How to Start Investing Through Robinhood: A Step-by-Step Guide
How to open an account and fund it
To invest through Robinhood, you first create an account on their website or mobile app, provide your Social Security number and basic identity information, and link a bank account. Robinhood will verify your identity — this usually takes a few minutes, though sometimes it takes longer if additional documentation is needed. Once verified, you can transfer money from your linked bank account into your Robinhood account.
The minimum to start investing is $1. You can transfer money in multiple ways: direct bank transfer (which takes 1 to 3 business days), instant deposit using a debit card (which shows up immediately but has limits on how much you can transfer at once), or ACH transfer from your bank. Check your bank's settings to make sure it allows transfers to investment platforms, since some banks block them by default.
After your money lands in your account, you are ready to place your first trade. You do not need to wait for a settlement period or meet any other requirement before buying stocks or other investments.
Key Takeaways
- You need a Social Security number, proof of identity, and a linked bank account to open a Robinhood account, and the whole process usually takes 10 to 15 minutes.
- Robinhood charges no commission on stock trades, options trades, or cryptocurrency trades, which is different from traditional brokers that charge per trade.
- You can buy individual stocks, exchange-traded funds (ETFs), options, and cryptocurrency through the same account.
- Robinhood uses a cash account by default, meaning you can only spend money you have already deposited — you cannot borrow to invest.
- Your investments are held in your name and insured by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account type.
Understanding what you can buy
Stocks are shares of individual companies. You can buy as little as one share of any stock, even expensive ones, because Robinhood allows fractional shares. If a stock costs $500 per share but you only have $100, you can buy 0.2 shares. This makes it easier to build a diversified portfolio without needing thousands of dollars upfront.
Exchange-traded funds (ETFs) are baskets of many stocks or bonds bundled into a single investment. An ETF might hold 500 different company stocks, so buying one ETF share gives you exposure to all 500. ETFs are popular for beginners because they spread your money across many companies at once, reducing the risk that one bad investment will hurt you badly.
Options are contracts that give you the right to buy or sell a stock at a set price on or before a certain date. Options are more complex than stocks and can result in larger losses. Robinhood requires you to request options trading separately and answer questions about your experience before they turn it on.
Cryptocurrency like Bitcoin and Ethereum can be bought and sold on Robinhood the same way as stocks. Cryptocurrency is highly volatile — prices swing wildly — and Robinhood does not insure cryptocurrency holdings the way it insures stocks.
How to place your first trade
Open the Robinhood app or website and search for the stock or ETF you want to buy by its ticker symbol (a short code like AAPL for Apple or SPY for an S&P 500 ETF). Tap or click on it to open the details page, which shows the current price, a chart of how the price has moved, and news about the company.
Tap the "Buy" button. You will see a screen asking how many shares you want to buy. Enter the number (or the dollar amount, and Robinhood will calculate the shares for you). Review the total cost, which includes the price per share times the number of shares. Robinhood shows you the price at the moment you place the order, but the actual price you pay may be slightly different if the market is moving fast — this difference is called slippage.
Tap "Review Order" and then "Submit Order" to complete the trade. Your order goes to the market immediately during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order after hours or on a weekend, it will execute when the market opens the next trading day. You will see the trade appear in your account within seconds, and your cash balance will drop by the amount you spent.
What fees and costs actually apply
Robinhood charges no commission on stock trades, ETF trades, options trades, or cryptocurrency trades. This is a major difference from older brokers like Fidelity or Charles Schwab, which historically charged $5 to $10 per trade (though many have also moved to zero commissions in recent years).
However, Robinhood makes money in other ways. When you buy or sell, Robinhood receives a small payment from the market maker who fills your order — this is called payment for order flow. You do not pay this directly, but it means Robinhood has an incentive to route your order in a way that benefits them, not necessarily in a way that gets you the best price.
If you use Robinhood's instant deposit feature to transfer money from your debit card, there is no fee, but the amount you can transfer at once is limited (usually $1,000 to $5,000 depending on your account age and history). If you hold stocks overnight and sell them the next day, there is no fee. If you borrow money to invest (through a margin account, which requires a separate request), Robinhood charges interest on the borrowed amount.
Cash accounts versus margin accounts
By default, Robinhood gives you a cash account. In a cash account, you can only spend money you have already deposited. If you buy $500 worth of stock, your cash balance drops by $500. You cannot borrow from Robinhood to invest more than you have.
A margin account lets you borrow money from Robinhood to invest. If you have $1,000 in your account, a margin account might let you invest $2,000 by borrowing the other $1,000. This amplifies your gains if the investment goes up, but it also amplifies your losses if it goes down. Robinhood charges interest on borrowed money, and if your investments drop far enough, Robinhood can force you to sell positions to cover the loan. Margin accounts require a minimum of $2,000 and are only available to users who request them.
For most beginners, a cash account is simpler and safer. You cannot lose more than you put in, and you do not pay interest on borrowed money.
Tax reporting and record-keeping
Robinhood tracks all your trades and sends you tax documents at the end of the year. If you sold any investments at a profit, you owe capital gains tax on that profit. If you held the investment for less than one year, it is taxed as a short-term capital gain (at your regular income tax rate). If you held it for more than one year, it is taxed as a long-term capital gain (usually at a lower rate).
Robinhood sends you a Form 1099-B in January or February showing all your sales and the gains or losses. If you received dividends (payments from companies to shareholders), Robinhood sends a Form 1099-DIV. You report these on your tax return, and the IRS cross-checks them against what Robinhood reported.
Keep records of when you bought and sold each investment, how much you paid, and how much you sold it for. Robinhood stores this information in your account history, so you can pull it anytime. If you transfer investments to another broker, Robinhood will provide a cost basis report showing what you paid for each position — this is important for calculating gains or losses on the new broker's platform.
Common mistakes to avoid
Do not treat investing like trading. Buying and selling the same stock multiple times a week is expensive in taxes and often results in losses because you are trying to time the market. Most people who invest for the long term — holding stocks for years — end up ahead of people who trade frequently.
Do not put money into Robinhood that you might need in the next few years. Stock prices go up and down. If you need the money in six months and the market has dropped, you will be forced to sell at a loss. Money you might need soon belongs in a savings account, not in stocks.
Do not buy stocks based on tips from social media or friends. Do your own research or invest in broad ETFs that hold hundreds of companies. Picking individual stocks requires understanding the company's business, finances, and competition — something most people do not have time for.
Do not use margin or options until you fully understand how they work. Both can result in losses larger than the money you invested. Start with stocks and ETFs in a cash account.
Frequently Asked Questions
Can I invest with less than $1?
No, the minimum to place a trade is $1. However, because Robinhood allows fractional shares, you can buy a portion of an expensive stock with $1. For example, you could buy $1 worth of a $500 stock, which would be 0.002 shares.
What happens if Robinhood goes out of business?
Your stocks and cash are held in your name and protected by the Securities Investor Protection Corporation (SIPC), which insures up to $500,000 per account type. This means even if Robinhood fails, your investments are yours and will be transferred to another broker. Cryptocurrency is not covered by SIPC.
Can I withdraw my money anytime?
Yes, you can sell any investment and transfer the cash back to your bank account anytime during market hours. The sale executes immediately, and the cash appears in your Robinhood account right away. Transferring cash back to your bank takes 1 to 3 business days depending on your bank.
Do I have to pay taxes on investments I have not sold yet?
No, you only owe tax when you sell an investment at a profit. If you buy a stock for $100 and it grows to $150 but you do not sell it, you owe no tax. You will owe tax only if and when you sell it for $150. Dividends are taxed in the year you receive them, even if you do not sell the stock.
Is Robinhood safe to use?
Robinhood is a regulated broker registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Your stocks are insured by SIPC. However, Robinhood has faced criticism for outages during high-volume trading days and for its payment-for-order-flow model, which some argue does not always get you the best price. Research the broker's practices before deciding if it is right for you.