Want to buy a stock? Even so-called “discount brokerages” will often charge you $5 to $10 for every trade you make.
For investors putting in thousands of dollars, this flat charge is only a small percentage and not much of a concern. But for those who just want to buy one share of a company or put a few hundred dollars into an index fund, that fee can make up a large percentage of the investment, hurting initial returns.
Finally, a startup from California has found a way to give everyday investors free trades.
Robinhood was founded after Stanford roommates Vladimir Tenev and Baiju Bhatt moved to New York City and built trading platforms for large financial institutions. They realized that the fees charged for each trade were immensely disproportional to the actual cost of the trade. So they decided they would change the industry.
The goal of Robinhood is to “democratize access to the financial markets,” giving everyday Americans the ability to invest without wasting their money on unnecessary fees and complexity.
Free trades aren’t the only advantage of Robinhood offers over other discount brokerages. “Robinhood’s servers stream market data from exchanges in real-time,” says the website. “So while some brokerages delay quotes up to 20 minutes and charge for real-time data, you’ll get timely quotes for free with Robinhood.”
Because of outstanding success at the beginning, Robinhood has been able to raise over $60 million, including investments from Google Ventures and renowned venture capital firm Andreessen Horowitz. The company is focusing on developing a clean and intuitive user experience while staying true to the business model of free trades.
Robinhood has continued to enjoy growing success. In May, the company won the 2016 Google Play Award for Best Use of Material Design. And in June, Robinhood expanded to China.
There are new products on the way, too. Robinhood recently announced Robinhood Instant, which lets users withdraw money immediately after selling a stock, rather than waiting the usual required three days.
It sounds too good to be true — but then again, isn’t that the beauty of innovation? But Robinhood is able to make money by interest earned on the un-invested cash in customer’s accounts, as well as through its margin-trading offering that is still in the works.
For now, Robinhood is one of the best places to look if you’re interested in getting started in investing and don’t want to waste your money on fees.