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Written by Ryan Scribner on March 22, 2024
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Here's What Happens If Robinhood Goes Out Of Business (Bankrupt)

Robinhood is a popular financial app.

With a few taps on your phone, you can invest in stocks, cryptos, and even options through the Robinhood app.

However, many investors wonder what would happen in the unlikely event that their brokerage firm goes out of business - potentially even going bankrupt. 

So, what would happen? Let's dive in.

New to Robinhood? Be sure to watch my full tutorial below!

Learn More: Robinhood Retirement 3% Match

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.

Robinhood IRA Boost

Here's what you need to know:

  • Robinhood offers 2 types of retirement accounts - the Roth IRA and Traditional IRA
  • All Robinhood investors will get a 1% Match on what they Contribute or Transfer
  • Robinhood Gold members will get a 3% Match - the biggest on the market

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.

Best Free Stock Promotions

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Robinhood Logo1 Free Fractional Share Worth Up To $200Learn More
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Robinhood Investments

Despite its innovative approach to investing, Robinhood operates within the same regulatory framework as traditional brokerages.

One crucial safeguard is its membership in the Securities Investor Protection Corporation (SIPC), a federally mandated insurer for securities held by customers of American brokerages.

First of all, if you invest in stocks or ETFs with Robinhood, your assets have SIPC insurance.

In a nutshell, this covers you in the event that your broker loses your financial assets or cash.

Since Robinhood is a member of SIPC, you are covered for up to $500,000 worth of securities, including $250,000 which can cover cash. 

So, if Robinhood somehow went out of business and lost customer assets, the SIPC would step in.

Robinhood Savings/Spend Account

In addition to the brokerage platform, Robinhood offers a high yield savings account as well as a spending account with a debit card. 

Robinhood itself is not actually a bank - instead, they partner with FDIC insured banks.

If Robinhood were to go out of business, that would have no impact on your deposits which are actually held at the partner banks.

Now, if those partner banks began to have solvency issues, your deposits would be protected through the FDIC.

The Federal Deposit Insurance Corporation (FDIC) is a government agency in the United States that provides deposit insurance to depositors.

It was created in 1933 in response to the widespread bank failures during the Great Depression.

The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

Robinhood Is Financially Sound

It's important to keep in mind that Robinhood is a publicly traded company which is required to provide quarterly earnings updates to shareholders.

Part of this update is details surrounding the amount of cash they have in the bank. If they were running low, they could take numerous measures - including issuing more shares to raise more capital.

In the unlikely event that their business began to falter, they would most likely be acquired by a larger brokerage firm, and your investments would transfer over.

If you want to learn more about Robinhood, check out our full beginner's guide about how Robinhood works here.

Article written by Ryan Scribner
Ryan Scribner is the Co-Founder of Investing Simple and author of the personal finance book ‘From Side Hustle To Main Hustle To Millionaire’ (available on Amazon and at Barnes & Noble). He is recognized as a Top 100 Money Expert by GoBankingRates. Ryan Scribner runs a successful YouTube channel focused on money and investing, which he started in 2016. Scribner was exposed to the finance world early on with a dad who is a financial advisor. Before he started his YouTube channel, he was working and making a surplus of money which he began investing on his own. Then he started to document it on his YouTube channel, before launching the Investing Simple blog in 2018. Ryan Scribner has used his own experiences with money to show others what he’s done to be successful so that they can learn from it. He has been featured in The Wall Street Journal in a publication on The Financial Gurus Millenials Listen To. In addition, Ryan Scribner has been featured in MarketWatch, Business Insider and Forbes - where he was recognized as the #1 Must Watch YouTube Channel For Making Money. In recent years, Ryan has become an angel investor across numerous startups. This includes fintech platforms such as Yotta, Mesh Connect and Commonstock - recently acquired by Yahoo Finance. Beyond that, Ryan has equity investments in a veteran-led cybersecurity company Netrise, as well as Beacons - an all-in-one builder tool for creators. Today, Scribner lives in South Florida - teaching others how to build wealth and “semi-retire,” without sacrificing your life to a 9-to-5.

Read more

Power Your Investing

Choosing the right product and service is essential for your investing. Here are some of the tools and services to help your portfolio grow.
Robinhood
Robinhood provides an easy-to-use free trading platform for beginner investors. Robinhood has $0 account minimums. Get a free stock when you open an account below.
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M1 Finance
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Fundrise
Passively invest in private real estate deals with as little as $10. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee.
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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.

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