Robinhood Gold Review: $10 a Month For Extended Trading and Interest-Free Margin

rhgold0The Robinhood app (my full review) became well-known for their free stock trades and sleek app-only interface. People wondered, how will they make money? Well, they just announced one way – Robinhood Gold, a premium plan starting at $10 per month with the following highlights.

  • Extended hours trading. In addition to standard trading hours, you can start trading a half-hour earlier (pre-market) and two hours later (after-market).
  • Additional buying power. The equivalent of a margin account, or a line of credit for the stock market. You get up to 2x your buying power so you can invest more, and keep any profits. You pay no interest, just the flat monthly fee.
  • Bigger instant deposits. Instant Reinvesting lets you access proceeds from a stock sale immediately, instead of having to wait for it to settle. Instant Deposit eliminates the three-day wait period for funds to transfer from your bank into Robinhood.

Let’s look at these features more closely.

Extended hours trading.. Traditionally, the markets are open from 9:30 am EST to 4:00 am EST during normal business days. With extended hours trading, every market day you’ll be able to trade an extra two and a half hours:

Pre-Market opens 30 minutes earlier starting at 9:00 am EST
After-Hours continues for 120 minutes (2 hours) until 6:00 am EST

Do you really need these hours? If you don’t have a specific reason, then you may want to steer clear. Liquidity is limited, price volatility is high, and you’ll be trading against mostly professionals and/or computers. It’s also not that special… Most other brokerage firms also allow extended hours trading.

Additional buying power. Robinhood Gold upgrades you to a “full” margin account. For one, this means that you can get immediate access to funds after selling stock. That means you can reinvest those funds without waiting three days for settlement. This also means that they are required by law to have a minimum balance of $2,000.

Margin is essentially borrowing money from Robinhood and using your cash and stocks as collateral. The amount of extra “Gold Buying Power” you get is based on how much you pay, up to 2X your normal buying power. If you invest in high volatility stocks like penny stocks or leveraged ETFs, they may also limit your buying power to less than 2X.

  • $2,000 of extra buying power is $10 a month, with 0% interest
  • $4,000 of extra buying power is $20 a month, with 0% interest
  • $6,000 of extra buying power is $30 a month, with 0% interest
  • $10,000 of extra buying power is $50 a month, with 0% interest
  • Additional buying power over $50,000.00 has a yearly interest rate of 5.0%.

For example, if you have $2000 in your account, you can get at most $2000 in Gold Buying Power. But if you increase your account value to $3000 by depositing $1000, you can get at most $3000 in Gold Buying Power (if you are on the appropriate tier).

Now, if you really cared about margin, you’d probably use a broker with cheap margin rates like Interactive Brokers. IB’s current margin rates for a $2,000 balance is 1.9%, which would amount to $38 a year in interest if you carried a $2,000 balance for an entire year. (IB also requires you to spend at least $10 a month in commissions and fees if you hold less than $100,000 in assets.) On the other hand, TD Ameritrade will charge you 9.25% on a $2,000 balance, or $185 a year. Compare with Robinhood Gold at $10 a month would be $120 a year.

Bigger instant deposits. Another way that Robinhood lets you borrow some short-term money is with Instant Deposits. When you initiate an ACH deposit at most brokerages, you have to wait 3 business days for the money to actually show up. With Instant Deposits, you can use the money to buy stocks instantly. Your maximum instant deposit amount is the same as your extra buying power tier above ($2,000 for $10/month, $4,000 for $20/month) etc.

Instant deposits let you act on a stock idea quickly without having a bunch of idle cash sitting around all the time. You can keep it in an online savings account earning 1% instead of nothing at Robinhood.

What about Robinhood Instant? Robinhood Instant is a free middle tier that has been around for a while. This is a “limited” margin account that has the following features:

  • Immediate access to funds from selling stock. That means you can reinvest those funds without waiting two days for settlement. (All brokerage margin accounts offer this.)
  • Limited instant deposits. Use up to $1,000 of your pending bank deposits right away. No waiting 2-3 days for a bank transfer to complete.

Bottom line. Robinhood has been doing a nice job of meeting their basic promise of free stock trades. Robinhood Instant is a useful upgrade option that I recommend in most cases. At the same time, they don’t let you use leverage, which magnifies both gains and losses.

Robinhood Gold takes off the training wheels and gives you a full margin account, for a fee. You are moving from credit as a temporary convenience to enabling riskier trading with long-term leverage and extended trading hours. This may be appealing to a newer trader that eventually wants a bit more buying flexibility. For a serious trader that uses a lot of margin, it may be cheaper to go with another broker with low margin rates.

Sign up for Robinhood with my referral link and get a free share of stock, and I’ll get one too. Details on this promotion here.

Comments

  1. Thanks for your posts. Always been very useful.
    Side question : Is there any brokerage house out there that allows you to invest in IPOs in IPO price ? Some of the ones I know ( Fidelity : too may requirements for traders ..100000 $ deposit, Wellsfargo does not even allow it) are not very helpful.

    • IPOs are usually only given to preferred customers of brokerages that have access to certain IPOs. You’ll likely either need a big balance or some sort of connection, especially for a “hot” IPO.

  2. I’m hoping to test out Robinhood Gold before the year is over! I want to see what it’s like, but I don’t think I’ll use it forever. Investing money that isn’t actually mine could be asking for trouble.

  3. I don’t like the format of the Robinhood app but I like the free trades. Im a long time follower of this blog and I’m trying to get offered the Robinhood gold so if I can get a couple people that are interested to help me out by signing up through this link- http://share.robinhood.com/briann80 it would be greatly appreciated.
    Thanks, Brian

  4. Do I have to pay the $2000 addition buying power back? Can I take the money out? How do I pay it back?

    • Please do more research before trading, you’re going to blow up your account if your comprehension is that low.

      • Raja Ram Mummadavarapu says:

        This is what research is, I have the same question, 2X buying power means, I get 2k in my account for my use?
        What is Gold Buying Power, and what are the benefits?

        Gold Buying Power — it’s money that we lend to you to buy stocks in the stock market. You can invest more, and keep the profits. It also gives you flexibility with your cash: if you see an opportunity and want to invest more, you can right away without depositing from your bank. And if you need to withdraw some cash from your account for day-to-day spending, you can use Gold buying power to keep the stocks you’ve got and not have to sell.

        This FAQ should help.
        https://support.robinhood.com/hc/en-us/articles/214681823-Introducing-Robinhood-Gold

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