We recently shared a post on The 10 Best Apps to Save You Money in 2018. Our best app for investing was Robinhood. It is a great app for investing, when used correctly. However, many users can confuse the ease of this app for an easy way to make money. As with most things: there is no easy way to make money outside of the lotto. Below, we will share 4 reasons to use caution with this popular investing app.
1. What is Robinhood?
Robinhood is a brokerage app that looks to bring stock investing to a wider audience looking to do everything on their phone. It carries a name that sounds like it takes from the rich and gives to the poor but does not do that. What it does is offers stock trades without fees aimed towards Millennial investors who want a piece of the market. The app allows them to do so via a smartphone-based trading platform.
2. Hidden Fees
Yes kids, nothing is free. Many of the services Robinhood provides are free of charge. However, there are some that aren’t. One way they provide trades without commission is to make money on the interest from the assets in your accounts. This isn’t unusual with most brokerage companies. Robinhood also has paid subscription services on margins, also known as borrowing money to trade stocks. This practice can go horribly wrong should the stocks you pick turn.
3. Don’t Succumb to the Pitch
Robinhood has a way of encouraging you to invest in the stocks they recommend. For example, your home screen will show stock info for well-known companies such as Apple, Netflix, and even Bitcoin. This sort of stock picking is best left to experienced investors who invest in what they want because they researched it rather than received a prompt on their phone. You’ll have to look for low cost, diversified funds yourself on the app. This isn’t too hard. What is hard is staying away from the bright, shiny objects Robinhood will throw at you.
4. It Encourages Frequent Trading
Even Fortune 500 owners don’t trade as frequently as you think they do. Just about every app wants you to interact with it on a daily basis. That can be great for social media as it costs you time not money. However, it is difficult to interact with Robinhood without investing, i.e. spending money. The app is designed to regularly give you updates on news, earnings, and price movements. These notifications can and should be customized in the app.
BONUS: Tips to Use Robinhood Effectively
- Find an ETF, mutual fund, whatever you have researched that is right for you. Use Robinhood to purchase it with no fees.
- Turn off notifications. You’re more likely to make an impulsive trade if you constantly see a barrage of notices on how your investments are doing.
- Do check back in every few weeks to months to get a bird’s eye view of how your investments are doing.
- Research other investing apps such as Vanguard, Fidelity, etc to see if they offer better options on the items you want to invest in.
- Read the detailed Robinhood review on Bankrate.
More Houston Bookkeeping
It is important to set investment goals, research a plan to meet them, and stick to it more than to follow a financial app. Give us a call if your business or family needs bookkeeping help.
