How to Buy a Stock with RobinHood
What started as a pet project of two Stanford graduates quickly turned into one of the most disruptive trading platforms to date. Robinhood aimed to revolutionize trading by removing the commission fee for the trades on the platform.
Consequently, the platform attracted a massive following, particularly amongst millennials. The following sections provide information on how to trade on the platform. Plus, the article explores some of the questions you might have.
How to Buy Stock on Robinhood?
Buying stocks on Robinhood is super simple on the mobile app and via the web-based dashboard. The following sections provide a quick guide for both methods and assume you’ve already created and logged into your account.
- Go to the details page. This is where you can track earnings, stock performance, and analyst ratings. Tap on the magnifying glass icon and search for the stock you’d like to buy.
- Click on the stock you’d like to buy.
- Type in the amount you’d like to spend then click on ‘Review Order.’
- Follow the remaining prompts to purchase your stock.
- Open the Robinhood application on your phone and tap on the magnifying glass at the bottom of the screen. From here you can search by category or search a specific company for stock to purchase.
- When you’ve located the company or category, tap on the stock you want to buy. Then, tap on the ‘Buy’ option at the bottom of the page.
- Type the amount (in dollars). Should you want to place an order, tap “Dollars” in the top-right corner, then input your pin number and tap ‘Review.’
- Check your order before final confirmation and tap “Edit” to make changes. Swipe up to finalize the order.
How to Fund Your Robinhood Account?
Robinhood makes depositing money easy and you can do it via mobile app and web dashboard. Here are the steps for each method.
- In the upper-right section of the dashboard, select “Account” then “Banking.”
- On the right side of the dashboard, click the “Transfers” panel and select the account to transfer the funds from. Then, type the amount.
- Select “Review” to check the amount, then finalize the action by clicking “Submit.”
- Select your “Account.” On iOS, it’s the person icon in the bottom-right of the screen. For Android users, it’s the Menu icon in the top-right of the screen.
- Choose “Transfers,” then “Transfers to Robinhood” and select your account.
- Type the deposit amount, review it, and submit to finalize the action.
Important Notes: On business days, it’s possible to deposit up to $50,000. Robinhood doesn’t take checks, but those who have a Cash Management account can enable direct deposits.
Can I Buy Robinhood Stock?
At the time of writing, you can’t buy Robinhood stock because the company hasn’t been listed yet. The company didn’t disclose the IPO date, but it may happen soon.
In the first quarter of 2021, Robinhood found itself amidst a battle between institutional and online retail investors who were after AMC Entertainment and GameStop. Many investors bought the shares of these companies via Robinhood.
This is a promising sign, but you’ll still have to wait until the company gets listed.
Is Robinhood Safe for Investors?
Yes, Robinhood is safe. The company is under SEC (Securities and Exchange Commission) regulation. They’re also a member of the FINRA (Financial Industry Regulatory Authority).
Even better, your account gets protected beyond the standard SIPC (Securities Investor Protection Corporation) coverage. More accurately, there’s an “excess of SIPC” after standard SPIC gets exhausted, and it covers the following:
• $10 million in securities for each customer
• $1.5 million (cash deposits)
When Can I Buy Stocks on Robinhood?
Generally, markets are open for trading between 9:30-4:00 PM EST on business days. However, Robinhood offers extended-hours trading, so you can trade before and after the market. The hours are as follows:
• Pre-Market – 30 minutes ahead of the market (9:00 AM)
• After-Hours – 2 hours after the market closes (6:00 PM)
When trading during extended hours, the listed stock price is the real-time price. The orders you make at those hours get fulfilled at the market open or at the start of extended hours.
Important Notes: You can execute trades two minutes before the extended hours begin (8:58 AM). There are markets that support extended hours broader than used by Robinhood.
Is Robinhood a Good Broker to Use for Day Trading?
Yes, Robinhood is a good broker for day trading, but there are certain things you should know.
For one, a lot of people love Robinhood because it made day-trading accessible to everyone via their app. The entire experience has been gamified so it’s particularly attractive to millennials. However, you’d need a pretty big account to make any significant gains.
The average Robinhood account is between $1,000-$5,000 which might not be enough to see the returns you’re expecting. Also, you need to pay attention to PDT (Pattern Day Trader) rules and order types.
Can You Short-Sell on Robinhood?
Currently, you can’t officially short-sell on Robinhood. The app does offer you to purchase put options, which could be regarded as a multi-dimensional strategy to short stocks. As long as you know the variables that affect the price, put options could be as profitable as shorting.
Also, you can open Robinhood Gold, which is a margin account. Then, find the stock to short sell, and figure out your exit strategy. But be careful; this is a very risky strategy, and the losses get deducted from the value of your account, not just the borrowed funds. So, there’s a chance that the margin will amplify your losses.
Is It Free to Buy Stocks on Robinhood?
Yes, it’s free to buy stocks, trade them, and exchange funds on Robinhood. The same goes for trading and buying cryptocurrencies with the app. The company claims that the service will be commission-free forever.
But, SROs (self-regulatory organizations) like FINRA will charge you a fee when you sell. The fee is small and it applies to all sales no matter the brokerage. The app will pass the fees onto you, then relay the funds to the right SRO.
There are two more FINRA fees you should know about.
1. Regulatory Transaction Fee – this is a fee FINRA pays to SEC, and Robinhood may pass it onto you if the notional value of your sales exceeds $500.
2. Trading Activity Fee – FINRA charges this to brokerage companies and Robinhood will pass it onto you if your sales exceed 50 shares. But, the fee itself is very small.
Other than that, you may need to pay for ADRs (American Depositary Receipts). These are for foreign stocks you can trade on US exchanges. Commonly, the fee per share is between $0.01-$0.03.
Is It Legal to Buy Stock With Robinhood?
Yes, it’s legal to buy stocks with Robinhood. But in the light of a recent lawsuit against the company, you might believe otherwise.
A group of users sued the platform because it blocked trading certain stocks to reign in their volatility. This may appear like an unfair move, but the platform has legal rights to do so. The move was aimed to prevent maverick traders from driving up the prices which could disturb the market.
Is It Safe to Buy Stocks on Robinhood?
Yes, it’s perfectly safe to buy stocks on Robinhood. As mentioned earlier, SEC regulates the exchange and they’re a member of FINRA. Also, you’re getting an extra layer of security called an “excess of SPIC.” So, there’s no reason to worry about your money as long as you’re making sound trades.
Why Do You Offer Fractional Shares?
Robinhood wants to democratize trading and finance, and fractional shares allow everybody to get a piece of the action. Otherwise, people might not have enough means to start trading.
To explain, fractional shares allow you to invest a dollar, for example, in stocks that might cost hundreds of dollars. So, you have the flexibility to purchase only a fraction of the share and mitigate the risk since you’re not tying all your money into the entire share.
Also, fractional shares allow you to build a diversified portfolio without spending a lot of money.
How Do You Trade Fractional Shares?
The platform allows you to trade in dollars or in shares. Here’s how to do it.
Trade in Shares
1. Within the app, select “Sell in Shares” or “Buy in Shares,” then type the desired amount -the minimum is 0.000001 shares.
2. Navigate to the stock page, choose “Trade” and select the “Sell” or “Buy” option.
3. Click or tap the green word in the upper-right of the screen. I could say “Dollars.” Then, select “Buy in Shares.”
Trade in Dollars
1. Place an order to “Sell in Dollars” or “Buy in Dollars.” Type in the desired amount and Robinhood converts it into shares.
2. Navigate to the stock page, select Trade, then click ‘’Sell’’ or ‘’Buy.’’
3. Choose the green word which could say “Shares.” Again, it’s in the upper-right of the screen. Then, complete the action by tapping “Buy in Dollars.”
When all is said and done, trading with Robinhood is safe, easy, and flexible. It’s great that the app allows for fractional shares, giving everybody the option to get the taste of the stock market.
So, there’s no reason to hesitate investing money into your favorite company.
What is your experience with the app? Do you find Robinhood easy to use? Tell us more in the comments section below.