A Robinhood account is a brokerage account that lets you buy and sell stocks, options, cryptocurrencies, and other investments through a mobile app or website

Robinhood is a financial company that holds your money and executes trades on your behalf. When you open an account, you deposit cash, and that cash sits in your Robinhood account until you use it to buy an investment or withdraw it. The account itself is not an investment—it is the container that holds your cash and your positions (the stocks, options, or crypto you own). Robinhood makes money by charging transaction fees on certain trades, offering a paid subscription tier called Robinhood Gold, and lending out the cash you hold in your account to other traders.

The account comes in two main types: a standard individual account and an IRA (Individual Retirement Account). A standard account has no contribution limits and no tax advantages, but you pay taxes on any gains when you sell. An IRA has annual contribution limits (currently $7,000 for most people under 50) but lets your investments grow tax-deferred or tax-free, depending on whether you choose a Traditional or Roth IRA. Most people start with a standard account.

Key Takeaways

  • A Robinhood account is a brokerage account where you deposit cash and use it to buy stocks, options, cryptocurrencies, and other investments.
  • Your cash and investments sit in the account until you sell or withdraw, and Robinhood holds the account but does not manage your money for you.
  • You can open a standard taxable account with no limits, or an IRA account with annual contribution limits and tax advantages.
  • Robinhood charges no commission on stock and options trades, but does charge fees for certain services like margin borrowing and subscription features.
  • Your account is insured up to $500,000 through SIPC (Securities Investor Protection Corporation), which covers losses if Robinhood fails, but not losses from bad trades.

How money moves in and out of your Robinhood account

To start trading, you link a bank account to Robinhood and transfer money in. This transfer usually takes three to five business days. Once the cash is in your Robinhood account, you can buy investments immediately. When you sell an investment, the proceeds go back into your Robinhood cash balance. You can then withdraw that cash back to your bank account, which again takes three to five business days.

If you want to trade before your deposit clears, Robinhood offers instant deposits for certain account types—the cash becomes available right away, but if you withdraw it before the bank transfer settles, Robinhood can reverse the trade. This is a convenience feature, not assistance programs. You can also use margin, which means borrowing money from Robinhood to buy more investments than your cash allows. Margin comes with interest charges and the risk that Robinhood will force you to sell positions if your account value drops too far.

What you can buy and sell through Robinhood

Robinhood lets you trade stocks (shares of public companies), options (contracts that bet on whether a stock price will go up or down), cryptocurrencies (Bitcoin, Ethereum, and others), and fractional shares (pieces of expensive stocks). You can also buy exchange-traded funds (ETFs), which are baskets of many stocks bundled together. You cannot trade bonds, mutual funds, or forex (foreign currency) through Robinhood.

Each trade executes at market price, meaning you get the price that the market is offering at the moment your order goes through. If you place an order after market hours (before 9:30 a.m. or after 4 p.m. Eastern Time on weekdays), it will execute the next time the market opens. Robinhood does not charge a commission per trade, but the bid-ask spread (the difference between what buyers will pay and what sellers want) is how the market maker makes money on your trade.

Fees and costs you should know about

Robinhood charges no commission on stock and options trades, which is why it became popular. However, other costs do exist. If you use margin (borrowed money), you pay interest on the borrowed amount—rates vary but are typically between 5% and 13% annually, depending on how much you borrow. If you subscribe to Robinhood Gold, a paid tier, you pay a monthly fee (currently $12.99) and get access to margin, extended-hours trading, and research tools.

Robinhood also charges fees for certain services: wire transfers out of your account, wire transfers in (though ACH transfers are free), and options assignment fees in some cases. The company also makes money through payment for order flow, which means it sells information about your trades to other financial firms. This is legal and common in the industry, but it means Robinhood has a financial incentive to execute your trades in a certain way.

How your account is protected if something goes wrong

Your Robinhood account is covered by SIPC (Securities Investor Protection Corporation) up to $500,000 per account. This means if Robinhood goes out of business or loses your money due to theft or fraud, SIPC will reimburse you up to that limit. The coverage splits between cash ($250,000) and securities ($250,000), so if you have $300,000 in stocks and $300,000 in cash, you would be fully covered on the stocks but only partially covered on the cash.

SIPC does not cover losses from bad trades or market downturns. If you buy a stock at $100 and it drops to $10, SIPC will not reimburse you—that is a market loss, not a protection issue. SIPC also does not cover cryptocurrency, because crypto is not a security. Robinhood holds cryptocurrency in a separate custodian account, and that custodian carries its own insurance, but the coverage is different and often lower.

Tax reporting and what happens at the end of the year

At the end of each calendar year, Robinhood sends you a tax document called a Form 1099-B, which lists every trade you made and the gain or loss on each one. You use this form to report your investment income to the IRS when you file your taxes. If you made any trades at a loss, you can use those losses to offset gains, and if your losses exceed your gains, you can deduct up to $3,000 of losses against other income in that year.

If you hold an IRA through Robinhood, you do not pay taxes on gains inside the account (in a Traditional IRA) or on withdrawals in retirement (in a Roth IRA). However, you still get a tax form each year showing your activity, and you must follow IRA rules about contribution limits and withdrawal timing. If you withdraw money from a Traditional IRA before age 59½, you typically owe income tax plus a 10% penalty, unless you meet a specific exception.

How Robinhood makes money and what that means for you

Robinhood's business model depends on three revenue streams: subscription fees (Robinhood Gold), interest on margin loans, and payment for order flow. Payment for order flow is the biggest one—when you place a trade, Robinhood sends that order to a market maker (a firm that buys and sells stocks all day), and the market maker pays Robinhood for the information. This creates a conflict of interest: Robinhood is incentivized to route your order to the highest-paying market maker, not necessarily the one that gives you the best price.

In practice, this conflict is usually small because market makers compete on price, and regulators require brokers to execute trades at the best available price. However, it is worth understanding that Robinhood is not a neutral service—it is a business with financial incentives that may not always align with yours. If you want to avoid payment for order flow entirely, you can use a broker that does not use it, though most large brokers do.

Frequently Asked Questions

Can I lose more money than I deposit in my Robinhood account?

Yes, if you use margin (borrowed money). If you borrow $10,000 and the stocks you buy drop 50%, you owe Robinhood the $10,000 plus interest, even though your account is worth less. Robinhood will force you to sell positions to cover the debt. With a standard account using only your own cash, the worst that can happen is you lose all the money you deposited.

Is my money safe if Robinhood gets hacked?

SIPC covers you up to $500,000 if Robinhood fails or loses your money due to theft. However, if a hacker breaks into your personal Robinhood account and sells your stocks, that is your account security problem, not Robinhood's failure. You should use a strong password and enable two-factor authentication to protect your login.

Can I transfer my stocks out of Robinhood to another broker?

Yes. You can request an ACAT transfer (Automated Customer Account Transfer), which moves your positions to another broker. The receiving broker handles the transfer, and it usually takes three to seven business days. Robinhood may charge a transfer fee (currently $75), though some brokers will reimburse it.

What happens to my account if I do not log in for a long time?

Your account stays open and your investments remain yours. Robinhood does not close inactive accounts or charge inactivity fees. However, if you hold a margin account and do not log in, you may miss margin calls or fee notifications, so it is worth checking periodically if you have an active position.

Can I use Robinhood if I am not a U.S. citizen?

You must be a U.S. resident with a valid Social Security Number or ITIN (Individual Taxpayer Identification Number) to open a Robinhood account. Non-residents and non-citizens cannot open accounts, though the rules vary by state and immigration status. Contact Robinhood directly if you are unsure whether you meet the requirements.