If you are looking to start investing in the stock market and meeting your financial goals, the first step is to find the right broker. And of the many to choose from, two of the hottest on the market now are Robinhood and Personal Capital.
Robinhood is commission free stock trading app that aims to be the most beginner friendly brokerage out there.
Personal Capital offers free tools for managing your money as well as a robo-advisor for high net worth clients.
Both have unique features, fees, pros, and cons that make each different in their own ways. We will look at Robinhood vs Personal Capital side by side so you can see which one is a better fit for you!
Robinhood is the original commission-free stock trading app. Since launching in 2013, they have gone on to grow exponentially and to this day they are still one of the most popular apps on the market. On the app, you can buy and sell stocks, ETFs, options, and cryptos. While you are able to use the app for free, there is no guidance or advice available which may deter brand-new investors.
Personal Capital takes a more hands-off approach by offering users a robo-advisor solution. A robo-advisor combines the ease-of-use of an app like Robinhood, and the professional guidance of working with an in-person financial advisor. Through the platform, you are able to receive personalized investment advice from a team of financial advisors. As a result, the platform is not free.
While both platforms allow users to invest in the stock market, they go about it in very different ways. With Robinhood, you are largely on your own to do your research and due diligence. With Personal Capital on the other hand, their team of advisors is there to support and guide you.
Robinhood Review 2021: Best Investing App?
Personal Capital Review 2021: Best Robo-Advisor?
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Robinhood's mission is to democratize the investing industry for all.
And, by cutting things like trading commissions completely out of its business model, it is able to live up to its word. Despite maintaining a low-cost structure, the broker also offers an array of features that help to simplify the investment process.
Let's take a look at some of them now!
As mentioned, Robinhood has an extensive array of top-quality features.
Because the broker has been around since 2013, it has had over eight years to refine its platform to make it a premier choice for those searching for an online broker.
Robinhood's app is one of the most notable features of the broker. Because of its ease of access and simplicity, Robinhood's app has found its way to #15 on the app store! It can also be found on the Google Play store for those who do not use Apple products.
Track returns, place trades, maintain a watchlist, and so much more on the Robinhood app!
For investors looking to dip their toes into the waters of cryptocurrencies, Robinhood Crypto offers a way to do just that. Investors can buy and sell cryptos like Bitcoin and Ethereum from within the standard Robinhood app.
This can be an effective way to get exposure to the cryptocurrency market without going through a dedicated crypto platform. However, there are some downsides investors should keep in mind.
The most significant of which is that you do not have the ability to transfer your crypto off of the platform. Many advanced crypto investors prefer to hold their crypto on a hardware wallet. This mitigates against the risk of the platform getting hacked and losing your assets. Our top pick for a platform allowing you to transfer your crypto to a hardware wallet is Coinbase.
When opening a Robinhood account, you will be granted a free stock! This stock can range between $2.50 and $250, and is automatically rewarded to the account holder when an account is opened. Not a bad deal!
The program gets even better when you are granted a referral code. All Robinhood users are given a referral code to invite friends to join Robinhood. When you refer a friend, both accounts will be granted a free stock!
This can be a great way to help your friends to start investing and get rewarded in the process.
For smaller investors, the ability to buy fractional shares on Robinhood is a significant selling point.
Instead of needing to buy full shares of companies, Robinhood allows its users to buy partial shares.
This means that in order to invest in Amazon, you don't need over $3,000 to buy a single share. You can instead buy as little as $5 worth of Amazon by buying a fractional share. As a result, complete beginners have access to a much wider variety of investments.
If you use the basic Robinhood account, there are no commissions and no fees.
They do, however, offer their premium Robinhood Gold subscription for a fee.
Robinhood Gold comes in at a price of $5 per month and grants users access to margin trading and advanced stock research.
While margin trading does come with several risks, if you are interested in buying stocks on borrowed money, you will need to pay the $5 monthly premium.
If research is something that you value heavily, and research is very important in the stock selection process, the $5 per month will let you access Robinhood's research.
This also gives you access to Level II market data and larger instant deposits. The $5 per month does not include your margin interest.
There are fees associated with taking out margin on Robinhood. After signing up for Robinhood Gold which is necessary to access margin on Robinhood, your first $1,000 of borrowed money can be used with no extra cost.
After the initial $1,000, however, there is a 2.5% daily margin fee for borrowed money. Your interest will be calculated daily and charged to your account on a monthly basis along with your $5 fee.
In short, Personal Capital is an online Financial Advisor and Wealth Management service.
Personal Capital has many features that will help to advise you and manage your finances. Its features focus mainly on automation, which is the core concept Personal Capital was built on.
Building a well-diversified portfolio for you and getting advice from top financial advisors are both priorities of Personal Capital.
Personal Capital, as mentioned, uses automation and in-person financial advisors to manage your money.
Under Personal Capital's Wealth Management plan is its Smart Weighting feature.
Smart Weighting in a portfolio is designed to allocate and weigh different sectors in your portfolio to manage the risk of your portfolio. For example, if your goals align with a more aggressive portfolio, Personal Capital's Smart Weighting feature may allocate more of your portfolio to the technology sector due to its higher volatility and returns.
This is just one example, but the principal to take away is that Personal Capital weighs all portfolios differently, and it uses its Smart Weighting feature to do this!
As a client of Personal Capital, you will have access to a team of licensed fiduciary advisors. The term fiduciary means that they are obligated to put your interests ahead of their own or their company's. This is a must-have when you are working with any financial advisor.
You'll be able to schedule calls with a financial advisor to discuss your individual investments, 401k plans, and even your general personal finances.
While they won't be able to dive in as deep as a personal financial planner, you're still getting much more support than you would from an app like Robinhood.
Personal Capital maintains a low fee-based structure. However, there is an annual assets-under-management fee that you should be aware of depending on the Personal Capital account you are planning on opening.
The annual Assets-Under-Management Fee, which is a % of the total assets that Personal Capital is managing for you, is variable based on the type of account you open.
The minimum amount to open up an account with Personal Capital is $100K.
The annual fees that you should expect Personal Capital to charge range from 0.89% (for the smallest account type) down to 0.49% (for the largest account type).
Because there is an inverse scaling of account size to % fee, the larger your account is, the less you should expect to pay in annual fees! This is definitely something to think about especially if you fall on the lower end of the account minimum spectrum.
Robinhood is more geared to the investor that is looking to make their own trades and have control over their portfolio. Users know that they are on their own to figure out how to invest.
Personal Capital, on the other hand, is geared more toward the investor that is looking for a highly automated service to create a portfolio for them.
The $100,000 minimum to invest with Personal Capital makes this truly out of reach for most beginner investors. If that is the case for you, Robinhood opens their doors to all by offering $0 minimums.