If you’re brand-new to investing, you may be wondering where you should open a brokerage account.
Should you go with Robinhood, the very popular app that offers free trades, or go with the well established TD Ameritrade?
I happen to have accounts with both. So I’m not biased either way. In tonight’s post, I’m going to share the pros and cons of each, and you can form your own opinion.
Let’s tackle Robinhood first.
Here are the pros:
1. Their commission-free trades allow for even the smallest of investors to participate in the stock market. Not everyone has $5,000 or $10,000 available to start investing. The ability to buy a share at a time and not pay commissions is huge.
2. Your funds are made available to invest the day you transfer them, as long as it’s during market trading hours which are between 9:30 a.m. and 4:00 p.m.
3. Ease of use. The Robinhood app is very user-friendly. Even a complete novice should have no problems navigating the app.
4. It’s ideal for day traders, because you never have to worry about trading commissions. To a day trader the price you pay is ultra-important.
Robinhood also has some cons:
1. There is no beneficiary contingency! If you were to pass away, your survivors would have to send a death certificate to Robinhood. Robinhood would sell the position and send you the cash, less fees. In my opinion, this is major, because it may not be in the best interest of your beneficiaries to sell the stock. Unfortunately, they will have no choice.
2. When it comes to my money, I would like to get a human on the phone if I need one. There aren’t many occasions when I need to speak with a person in a customer service department. In most cases, I actually prefer not to.
With Robinhood, however, I’m not even allowed the option. When responding to inquiries by email, there are sometimes circumstances where they are very slow, or have difficulty understanding my question when a simple voice conversation would clear up the confusion quickly.
3. How will Robinhood hold up during a market crash? There’s no precedent, so we don’t know.
4. Robinhood does not offer custodial accounts or IRAs.
5. You are limited to only one account per account holder.
6. Robinhood is limited regarding the type of stocks you can buy. You can only purchase stocks that trade on the New York Stock Exchange, the American Stock Exchange, and the NASDAQ.
Now we’ll move on to TD Ameritrade.
Pros
1. TD Ameritrade has been around for 20 years. They offer every amenity you can imagine.
2. Their customer service is outstanding. You can reach a live person 24 hours a day, seven days a week. In the event call volume is heavy, you can leave your phone number and someone will call you back.
3. TD Ameritrade trades every stock on every American exchange. This includes the New York Stock Exchange, the American Stock Exchange, the NASDAQ, Bulletin Board stocks, and Pink Sheet stocks.
4. There are unlimited investing and trading tools at your disposal – all the charts you will ever need, as well as classes for every investor at every level.
5. TD Ameritrade offers custodial accounts for minors, as well as IRAs. You may also own multiple accounts, which is huge for me.
6. TD has a simple beneficiary contingency. In the event something happens to you, the account will be assigned to your loved one once s/he sends the death certificate. No hassles!
7. Although Robinhood gets a good deal of praise for its app, TD Ameritrade’s app is no slouch! Out of the two, I actually prefer TD’s app myself.
8. TD Ameritrade actually has physical branches that you can visit.
Cons
1. Deposits are not available for trading on the day you make them. There is usually a 24-hour wait.
2. The app is not as user friendly for beginners as Robinhood’s is.
3. They charge $6.50 per trade.
So there you have it. As a user of both Robinhood and TD Ameritrade, here are the pros and cons based on my personal experience.
I hope this helps you in making your decision.
Whatever platform you use, what is most important is that you’re invested!
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