Robinhood has turned the investing world the other way up as a mobile-only brokerage providing no commissions, buying and selling charges, or account minimums. Since December 2014, thousands and thousands of buyers have determined to speculate with Robinhood.
In lots of Robinhood evaluations, we’ve seen how handy it’s to entry the monetary markets by way of the app. The best option to describe Robinhood is because the Uber of the investing world.
It additionally runs a premium buying and selling platform known as Robinhood Gold, which comes with a $5 month-to-month price. Robinhood Gold allows you to commerce on margin, enlarge deposits, and entry Degree II market information.
All this leads us to the query, “Is Robinhood legit?”
Is Robinhood Regulated with the SEC?
The Securities and Alternate Fee (SEC) regulates all brokerage corporations that deal in securities. The entire level of the SEC is to make sure brokerages play pretty and assure a minimal degree of transparency.
The SEC’s main compliance mechanism is to prosecute civil instances in opposition to those that commit insider buying and selling, launch false market information, and commit monetary fraud.
Though most Robinhood evaluations discuss SEC safety, it is a matter of regulating corporations. There aren’t any protections for the person investor.
The SEC is not going to insure you in opposition to losses, no matter your brokerage’s actions.
Each time evaluating a brokerage agency, that you must transcend SEC safety to make sure you and your cash are protected.
Does Robinhood Maintain Membership with FINRA?
The Monetary Business Regulatory Authority (FINRA) is a self-regulating group overseen by the SEC. In contrast to the SEC, FINRA isn’t a authorities physique.
Most brokerages voluntarily signal as much as FINRA, however they’re not obligated. Robinhood is a member of FINRA, due to this fact, abides by all its guidelines and rules.
FINRA’s objective is to offer testing and licensing to brokerages and particular person brokers. Via this clear disclosure group, buyers have restricted protections in opposition to rogue brokers.
When asking, “Is Robinhood protected?” FINRA safety is one thing it’s best to prioritize.
Is My Cash Insured with Robinhood?
Many evaluations on Robinhood made it clear that your cash is protected by way of the Securities Investor Safety Company (SIPC). The SIPC is a nonprofit that protects the funds held by buyers if a brokerage recordsdata for chapter or experiences different monetary difficulties.
The SIPC has existed since 1970 and was created by an act of Congress. Nevertheless, the SIPC gives no regulation. It exists solely to revive investor funds if a brokerage goes below.
As of this writing, if Robinhood goes bankrupt or misappropriates your funds, you’ll get again $500,000 in securities and as much as $250,000 in money. Something greater than these quantities is uninsured.
Most buyers will discover that Robinhood’s insurance coverage is greater than sufficient to cowl their portfolios.
Robinhood Extra of SIPC
Earlier than you begin considering that Robinhood isn’t appropriate for bigger buyers or these in search of a spot to retailer their retirement funds, there’s additionally “extra of SIPC” to think about.
Robinhood has gone additional than most brokerages by growing a relationship with Lloyd’s of London.
In follow, which means that after your SIPC protections have been exhausted, you’ll stand up to $1.5 million in money lined and $10 million in securities. Except you’re one of many wealthiest 1% of People, every part you’ve got in your Robinhood portfolio is totally lined.
So, is Robinhood legit? Completely.
Is Robinhood the Most secure Place to Make investments Your Cash?
Perceive that Robinhood is a rudimentary funding app. It doesn’t have the identical controls as different low-cost investing apps, reminiscent of M1 Finance, SoFi Make investments, or Betterment. Even conventional brokerages have much more modern apps that will help you handle your portfolio and make knowledgeable investing choices.
Managing a diversified portfolio with Robinhood will be troublesome. Monitoring greater than three or 4 positions will be close to inconceivable. Plus, it’s exhausting to keep up diversification for the reason that platform doesn’t provide bonds and mutual funds.
Lastly, you can not combine Robinhood with widespread monetary administration platforms, reminiscent of Quicken and Mint. Monitoring and managing your holdings as a part of a broader monetary technique is way from easy while you use Robinhood.
However what does this should do with judging the security of Robinhood?
Easy. Managing, researching, and investing turns into extra advanced, main novice buyers to make the incorrect choices.
Robinhood Outages and Interruptions
One of many greatest causes folks ask, “Is Robinhood legit?” comes right down to an imposed interruption on GameStop inventory.
Again in January 2021, the GameStop Quick Squeeze was in full swing, and the share value soared. Robinhood reacted by inserting strict limits on buying and selling, which stopped the rise in its tracks. It led to outrage and a number of lawsuits being leveled in opposition to the corporate.
Though a number of lawsuits have been dismissed in Federal courtroom, lots of the extra critical instances are nonetheless ongoing.
It’s not the primary time Robinhood has discovered itself in scorching water. On account of execution violations between 2016 and 2017, FINRA fined Robinhood $1.25 million, a comparatively mild penalty traditionally.
These points don’t make Robinhood unsafe, however they’re a warning to day merchants trying to make the most of extremely unstable markets. Many buyers who have been burned throughout the GameStop saga have come out and mentioned they’d by no means belief this brokerage once more.
Is Robinhood Secure for Traders?
Robinhood has gone by way of some questionable sagas lately. For the reason that platform launched so just lately, it has by no means tackled a extreme market downturn on the extent of 2008. Whereas this would possibly make some buyers nervous, it shouldn’t trouble the bulk.
The very fact is that Robinhood investing goes above and past what’s essential by not solely having SIPC safety to your cash however extra SIPC safety.
No matter any actions Robinhood might or might not take sooner or later, your cash is protected. Within the worst-case state of affairs, you might have to attend slightly time for the authorized mechanisms to work and start refunding investor cash. However you’ll get your cash.
We consider that Robinhood affords a good investing platform. Nonetheless, we advocate evaluating it with platforms like M1 Finance vs. Robinhood and Betterment vs. Robinhood that will help you make the suitable determination.