Ditching the traditional fee structure used by the vast majority of brokerages, Robinhood for the iPhone lets investors purchase and sell stocks without having to pay a fee on each trade. This has created a new way for smaller investors with limited funds purchase stock quantities as small as one share without spending at least $8 on a trading fee.
The creators of the application make money on the interest collected on funds deposited for trading as well as interest when a user buys in margin. However, users aren’t required to maintain a minimum balance and can easily deposit earnings in their bank account at any time.
Regarding security, users are required to scan their fingerprint with Touch ID to access the app. A simple password can be used on older iPhones. Within the application, users have the ability to view the price of a stock over a single day, one month, three months, six months or one year. Users will be able to view a list of stocks that they own as well as a color indicator on the status of their original purchase. Stocks that are doing poorly since a purchase will be shaded red and stocks that are climbing in price will appear in a shade of green.
Regarding a user’s bank account, Robinhood makes it easy by integrating the login process of nine of the largest banks within the application. This means you can automatically connect to your bank account without having to search around for a routing number and account number. Purchasing and selling stocks is equally as simple, basically just a couple taps as well as a confirmation screen. Notifications are also used when trading after hours, essentially notifying the investor the next day when the markets open.
While the company is still slowly passing out invitations to approximately half a million interested investors on the waiting list, this simple application has the potential to significantly disrupt popular companies like E-Trade, Fidelity and Schwab. These companies charge trading fees around $8 to $10 and require investors to keep a minimum of $500 to $1000 in their trading accounts.
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