The world of investing has changed a lot in the past decade as brokerage services have made it easier than ever to execute trades at no extra cost. At the forefront of this zero-commission revolution is Robinhood who also is in the spotlight for its free stock program that is going on right now.
Brokerages like Robinhood are looking to acquire new customers, and one way to accomplish this is by incentivizing them with a free stock! When you open a new account with them, you get a free stock. Then, you can refer friends to earn more free stocks!
That being said, here is everything you need to know about the Robinhood free stock promotion.
How Does It Work?
Robinhood’s free stock promotion is simple. Open up a brokerage account using the link below. Then, once your account is approved, you get to scratch off a free stock!
How Does Robinhood Choose Which Stock I Get?
Robinhood prioritizes the largest, most popular stocks being bought on its platform to offer to its new clients. Typically, priorities include large market-cap names that have high trading volume.
These shares are chosen at random from Robinhood’s inventory of “settled shares."
Due to the randomness of the system, it is impossible to calculate the average value of the share that you will receive. Robinhood makes an estimate on its website, however.
How Much Are The Free Stocks Worth?
The value of the free stock is a range between $2.50 and $200.
Robinhood made a statement about the value of the free stock on its website saying that 98% of the stocks offered will be worth between $2.50 and $10.00.
This does not mean it is impossible to receive that $200 stock that you are looking for. Though it is a low chance, this program is a win win situation for all investors opening up a brokerage account with Robinhood. $5.00 or $50.00, free on Robinhood really does mean free.
Is It Possible To Open Multiple Accounts?
No. Robinhood only allows one account to be opened per person to restrict abuse of their free stock promotion. However, you can invite friends and each of you will get a free stock when you do this.
Having Trouble With Your Free Stock?
Robinhood has you covered. Simply contact them at robinhood.com/contact and customer service will help you to receive your free stock.
Can You Sell The Stock?
Investors using Robinhood have two options when deciding what they want to do with their new stock. They can either hold the stock, betting on it appreciating in value, or after two trading days they can sell it.
A “trading day” is a day when the market is open. The market is typically open Monday - Friday, depending on the holiday schedule. Understand this if you are looking to sell your free share immediately. Your sell order will have to wait at least two of these days.
Robinhood Referral Program
Get Your Own Referral Code
Want another free stock? Robinhood allows its clients a referral link that they can send to their friends. When your friend signs up, you will both be given a free stock valued between $2.50 and $200.
Inviting Friends on Robinhood
You can invite friends in a very simple 4-step process on Robinhood’s app:
- Tap “Account” in the bottom right corner of the home screen.
- Hit “Invite Friends, Get a Free Stock Card."
- Tap “Invite Contacts."
- Hit “Invite” to the friends who you think may be interested in Robinhood.
It is as easy as that. Invite as many friends as you would like and claim the rewards from the referral program.
Referral Program Limits
There are limits to this referral program put in place by Robinhood. Robinhood allows for up to $500 in free stock per year per account. By referring your friends, they will still receive their free stock for opening up an account with your referral link.
Taxes On Free Stocks
The short answer here is yes, you pay taxes on your free stocks.
The value of the stocks that you receive from the referral program are reported as “Other Income” on the 1099-Misc tax form. When the stock is sold, the gains are reported as capital gains or losses and subject to federal income taxes.
Here is an example to help you understand:
- You receive a stock with the referral program that is worth $5. This will be reported as $5 in “Other Income."
- You sell the stock when it appreciates 50% to a value of $7.50. Your cost basis is $5 and your gain is $2.50. The $2.50 that you made will be reported as either long term or short term capital gains depending on how long you hold the position.
Robinhood Referral Program Summary
- The referral program is easy to use and easy to understand.
- Given the option to sell the stock or hold it for further appreciation.
- 98% of the time the stock is worth between $2.50 and $200.
- Receive up to $500 in free stocks from referrals per year.
- Free stock will be reported as “other income” on tax form. The gains will be reported as “capital gains” and subject to federal income taxes.
- Prioritization of popular companies with large market caps and high volume.