How to Start Investing Through Robinhood

Getting Your Account Open and Funded

To invest through Robinhood, you first download the app or visit the website, then create an account with your email, phone number, and Social Security number. Robinhood will ask you to verify your identity — this typically takes a few minutes through their automated system, though some accounts require manual review and may take longer.

Once your account is open, you link a bank account to fund it. You can transfer money from your checking or savings account; Robinhood does not charge a fee for deposits. The first transfer usually takes three to five business days, though subsequent transfers may arrive faster depending on your bank.

You do not need a minimum balance to open an account, but you do need money in your account before you can buy stocks, exchange-traded funds (ETFs), or options. Start with whatever amount you can afford to invest — even $1 will let you buy fractional shares of expensive stocks.

Key Takeaways

• You can open a Robinhood account in minutes with your email and Social Security number, and start investing once your bank transfer arrives.
• Robinhood charges no commission on stock and ETF trades, but does charge for options trades and margin borrowing.
• Fractional shares let you buy a portion of an expensive stock with whatever money you have available.
• Your cash and investments sit in a standard brokerage account unless you open an IRA, which has tax advantages for retirement savings.
• Robinhood is not a bank and does not insure your cash the way a bank does, though your securities are protected by SIPC coverage.

Choosing What to Buy: Stocks, ETFs, and Options

Robinhood lets you buy individual stocks, ETFs, and options contracts. Most new investors start with stocks or ETFs because they are simpler to understand. A stock represents ownership in a single company; an ETF is a basket of many stocks bundled together, which spreads your risk across multiple companies.

You search for a stock or ETF by its ticker symbol — for example, AAPL for Apple or SPY for an S&P 500 tracking fund. Robinhood shows you the current price, a chart of how the price has moved, and basic company information. You decide how many shares (or fractional shares) you want to buy, then confirm the purchase.

Options are contracts that give you the right to buy or sell a stock at a set price by a certain date. They are more complex and carry higher risk than owning the stock itself. Robinhood requires you to request options trading separately and answer questions about your experience before they turn it on.

Understanding Robinhood's Costs and Fees

Robinhood charges zero commission on stock and ETF trades — you pay no fee when you buy or sell. This is a major difference from traditional brokers, which historically charged $5 to $10 per trade. However, Robinhood makes money in other ways that do affect your returns.

When you buy or sell, Robinhood executes your order and keeps a small portion of the difference between the bid price (what buyers offer) and the ask price (what sellers want). This is called the spread, and it is how most commission-free brokers make money. The spread varies depending on the stock — popular stocks have tighter spreads, while less-traded stocks have wider ones.

If you use Robinhood Gold (their paid membership), you pay $5 per month for margin borrowing — the ability to invest money you do not yet have. Options trades carry a $0.65 per-contract fee. If you hold stocks that pay dividends, Robinhood deposits those payments into your account automatically.

Account Types: Standard Brokerage Versus Retirement Accounts

When you open Robinhood, you start with a standard brokerage account. Money you invest here is not protected from taxes — when you sell a stock for a profit, you owe capital gains tax on that profit. If you hold the stock for less than one year, the tax rate is higher (short-term capital gains). If you hold it for more than one year, the rate is lower (long-term capital gains).

Robinhood also offers individual retirement accounts (IRAs), which let you invest money in a tax-advantaged way. With a Traditional IRA, you may deduct contributions from your taxes now, and you pay taxes when you withdraw money in retirement. With a Roth IRA, you pay taxes now, but withdrawals in retirement are tax-free. Both types have annual contribution limits set by the IRS — for 2024, the limit is $7,000 per year for most people under 50.

Choose a standard account if you are investing money you may need before retirement. Choose an IRA if you are saving specifically for retirement and want to reduce your tax burden. You can have both at the same time.

How to Place Your First Trade

Once your account is funded, navigate to the stock or ETF you want to buy. Tap or click the ticker symbol to open its detail page. You will see the current price, a buy button, and a sell button. Tap buy, then enter the number of shares or the dollar amount you want to invest.

Robinhood shows you the estimated total cost, including any fractional shares. Review the order, then confirm. The trade executes immediately during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order outside market hours, it will execute when the market opens the next trading day.

After the trade completes, your shares appear in your portfolio. You can see your total investment, the current value, and your gain or loss. You can hold the shares as long as you want, or sell them at any time by tapping the sell button.

Setting Up Automatic Investing and Recurring Deposits

Robinhood lets you set up recurring transfers from your bank account on a schedule you choose — weekly, biweekly, or monthly. This automates the process of adding money to invest and helps you build the habit of regular investing without having to remember to transfer funds manually.

You can also set up automatic investments, where Robinhood buys a specific stock or ETF with each deposit. For example, you could set up a $100 monthly transfer and tell Robinhood to automatically buy $100 of an S&P 500 ETF each month. This is called dollar-cost averaging, and it removes the pressure of trying to time the market perfectly.

Both features are optional. You can also transfer money whenever you want and decide what to buy each time.

What Happens to Your Money and Investments

Your cash sits in Robinhood's brokerage account until you invest it or withdraw it. Robinhood is not a bank, so your cash is not insured by the Federal Deposit Insurance Corporation (FDIC) the way money in a bank savings account is. However, your securities — the stocks and ETFs you own — are protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account if Robinhood fails.

You can withdraw your cash or the proceeds from selling stocks back to your bank account at any time. Withdrawals typically take three to five business days. If you sell a stock and immediately withdraw the money, you may trigger a settlement rule that temporarily restricts your account, so check Robinhood's current rules before doing this repeatedly.

Frequently Asked Questions

Do I need a minimum amount of money to start investing on Robinhood?

No. Robinhood has no minimum deposit or account balance. You can open an account and start investing with $1 or any amount you have available. Fractional shares let you buy a portion of expensive stocks, so you are not locked out of any investment.

Can I lose more money than I invested?

With stocks and ETFs, no — your loss is limited to what you invested. If you buy $100 of a stock and it goes to zero, you lose $100. With options and margin trading, you can lose more than your initial investment, which is why these are riskier strategies for experienced investors.

What is the difference between a market order and a limit order?

A market order buys or sells immediately at the current price. A limit order lets you set a price and only buys or sells if the stock reaches that price. Limit orders give you more control but may not execute if the price never reaches your target.

Can I invest in Robinhood if I am under 18?

No, you must be at least 18 to open a Robinhood account. If you are younger, a parent or guardian can open a custodial account that you can use under their supervision, though Robinhood does not currently offer this feature — you would need to use a different broker.

What happens to my stocks if Robinhood goes out of business?

Your stocks are yours, not Robinhood's property. If Robinhood fails, SIPC rules require that your securities be transferred to another broker so you can access them. Your investments are protected even if the company closes.