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Jeff MacDonald
Digital Strategist / Creative Technologist

My First Two Months Trading Stocks with Robinhood

How I made a few bucks on Wall Street with minimal effort and very little understanding of how the stock market works.

UPDATE 11.1.17:Join Robinhood and we'll both get a free share of stock
Join Robinhood and we'll both get a share of stock like Apple, Ford, or Sprint for free. Make sure you use my link. https://share.robinhood.com/jacksor96
2.8 years & 360,000 views later. Back in 2015 I posted about my experience trading on Robinhood, I never knew this article would take off like this. Thank you so much. I’ve worked diligently to update this article as new features have come out. Thanks again for reading.

Robinhood, for iOS and Androidand Web!, allows you to make zero-commission trades on the stock exchange. That’s a big deal because with trades costing up to $10 a transaction, you can lose most of your gains just in the buying and selling of your shares. I recently got my invite to the service, and for the past 2 months have been trading some extra cash to see what it’s like. Overall, Robinhood is an addicting way to trade stocks, but might leave some traders wanting more.

Join Robinhood and we'll both get a free share of stock
Join Robinhood and we'll both get a share of stock like Apple, Ford, or Sprint for free. Make sure you use my link. https://share.robinhood.com/jacksor96
Here’s a video they produced to help explain the app.
The App has a super simple interface that is sure to win design awards.

How The App Works

To get a Robinhood account you’ll sign-up through the app After you’ve signed up, you’ll need to connect Robinhood to a bank account in which you’ll fund your brokerage account with. I initially put in $100 just to test it out. Once you make the first transfer it will take about three days for your money to appear in the app ready to trade. Trading in the app is as easy as liking someone’s post on Facebook. You can try doing some research inside that app about a particular stock, but I recommend using a mixture of tools to find out who to invest in.
Overall, the process is made as simple as it could be considering you now are a stock trader, with all the power to make and lose fortunes.

My Investment StrategyJoin Robinhood and we'll both get a free share of stock

Join Robinhood and we'll both get a share of stock like Apple, Ford, or Sprint for free. Make sure you use my link. https://share.robinhood.com/jacksor96
Once your account is funded, the homework starts. I spent the first three days, while I waited for my money to clear, researching what stocks I wanted to buy. The site I found most helpful was stockflare.com. At Stockflare you can easily see performance of stocks based on their 5-star system:
  • Is the stock cheaper than the competition?
  • What’s it’s growth outlook compared to the competition?
  • How is Wall Street’s target price compare to the current value?
  • Is it profitable from an earnings per share basis?
  • Does the stock pay dividends?
You can sort stocks by these different variables, as well as filter what sectors and trading styles. After some research my first buys were for Kroger ($KR) and Petroleo Brasileiro ($PBR). Kroger did very well and I still hold it; Petroleo, not so much. After my first go at it , I decided to diversify my research a bit. I started reading CNBC and keeping an eye on other market trends. I added Stocktwits.com to my research stack as well. Stocktwits allows you to see what other hobby traders are talking about with stocks. You can enter any company and see the sentiment of the group and see how it’s changed over time. The community is very active and you can get into some great conversations through the site. [UPDATE 11.23.15:
Robinhood has partnered with StockTwits to add the ability to trade right from within StockTwits. Read more about it here.]
So far, I’ve made $12 bucks from my investments, or a 4.9% return. [UPDATE 03.12.15: In my 3rd month of trading. I got it as high as 8.26%. My secret: Not trading. I’m just playing the long game.] Not good, but not bad for my first shot out of the gates. I’ve made some missteps along the way, looking at you Box.com ($BOX), that have eaten into my overall earnings. This is way more fun, though, than just sitting and staring at your money in a savings account.

The Downsides

You will not become Gordon Gekko using this app. At least not right away. I learned a few things about the stock market while using Robinhood; some not so pretty things. First off, the big guys are the big guys because they have the money to stay on top. When Shake Shack’s ($SHAK) IPO started a buzz during January, I became really excited about the possibility of getting in early on a stock I knew would succeed. I did my research and saw that trading on SHAK would start at around $25 a share. The morning of their IPO Shake Shack traded in Robinhood at nearly $50 a share. That’s because the big guys at the hedge funds bought up early shares that drove the price then dumped it onto the little guys at double what they got it for. That’s how it works, and unless you have millions of bucks, you won’t beat the system.
The other downside is you can’t trade a stock and immediately use your profits to buy up another. They sit unusable as “unsettled funds” for as many as three business days. Here’s how Robinhood addresses it:
Unsettled Funds: Cash from the sale of stock that the buyer has yet transferred to the seller. This transfer is part of the settlement process, and may take up to 3 business days.
Last I checked, they were actively working to make this time faster.
BIG UPDATE 2.23.16:
On the one year anniversary of this article, Robinhood announced Instant. Which removes the three day waiting period and allows you to reinvest immediately after selling your stock. You can also invest up to $1000 in stock immediately after depositing from you bank. Goodbye 5 day wait!
Before you begin trading with Robinhood, I recommend reading their FAQ to make sure you understand how it works.

UPDATE: Robinhood As A Social Network

11.1.17 — Today Robinhood announced a new desktop interface that brings its app more inline with other trading sites like E*TRADE. While a desktop experience will make it easier for people to trade while they research, it also brings a whole slew of new updates to the platform. These changes start to show Robinhood’s larger strategy to become the one-stop-shop for your trading needs.
Most of the new features launching in 2018 will focus on the more social aspects of the platform, such as “People Also Bought” and “Price Paid”, which will help highlight trades other users are making on the site. Features like “Analyst Rating” and “News and Fundamentals” start to move into CNBC, StockTwits, and Stockflare’s territories. I look forward to getting into the beta to see more details, but until then check out the screenshots below and the official announcement on Robinhood’s blog.
An Early Preview of The New Web Interface

How They Make Money

Photo from Robinhood’s Blog
It’s actually pretty brilliant, likeSuperman 3 penny scheme brilliant. They make interest off the uninvested money left in people’s Robinhood accounts. I assume every brokerage does this since it’s the basis for how banks make money, but I thought it was smart.
You can read more here about their plan to offer margin accounts and other plans to generate revenue.

Going Forward

The startup has receive massive amounts of attention from both the financial world and from the start-up community. Photos from Robinhood
Robinhood is not the first brokerage to do zero-commission trades. Others have tried and failed after not finding enough revenue, but Robinhood appears to be on track to succeed. They’ve made trading stocks as easy as using Instagram or Twitter. That’s not a good thing, according to the pros. In a September 2014 Marketplace.com published an article named, The Trouble with Robinhood’s No Commission Trading App, that described how mobile trading is leading to bad investment strategies. When buying or selling a stock is made so convenient, investors tend to make rushed, poor decisions rather than waiting to do their homework.
As for me, well, it’s something short of an addiction. It’s so easy to keep that app open and to check it throughout the work day. I find myself at lunch cheering on the little green highlights in the app as my stocks rise a few pennies. I’m not a serious trader, and I think I’ll probably wait to invest any serious cash into Robinhood, but it’s been a great learning experience. Never before have I been so educated on the economy and up-to-date on business news. That for me, has been the biggest win so far.
Robinhood may not be the best option in the long term to stock market investing, but it does bring the barrier of entry to an all time low. A new generation of investors who are use to simplicity and on-the-go tools, now, have a pretty slick app for investing. Robinhood’s biggest legacy might be how it influenced an industry that is big, bloated, and not easily changed to become fast and mobile.
Thank you so much for reading. Please follow me on Twitter and Medium to hear more about my perspectives on technology and advertising.Join Robinhood and we'll both get a free share of stock
Join Robinhood and we'll both get a share of stock like Apple, Ford, or Sprint for free. Make sure you use my link. https://share.robinhood.com/jacksor9