Unless you have been living under a rock for the last few years, or totally unaware of the stock market, you've surely heard of Robinhood.
This is the app that kicked off the commission free trading revolution that led to almost all brokerage platforms ditching trading commissions altogether.
However, there are some who doubt the longevity of this business model for Robinhood. They do make money from a few different sources, but the company itself is not profitable.
At the end of the day, it doesn't really matter to you as a Robinhood user whether or not the company is actually making money. It doesn't have any impact on you using the app to potentially make money yourself.
So, let's dive into the numerous ways in which it is possible to make money using the Robinhood app.
If you prefer watching instead, check out our YouTube video on the topic below!
Since Robinhood is a publicly traded company that offers numerous financial products, there are a few different ways to make money with them:
Let's go into more detail about each one of these now!
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Perhaps the easiest way to make money with Robinhood is getting your free stock.
Use our button above to get a free stock worth $3 to $225 when you open an account!
As soon as you link your bank account after opening the brokerage account, Robinhood will deposit 1 free share into your account.
Better yet, you can sell it after 2 trading days if you want to withdraw the cash or invest it in something else.
Since this is totally free, it's a guaranteed way to make money with Robinhood.
The next few, however, are not guaranteed.
When you buy shares of stocks and/or ETFs on Robinhood, it is possible that some of these will pay out dividends.
Typically, dividends are paid out on a quarterly basis. They are deposited to your cash balance within your brokerage account by default.
But remember, there’s an option to reinvest those dividends to purchase more shares automatically.
Robinhood offers this dividend reinvestment, assuming you also have fractional shares enabled.
Reinvesting dividends allows you to earn compound interest.
If you are on the hunt for dividend stocks, check out the list of dividend aristocrats. These companies have grown and paid dividends for 25+ years consecutively.
While there's no guarantee that these companies (or any company) will continue to pay dividends, a strong track record is always a good sign.
This is the most common way to earn money in the stock market, and that is from buying low and selling high.
The idea here is to purchase a stock or ETF that is undervalued. Then, at a later date, you would sell that same investment for a profit. However, this is far easier said than done.
Growth investors are often looking to make money solely through this asset appreciation. They don't care about dividends.
Income investors, on the other hand, often avoid growth stocks. They instead focus on the dividend cash flow being provided by well established companies.
When looking to make money from asset appreciation, you ideally need to have the market in your favor. If the broad market goes down, such as the S&P 500, it's almost certain to have an effect on all investments across the board.
In order to make money from asset appreciation, you have to sell to realize the gain or loss.
Since Robinhood also offers a limited selection of cryptocurrencies available for trading, it is possible to make money with these as well.
However, cryptocurrencies are not yield bearing. This means the only way to make money from them is asset appreciation.
They don't pay out dividends like certain stocks do.
So, the only way to make money investing in crypto on Robinhood is to buy and hopefully sell for a higher price later.
Since crypto markets are extremely volatile, meaning prices go up and down a lot, it's very easy to lose money in crypto and fast.
While most people lose money with options trading, there are certainly some that make money.
An even smaller number have wild 1,000%+ returns from options. Unfortunately, options tend to be a sure fire way for most people to lose money.
For some, this is how they "blow up their account" or bring the balance down to $0.
However, since it is still possible to make money trading options, we included it.
Robinhood stock itself is publicly traded.
The stock trades on the NASDAQ under the symbol HOOD.
Again, while it is theoretically possible to make money with options on Robinhood, it's unlikely.
Truth be told, based on the share performance of HOOD since IPO, it's also unlikely that investing in this stock will make you any money.
From heights of $70+ per share in August 2021, the stock is now trading under $13 in January 2022. Ouch.
An IPO or initial public offering describes the process of a private company offering its shares to the public for the first time.
In the past, these deals have usually been reserved for large institutional investors.
However, Robinhood now gives everyday investors the ability to invest in some of these IPOs and potentially profit.
Within the app, you can see which IPO's are currently available. At that point, you put in a request for how many shares you want.
There's no guarantee you will get all the shares you are looking for, since it is a random and equal system.
While it is possible to make money getting in early on the next big IPO, most companies tend to go down in value after going public.
Don't count on getting in early to an IPO on Robinhood as a guaranteed way to make money. However, it is possible.
Lastly, for those who want to earn interest on their idle cash, Robinhood offers a Cash Management product.
This allows you to get paid, pay bills, send checks and earn interest all in one place.
So, if you decide to use this, you will earn interest on your deposits within this account.
Robinhood itself isn't actually a bank. Instead, they partner with existing FDIC insured banks.