5/14/2023
If you are interested in the world of investments, you have surely heard of Robinhood App. It is one of the favorite apps among small investors that has become very popular since its appearance, it already has more than 18 million customers and is one of the favorite Apps in the online investor forums on Reddit.
Its popularity is due to the fact that anyone can invest in ETFs, stocks or cryptocurrencies without paying fees.
Robinhood grew in number of users in the US thanks to the pandemic, but there are still many people who don't know about it and want to know how it works and how it can help them invest their savings. Here is all the information you need to know about Robinhood app.
What is Robinhood?
Robinhood was launched in April 2013 as the first completely free investment platform. Since its launch it has had a huge impact on the investment world, even coining the term "Robinhood effect".
Robinhood revolutionized the brokerage industry as it was known to date by offering commission-free trading. As a result, other brokerages have followed suit, including industry titans such as Charles Schwab. Robinhood transformed the brokerage industry forever.
Its focus on an easy-to-use platform for beginners has attracted many novice investors to the world of the stock and financial markets.
With Robinhood the only fees the client pays are the expense ratios associated with ETFs and nominal regulatory fees.
How to start using Robinhood?
Robinhood is an investment App, so you have to download the Robinhood App. You can download the app for Android or iOS. Once you have done so, you need to register an account on the app in order to start using it. The process is very easy.
Once registered when you enter the app you will see that for being a new customer you get a free share. Keep in mind that the free stock will not have a high value, like Amazon stock or Apple stock, but it helps new investors to better understand how to invest in the US stock market.
Once you are in the app you can start browsing the App to see the different options. The "Stocks" option is the stocks you currently own. There, you should see the stock you are gifted, for example.
Watchlist
The "Watchlist" option shows the stocks you are interested in or are paying attention to. For example, if you want to buy the shares of a company, but the price is too high at the moment and you prefer to wait for a correction, it might be a good idea to list it in watchlist to follow it and buy if it goes down in price.
If you have a lot of stocks in the list you can click on the ones you are most interested in and drag them upwards so that they appear in first place.
Search
In the upper central part there is a search button, when you click on it a window opens so you can write what you want to find.
People used to investing in the stock market usually know the tickers of the shares, a unique combination of letters for each share (Microsoft's ticker is MSFT), but it is not necessary because you can type the name of the company and the search engine will find it.
Once you have found the desired stocks you can buy them or move them to watchlist to be able to follow them quickly without having to search for them again each time.
Within the application there are other very useful and simple sections such as a news section, access to charts, statistics and expert analysis on stocks.
If you are new to the world of investing remember that Robinhood is the favorite App for novice investors because of its low commissions and simplicity. You can download the app and start to see all its options without investing anything until you understand how it works.
After familiarizing yourself with the app you can make your first deposit, you can deposit money immediately whenever you want.
What assets can you invest in with Robinhood?
Currently Robinhooh offers enough assets for novice investors. You can invest in stocks, cryptocurrencies, ETFs and fractions of stocks. There is a possibility to invest in options if after passing a test we are authorized.
The great advantage Robinhood offers to its customers is the possibility to start investing from just $1 and without commissions.
The second great attraction for small investors is the possibility to invest in fractions of shares, something that other brokers do not allow, so any small investor can invest any amount of money in their favorite companies without the need to buy a full share. If some small investor wants to invest $50 in Amazon he can do it through Robinhood, even if the stock is priced at $3,000.
The number of cryptocurrencies offered to investors is relatively small, but they are the main cryptocurrencies on the market. Currently you can invest in:
- Bitcoin
- Ethereum
- Dogecoin
- OmiseGO
- Lisk
- Dash
- Monero
- Zcash
- NEO
- Stellar
- Qtum
- Ripple
- Litecoin
We have to warn that Robinhood is not a cryptocurrency exchange, that means that we can buy and sell the cryptocurrencies listed above, but we cannot transfer them to an external wallet.
If we want to invest cryptocurrencies in a more advanced way, make exchanges between them or even make payments, the ideal is to open an account in an external exchange like Coinbase or similar.
Other advantages of Robinhood
In addition to the possibility of investing in stocks, ETFs and cryptos from just $1 and with the option of investing in fractional shares without commissions, there are other advantages of the Robinhood App that we will explain below.
Dividend reinvestment plan
One of Robinhood's most requested features from the beginning was a dividend reinvestment plan or "DRIP". A DRIP allows investors to choose whether to take their dividends in cash or reinvest them in more shares of the underlying stock.
Activating this option when collecting dividends from a company automatically invests those dividends in buying additional shares of that same company.
By choosing to reinvest your dividends, you can take advantage of compound interest and increase the growth rate of your portfolio over time.
As a platform that caters to long-term investors, it's important to have access to a DRIP because many investors want to keep as much of their money working for them as possible. When you take your dividends as cash, they just sit there and don't grow for you, this is not desirable for many investors.
Access to Initial Public Offerings (IPOs)
Traditionally, IPOs have been reserved for institutions and high net worth individuals. Today, however, Robinhood has created a capability to allow anyone to participate.
When a company goes public, it starts with an IPO. Robinhood partners with banks that place the shares offered in the IPO so that Robinhood account holders can purchase shares in the IPO.
Cash management
For those looking to build an emergency fund, Robinhood also offers a product for this.
Robinhood Cash Management is an FDIC-insured, high-interest online savings account. This includes a debit card and checking account, where you can earn an above-average interest rate on your cash.
In addition to earning interest on your uninvested cash, you'll also be able to keep your available cash on the sidelines because you can instantly transfer money between your cash management account and your investment account.
This account will come with no minimum balance requirement and FDIC insurance of up to $1.25 million.
How to buy stocks at Robinhood?
Find the stock or cryptocurrency you want to buy and click on it, you will see at the bottom the buy stock or "Trade" button. Click on the "trade" button to start the purchase.
Here are the options you have when buying shares on Robinhood.
Select an order type
If you click on the Trade button, you will be taken to the purchase screen. Automatically, the application will show you the possibility to buy at the current market price. At the top right of the app, you will see a button that says "Order Type". If you click there, you will see the types of orders available to you:
- Market order: Buy at the market price almost instantly. This option is the most recommended for new investors. You buy the shares at the current price of the stock.
- Limit order: This order is used to buy a share at a price lower than the current price, a purchase price lower than the current price is set, and if the share reaches that price the purchase is made automatically. This way, you don't have to watch the stock all day, but it will be automatically executed when the time comes. If the stock does not reach the set price the shares are not bought.
- Stop loss: If you activate this automatic option, the system will sell your shares if they fall below a certain price. In this way, you will have protection in case the market falls.
- Stop limit: In the same way that you can automatically sell when the price falls, you can automatically sell if the share price rises. This way, you can lock in your profits without watching the chart all day.
Finalizing the purchase
Once you choose the order that suits you best, the system will show you the transaction screen. There you will be asked to enter the number of shares you wish to buy, the market price and the total amount of money you will pay for the purchase.
Finally, you must click on the "Review" button to finalize the purchase. If you do not have enough money in your investment account, the system will give you the option to make a deposit.
Español: Qué es y cómo funciona Robinhood App en español