Why is Robinhood a second rate stock broker?

Question

I have heard that Robinhood is not the best fee free stock broker.

The issues I am aware of are that you can't buy fractional shares of stocks, and you can't day trade efficiently.

What other issues does Robinhood have?

Answer 1

Robinhood had a perceived an edge when they were one of the few brokers that didn’t charge commissions. I say perceived edge because they have many deficiencies. Until recently they didn't pay interest on cash balances, they charge more for margin borrowing than other brokers, and they route orders for Payment For Order Flow which can lead to poorer fills. So effectively, they have one hand in your pocket while dangling a no commission carrot in front of you.

The drawbacks of Robinhood versus a discount broker? Here are many of many things that they lack:

• timely data
• good customer and tech support
• investment education
• interest on cash balances
• a platform that doesn't lock up
• research
• good charting
• prompt trade execution reports
• low margin rates
• portfolio margin
• good option analytics
• maker/taker rebates

Given that most of these services are available at major brokers who are now commission free, it makes no sense to trade at Robinhood. if you're a serious investor who needs better services and more than a stripped down platform, you should be trading elsewhere.

A few months ago, a Robinhood trader discovered a GLITCH in their margin monitoring. He used $3,000 to buy more than $1.7 million in shares of Advanced Micro Devices while selling about $1.6 million in calls. IMO, Robinhood is a Mickey Mouse operation.