Robinhood is a new brokerage firm that offers investors free stock trading. Yes, that's right. Free. It sounds too good to be true but that is exactly what Robinhood is offering. There isn't a minimum amount to open an account either. With Robinhood anybody can invest in the stockmarket without paying a dime in fees. The goal is to capitalize on the huge and untapped market of millenial investors.
Robinhoood allows investors to buy or sell at market price, or make limit orders for free on U.S. listed securities when bought via a mobile device. More sophisticated moves, such as shorts and options and are not yet available. This gives investors a great way to reduce investment costs as trade fees often cost $10 a transaction.
Robinhood does charge a $50 fee on listed foreign securities and $15 on foreign security adjustments. Even U.S. security trades have a $10 fee when they are done over the phone with the assitance of a broker. The free trade offer is only available for transactions done over a mobile device without the assistance of a broker.
The first question when you see a company provide an offer that is too good to be true is "how do they make money?" Robinhood makes money in the same ways other brokerages make money, with the exception of U.S. stock trades via a smartphone. For instance, Robinhood earns interest on the uninvested cash balances of customers and by collecting interest on clients who decide to use a margin account to invest. Margin accounts allows people to use borrowed money to invest in securities.
Robinhood does not charge commissions or fees and there is no minimum amount to open an account. This alone differentiates Robinhood from most brokerages that charge $10 or more on every trade.