This post may contain affiliate links. Please see my disclosure to learn more.
Have you ever wondered how to make your money grow? Do you want money to work for you instead of the other way around? Have you heard about stock investing but have no clue where to start? Do you want to practice investing to reach a better understanding of the market? Look no further than Robinhood, a financial services company that has revolutionized the way millennials invest.
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Robinhood is a fairly new platform that has introduced young people to the stock market. It has allowed for next gen investing with ease. The world does not prepare young people to invest in stocks. For the regular new-kid-on-the-block, stock investing may seem complicated. Setting up brokerage accounts, keeping track of management and additional fees, and researching stock options can be quite over-whelming. I would know. When I first started out, I felt like I was drowning in information and uncertainty at the same time. Even learning the terms was difficult!
Robinhood, however, makes investing simple. Signing up for an account is very easy thanks to the form they use. Management of the account has also been a breeze. Unlike other brokerage accounts, Robinhood provides FREE trades on stock, options, ETF, and cryptocurrency. They were one of the pioneers in offering free trades, although many big-name companies have started doing the same in recent years. They also have no required minimum amount for their accounts, meaning the account can be at $0. This makes it an attainable platform for college students and new grads earning very little money or just starting out on their career journey. Plus, they welcome newcomers with a gift: a FREE stock (find out how here!)
When you open your Robinhood brokerage account, you are asked to link it to your bank account. After the connection is made, funding Robinhood is as quick as pressing a button. Unlike other brokerage accounts, Robinhood gives you the credit once you begin the transfer, instead of waiting a few days for the transfer to go through. The immediacy of your funds allows you to invest right away, without losing out on an opportunity or wasting precious time.
Investment on the go has never been easier with Robinhood’s mobile app. Both the website and the app are minimalist and easy to maneuver. There isn’t much to do or choose from, something that more experienced investors find lacking, However, this is a great introductory way for the younger generations to enter the stock scene. It comes as no surprise that the average age of Robinhood users is 31 years old (same age as me!).
Another strength of Robinhood’s is the purchase of fractional shares. Some companies only allow entire quantities of a stock to be purchased. What does this mean? This means that if Apple costs $140, you need to have at least $140 in your brokerage account. Not in Robinhood. If all you have to work with is $50, you can still buy a portion of Apple.
There are, however, a few cons. Mutual funds and bonds are not offered. Also, only taxable investment accounts are available and there is limited customer support. But still. If you are looking to dip your toes in elementary stock investing, this is a great way to limit your costs or start trading cryptocurrency.
One word of caution. If you are new to investing, it is easy to get sucked into the potential growth stocks have to offer. Robinhood makes trading so accessible to millennials that it could almost act like a casino for those with a higher-risk personality. If this is your first experience with stock investing, here is some good advice.
- Research the stocks that you are choosing to buy. Make sure you believe in what that company is doing. That makes it easier to…
- Hold onto stocks especially when the market dips. Do not panic and sell your stocks when they tank. If you do, you are taking a hypothetical situation (that being that you lost money) and making it a reality. The market will fluctuate often, but in general, the trend goes up. Have faith and hang on.
- Treat a brokerage account as your fun money account. I have a fun money envelope in my budget (read about the importance of having fun money in this post) and I will invest the money from this envelope in stocks. Your brokerage account is NOT where your emergency fund goes. The High Yield Savings Account is a better place for that. If you are saving for a home, car, or student loans, place it in a high yield savings account to avoid the risk of losing it all. This affiliate link of mine with Marcus will give you an extra 0.2% APY boost! I would also like to dissuade my readers to Robinhood as a means for their retirement savings. Open a 401K elsewhere or with your company and choose an end-date target fund instead. We shouldn’t be playing games with our retirement savings.
- Speaking of games, be prepared to lose it all. It is hard to separate emotion from stock trading at first, but perhaps entering with the mindset that you can lose all of your money tomorrow will help. You can think of stock investing as a game. If the market goes down, well you began playing knowing you could lose. Don’t let that dishearten you. Try to think of it as being fun. The stock market is too volatile for it to be your main mode of gaining wealth. I prefer to get rich by doing the small, responsible things such as maxing out a 401K, maxing out a ROTH IRA, contributing to an HSA, travel hacking with credit cards, living a frugal lifestyle through minimalism, paying down my debts, putting my savings in a high yield savings account and reading up as much as I can about finance. I consider the stock market a game, which is why I use fun money a.k.a. extra money that I don’t need for my necessary spending. Other people spend their fun money on things, dining out, travelling, and experiences. But if I spend my fun money on stocks because I don’t need to spend money on all that other stuff, then there is an opportunity for my money to grow. I can lose it all, but hey, everyone else loses all of their fun money by just buying THINGS and they never give money the opportunity to grow. With that being said, don’t place money that you need to access soon in these accounts. That could lead your investing story to a very sad ending.
Despite all of these warning signs, I still suggest young people at least dip their toes in the stock market, if only to experience it and to learn from it. For all new account owners who sign up using my affiliate link, you will receive one random FREE stock. Once signed up, you can spread the word amongst all your friends and family and receive free stocks yourself! Just make sure to refer them using your own specific referral link like I did in this post. Both you and your acquaintance get a new stock with each referral and account set-up (limited to $500 of FREE stock per person per year). This is a great way to start a conversation around investing and to create a community around growing wealth.