must complete a few options trades in order to gain access to the higher-level strategies.
Investing on a margin is sometimes a controversial topic. When you invest on margin, it means that you are borrowing money in order to buy stocks. If you do want to invest on margin, Robinhood does offer this.
This is a feature that is only available through Robinhood’s premium level of service called Robinhood Gold.
The amount you are able to invest on margin is the same as the amount of cash in your Robinhood account. You get a loan dollar for dollar and pay interest on it.
The example Robinhood uses is that if you have $2,000 cash in your account you can invest up to $2,000 on margin. If you deposit another $1,000 increasing your cash account value to $3,000 your available margin will increase to $3,000.
The ability to invest in fractional shares is a really good way to make use of all your available investment funds, but a lot of brokerages don’t offer it.
Traditionally if a stock has a value of $1,000 then you must have $1,000 in order to purchase a share of that stock and invest in it.
With fractional shares offered by Robinhood, you may buy a piece of the share instead, all the way down to $1. So for a stock trading at $1,000 per share you will be able to invest a smaller amount.
This means you won’t have cash just sitting in your account unused if you don’t want it. It also allows you to create a more diversified portfolio.
The only thing you pay for with Robinhood is the Gold service, which is totally optional.
The cost of Gold starts out at $5 per month and it gives you access to things like margin lending and deeper analytics. Though they are still not on par with the analytics of some other brokers, this does take a step in the right direction.
Fundrise is a bit unique in the world of online investment platforms. They allow their users to invest directly in real estate without the hassle of finding, managing and directing the investment. This is accomplished through something called real estate crowdfunding.
Usually, real estate investing is difficult for the average investor as it requires a large amount of capital to get started.
Fundrise aims to bridge the gap between the average and the wealthy investor. Fundrise investors collectively pool money together that is used to invest in portfolios of real estate. Since everyone is chipping in money, the investment minimums are low.
They currently offer three different investment portfolios as well as a starter portfolios for those looking to give it a shot.
Fundrise brings the world of crowdfunding to the investment industry. All the investors pool their money in order to purchase real estate.
In comparison to other real estate investing options, their account minimum is relatively low at $10.
At one point, Fundrise was only available to accredited investors. Now, they offer their service to non-accredited investors as well, giving average people the ability to get in on the opportunities of private real estate.
In the past, these deals were reserved for high net worth investors who were "in the know."
Fundrise offers a variety of portfolios at differing minimum investments. As you can see below, the higher your minimum investment, the more features you will have access to.
Features: Dividend reinvestment, auto-invest, registered products
Features: Start features + IRA investing, Fundrise iPO, goal creation and management tools
Features: Core features + customizable portfolio strategies, non-registered products
Features: Core features + plus plans (evolving real estate strategies that adjust over time based on new market opportunities)
Features: Advanced features + access to investment staff, periodic accredited offerings
When you invest in Fundrise you will pay a fee of 1% per year. This fee consists of a 0.15% advisory fee and a 0.85% management fee.
They do have some of the lower fees in the real estate investing circuit with some competitors charging 1.25% fee in its place.
Fundrise also does not charge a commission in order to facilitate purchases.
As asset's liquidity refers to how quickly you can access your funds. Typically, real estate is considered less liquid while trading stocks and ETFs are more liquid investments.
When Fundrise invests in a real estate project, it is typically a long-term investment of five years or more. It is important to understand this as an investor. You should be prepared to leave that money invested for the long term.
Fundrise has stated this platform is for investors who have a minimum time horizon of five years. If you are a short-term investor, Fundrise may not be for you!
However, with that in mind, Fundrise does offer a monthly redemption period where investors have the opportunity to cash out each month following a minimum 60 day waiting period. It is important to understand however that Fundrise does not guarantee liquidity.
In order for Fundrise to generate the greatest return for investors, they need to remain as fully invested as possible. If Fundrise holds 20% of the fund in cash for redemption, that means 20% of the fund is earning a return of 0% or close to it.
If you do redeem your shares early, you will pay an early redemption fee as follows:
|First 90 Days||None|
|90 Days To 3 Years||3%|
|3 To 4 Years||2%|
|4 To 5 Years||1%|
These redemption fees are in place to discourage people from moving money in and out of Fundrise, which is actually in the best interest of all investors involved.
The differences between these two investment platforms are staggering. This does not mean that one is head and shoulders better than the other. In fact, many investors will find that both are useful in their own way!
When it comes down to it, you are going to have to sit down and think about where your investment journey is going to take you.
If you want a free service that allows you to trade stocks, make use of options contracts and even get into the world of cryptocurrency then Robinhood may be a good fit.
However, if you are more of a passive investor or someone who is looking for supplemental income from their assets Fundrise might be the better way to go.
If liquidity is a priority, you should avoid Fundrise altogether as this is a highly illiquid investment.
At the end of the day, diversification is important when it comes to investing. It might make sense to have some money in stocks and some money in a private real estate investment like Fundrise.