If you have even a fraction of interest in the financial markets or investing, there is no doubt that you have stumbled across Robinhood. Despite its popularity as a leader in commission-free trading, the platform gets decried by some opponents as a video game-like experience that is not suited for “serious investors”.
However, this statement is full of fallacy.
While its ease-of-use may get some reckless traders in trouble, Robinhood is actually well-suited to a wide spectrum of investors, including those long-term investors who want to steadily build wealth over time.
With this in mind, the following breakdown looks at five reasons why Robinhood is a good platform for long-term investing.
1. A Wide Variety of Investment Options
Diversity is critical for long-term investing. Throughout your journey, from the first day you invest until the day you retire, some assets and asset classes will appreciate, while others will unfortunatley do the opposite.
By properly diversifying your investment portfolio, you can mitigate your risk and ensure that when one sector is doing poorly, you have enough sectors performing well to keep your account trending in a positive direction.
Robinhood offers a full spectrum of investment instruments to allow users to create a highly diversified portfolio. Among the offerings in which you can trade on Robinhood include:
- Stocks of all sizes, ranging from small caps to ultra-large caps
- Exchange-traded funds (ETFs)
- Bond ETFs
- Real estate investment trusts (REITs)
- Select cryptocurrencies
- Precious metal indexes
By using Robinhood to create a healthy mix of high-risk, low-risk, and dividend-yielding instruments, users can create a highly diversified account that shares in the highlights while mitigating the lowlights of various asset classes, increasing the likelihood of steady, snowball-like growth over time.
2. Outstanding Passive Investment Features
Many investors with a long-term approach are not necessarily interested in the day-to-day, week-to-week, or even month-to-month movements of the markets. They’re more interested in making steady contributions to their account and letting it grow over time.
As a result of this, these types of long-term investors are not as interested in following every little piece of market news, logging into their accounts every day, and actively making trades. And this is exactly where Robinhood’s passive investment features are ideal for long-term investors.
The platform has the option for automated bank drafts, allowing you to fund your account with a portion of your paycheck each month.
From there, you can set up recurring investments into various instruments of your choosing. For example, you may want to schedule a daily $3 investment into Amazon, or maybe you want a little more diversity and decide to contribute $25 a week into the Vanguard Total Stock Market Index Fund.
Using this recurring investment feature, users can steadily build their position in their favourite assets, while taking advantage of dollar-cost averaging along the way.
Place Limit Orders
In addition to recurring investments, Robinhood makes it easy for users to place limit orders. Perhaps you are bullish on a certain stock’s long-term potential but do not want to buy at the current price.
Robinhood allows you to place a limit order, where you specify how many shares you want to buy when the stock reaches a certain low point. This allows investors to consistently get the best price over time without constantly micromanaging their accounts.
3. Robust Data and Charts
As mentioned, long-term investors are not necessarily interested in what assets are doing daily, nor should they be.
They are more interested in the financial strength of the stock and how the asset is positioned to perform over the long haul.
Robinhood helps in this regard by furnishing account holders with robust financial data. A few of the basic insights include:
- Market cap
- Price-to-earnings (P/E) ratio
- 52-week high
- 52-week low
- Dividend yield
They also provide analyst ratings for many of the most popular instruments on the platform, along with charts that show how the asset has performed over given timeframes.
For even greater financial analysis, the platform offers an upgrade to Robinhood Gold. While some argue this is a tool aimed at day traders, it can be very valuable to long-term investors who want to do extra research to ensure that their investment funds have the best chance for consistent growth.
4. Enticing Cash Management Options
In addition to automated bank drafts, Robinhood also has some pretty cool cash management features that may appeal to long-term investors.
By simply leaving uninvested funds in Robinhood, users will get a .3% yield on their cash. While this is not a lot compared to the return on invested money, it actually stacks up decently well against a lot of other savings accounts.
On top of earning interest on uninvested cash, users can also apply for a Robinhood debit card to spend their cash without transferring it back to their bank.
This is actually pretty a neat feature because it can make cash readily available after an asset sale, so if you have reached your investment goal and are ready to start using your funds, you don’t have to wait for a transfer to your primary bank to clear.
5. The Platform Constantly Evolves
Finally, Robinhood is a platform that continually evolves to meet the needs of its 22.5 million users. For people thinking long-term, this is a critical component in ensuring that the platform will remain relevant years into the future.
Some of the innovative features that the platform has rolled out over the years include:
- Two-factor authentication to help protect the security of accounts
- Dividend reinvestment to help users experience the joys of compound interest
- Cash management features to give users more control over their funds
- IPO access to allow investors to get in at the IPO price for some of the most exciting new companies
- Crypto wallets (still pending) to give users proprietary ownership of their crypto keys
Each of these innovations resulted from listening to user feedback and making changes that favor the investor. With such a constantly evolving and improving platform, long-term investors can feel confident that Robinhood has true staying power as a leading investment platform.
An easy-to-use platform, Robinhood is an equally strong choice for the long-term investor as it is the day trader.
For those investors with a conservative, long-term approach to investing, Robinhood’s wide variety of assets, outstanding passive investment features, robust data and charts, enticing cash management features, and constantly evolving mindset are five reasons why Robinhood should be a top choice.
Thanks for reading Geekers! As always, I hope you found this content valuable.