Why to Buy Robinhood Stock (HOOD)

Feb 01, 2023 By Susan Kelly

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Information on investment presented here is for reference purposes only. NerdWallet does not provide investment advice or brokerage services to its users. With a name like Robinhood, the company didn't try to hide its mission to level the playing field in the stock market and make it available to regular people and the wealthy.

Some of the top brokerages in the country followed Robinhood's lead and started offering commission-free stock and ETF trading toward the end of 2019. Since Robinhood entered the market, online brokerages have been forced to compete on pricing while keeping (and sometimes even improving) the quality of their services and user experience.

Even with all the new competition, Robinhood still managed to amass 12.5 million customers by the end of 2022 [1]. Additionally, the broker will offer 1% matching contributions to IRAs beginning in December 2022.

Evaluate Robinhood's Potential

Robinhood has dealt with public outcry and class action lawsuits, spent millions to settle an SEC charge, repaid millions to investors, and responded to a complaint from the state of Massachusetts.

Accessibility to the stock market has been the source of some debate, with proponents of both sides pointing to issues such as gamification, deceptive advertising, and inadequate customer service as evidence. Financial experts are split on whether or not easier access to the stock market is a net positive.

But if you share our belief in Robinhood's purpose and want to invest in the firm, there are a few things to consider first. It would be best if you evaluated Robinhood as an investment opportunity in light of the information provided by its financial statements, earnings and revenue reports, predicted performance, and other data. This information should be accessible if you have a brokerage account, either through your broker's research tools or through an independent research site like Morningstar.

The ability of a firm to sustain its profits over time is the single most important factor in determining the direction of its stock price. How to buy stock on Robinhood Among its methods are charging for its Robinhood Gold subscription, which grants users access to margin trading and more stock analysis, and charging interest on idle funds.

The Majority of Its Income

However, most of its income derives from a business model known as "payment for order flow," in which huge financial institutions (the ones who pair buyers and sellers to complete a trade) pay Robinhood to direct trades their way. Therefore, the greater the number of stock trades conducted on Robinhood, the greater the company's revenue.

The initial public offering (IPO) price of Robinhood shares was $38 on July 29, 2021. Since then, it has dropped drastically. Even if there is no assurance that your portfolio will achieve the same or similar outcomes in the future, how to buy stock options on robinhood, you should think about whether or not you can handle the ups and downs that may occur if you invest in volatile assets.

Although all investments carry some degree of uncertainty, putting money into particular equities can multiply those dangers. If you want to invest in Robinhood but are worried about losing money, you can do so through a low-cost index fund, mutual fund, or exchange-traded fund. You could own shares of Robinhood and other companies across industries through these funds, as they hold a diversified portfolio of stocks.

What makes a good investment portfolio?

Financial experts recommend allocating no more than 5–10% of your portfolio to Robinhood or any other individual stock. Also, only put away money that you won't need for at least five years into investments. The appropriate sum for you will depend on your unique financial circumstances, so it's important to consider those.

Sign up for a stock trading account and put in your stock order.

Robinhood stock purchases require a brokerage account, which can be opened in a short amount of time. When it comes to purchasing Robinhood stock, you have the option of using Robinhood or one of its rival brokers. When searching for an online broker, prioritise those that offer superior customer service, a diverse range of investment options, minimal or no fees, and no commissions on stock trades.

Create an account, deposit money, and put in your order online. If you've decided to invest after weighing the company's ability to create money, expand its business, and remain competitive, then purchasing Robinhood stock should be simple. Learn the basics of stock investing by reading our beginner's guide.

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