Robinhood Is Not A Scam, Here's How It's Free
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Robinhood, the completely free stock trading app (think E-Trade with no fees), launched publicly today after much fanfare. The company notably amassed more than 500,000 waitlisted people and raised $16 million from Google Ventures, Andreessen Horowitz, Index Ventures and many more.
Is It A Scam? If Not, How Is It Free?
Absolutely not, the company is a legitimate business backed by some of the best investors in the world. The reason that it can offer completely free trading is because it relies on automated technology instead of costly paper receipts, because it doesn't do costly advertising and because it doesn't have expensive brick and mortar locations.
How Does Robinhood Make Money?
Robinhood's answer is that it “charges interest for margin trading and collects interest on cash balances.” The company also notes that it is heavily financed and in no rush to make money, scaling is currently the most important thing.
Why Has It Taken So Long To Launch?
Because the Founders were worried that if there were any hiccups in the launch or security issues that no one would ever trust Robinhood with their money.
I personally think that if you aren't an expert on the markets that you're better off investing with Wealthfront, that's just my opinion though.
For more information check out Robinhood's FAQ Center.