Robinhood launched in April of 2013.
Their impact on the investment industry has not been small, they even have a term for it called the “Robinhood Effect."
Robinhood revolutionized the brokerage industry by offering commission-free trading. Almost all other brokerages have followed suit as a result. Robinhood truly transformed the brokerage industry forever.
Their focus on an easy-to-use beginner-friendly platform has drawn in many beginner investors.
Robinhood is the first step in many beginner investors' journeys. With their widespread popularity and simple interface, this is for good reason.
So how does Robinhood work?
Check out my video below to learn more, or keep on reading!
Robinhood is a popular "all-in-one" investing app.
While they are most well-known for their commission free stock trading, they've recently shaken up the Retirement Investing World too.
Introducing Robinhood Retirement; home of the biggest IRA match on the market.
Here's what you need to know:
And don't worry, this comes with a Portfolio Builder Tool. You don't have to construct your investment portfolio from scratch if you don't want to.
Lastly, you'll even get a free stock worth up to $200 when you open a new Robinhood account using our link.
First things first, in order to use Robinhood and see how it works, you will need to sign up for an account here.
Be sure to use our link above, as you will get a free stock worth up to $200! You get to pick your free stock from a list of 20 leading American companies.
Since this is a full-blown brokerage account, Robinhood is required to ask you for certain information such as your employment, social security number and level of investment experience.
Robinhood is required by law to collect this information, and they make it clear that they do not share this information.
During the sign up process, Robinhood will ask you a few questions related to your possible relationships with individuals at publicly traded companies.
All brokerage platforms are required to ask these questions:
Next, Robinhood is going to ask you to answer some required questions about your tax situation.
They will ask you whether or not you are subject to backup withholdings from the IRS.
If you don't owe money to the IRS, this is most likely going to be a "no."
Robinhood is required by law to report your investment activities to the IRS, as you will need to pay taxes on your capital gains, earned interest, dividends and more.
You can read our full article about Robinhood taxes here.
The next step in the sign up process will be linking your bank account in order to deposit funds.
Here's step-by-step instructions on how to do this:
Robinhood gives you a few different options when it comes to funding your new account. You can link up to 3 bank accounts as well as 1 debit card.
The debit card comes with a $1,000 daily deposit limit, however you have the advantage of instant transfers here.
Direct bank account transfers, on the other hand, are expected to take 4 to 5 business days.
At this point, you'll decide whether you want to add a bank account or a debit card. Then, you'll have the option to initiate a transfer once the account is successfully linked.
Time for the fun part! As soon as you fund your account, you'll receive a notification about getting your free reward stock.
Robinhood offers a unique incentive where you are actually able to pick your free stock yourself.
Once your account is funded with any dollar amount, you'll receive a random dollar amount as a reward.
With this reward, you have the exciting opportunity to pick a gift stock from a list of 20 of America's leading companies. These companies are carefully selected based on their market capitalization within their respective sectors.
You can use this reward to claim a fractional share of a stock.
Check out our full article on the Robinhood free stock here to learn more.
In the past, investors would have to purchase a whole share of a stock or ETF in order to gain exposure to the asset.
This became problematic when investing in companies with a high share price, such as Berkshire Hathaway Class A shares. These shares have never been split, and as a result, the share price is over $500,000!
If you wanted to buy shares of this stock, or others with a high share price, Robinhood allows you to invest in $1 increments using fractional shares.
Instead of owning an entire share, you could own as little as 1/1,000,000th of a share.
One of the very next things you might want to do is search for a stock or ETF using the Robinhood app.
Here's my full video tutorial below, or keep on reading!
Here's instructions on how to search for an investment using Robinhood:
After looking for Apple stock, here is what you will see.
Here's some of the key information on this screen:
With time, you'll become more familiar with these various statistics. For now, it's just important to be aware of where you access this information.
So how do you make money with Robinhood? It's actually quite simple.
The first way to make money is through asset appreciation - or the old adage "buy low, sell high." This would mean buying a stock or ETF and then selling it at a later date for a higher price than you paid. While this is easier said than done, it largely comes down to the performance of the overall stock market or the individual company that you own.
The stock market is all about supply and demand. If you own shares of an individual company that is growing revenues at an above-average rate, for example, this could increase the demand for those shares. This would, in turn, drive up the price.
The second way to potentially make money through Robinhood is by earning dividends.
A dividend is a payment that a company gives to its shareholders, usually from its profits. It's a way for the company to share a portion of its earnings with the people who own its stock.
Dividends can be paid in cash or additional shares of stock and are typically given out regularly, such as every quarter (three months).
By purchasing dividend paying stocks or ETFs, you too can make money through these routine payments! It's also possible to make money through both dividends and asset appreciation. An example of this would be purchasing a dividend paying stock that also appreciates in value over time.
If you want to actually purchase a stock, such as Apple, you will click on the green Buy button.
By default, it will be set to dollar value investing - leveraging those fractional shares. However, you can click the drop down menu in the top right if you want to change this to whole shares.
At this point, you will enter the dollar value you want to invest, or the total number of shares you are looking to purchase. If you want to take advantage of fractional shares, you will need to invest using the dollar value.
Once you are ready to move forward, click on the green Review button.
Finally, you will confirm the order if you want to actually place the order.
Let's say some time has passed and you are now looking to sell a stock or ETF that you own in your Robinhood portfolio. Hopefully, you are looking to take some profits!
First of all, let's cover how to tell whether or not you have made money through your Robinhood investment.
On the main home screen of the app, if you scroll down to the Stocks & ETFs section, this will show you what you currently own within your Robinhood portfolio. You'll want to click on whatever stock or ETF you are looking to potentially sell.
This will bring you to the specific page for that investment. For example, I own a fractional share of Microsoft stock (MSFT) in my demo Robinhood portfolio.
Since purchasing this, my original $10 investment has grown in value to $10.68 - or an overall return of 6.83%.
In order to sell this, or any stock/ETF owned within Robinhood, here are the steps:
Robinhood is one of the most popular modern day investing apps for a reason. Known for their extremely user friendly interface, Robinhood makes investing and even managing your money a breeze.
You are now one step closer to leveraging the full potential of this powerful platform! Happy investing.
Get 1 Free Stock Worth Up To $200 From Robinhood!
Don't Miss This Opportunity!
Investing Simple readers can claim a free stock from Robinhood worth up to $200 when they open a brokerage account and deposit any amount.
For US Residents only. Investing Simple is affiliated with Robinhood, and we may earn a commission when you sign up for Robinhood.
