Is the Robinhood app recommended for beginners looking to start investing?

since we’re in similar positions in terms of age and occupation, I’d like to share my approach to investing, which you might find helpful.

At 22, you have the advantage of time when it comes to investing, especially for long-term goals. I recommend putting your money into a broad market index fund. Compound interest works wonders over time, and in the long run, you’ll likely outperform most actively managed mutual funds. Vanguard is a reputable company with low expense ratios for their mutual funds that track broad markets. They also offer funds tailored to your retirement date, which can be a convenient option to consider. Personally, I have both a retirement account and a personal investment account. I intend to keep my retirement funds untouched until retirement and be mindful about withdrawing from my investment account, only doing so when absolutely necessary and ideally reinvesting any profits into new opportunities.

Now, onto the exciting part! Firstly, I want to emphasize that I don’t expect to profit from trading, and I’m mentally prepared to incur losses. Even professional traders struggle to consistently beat the market, so it’s essential to approach trading with caution. Luck plays a significant role, despite thorough research.

With that said, I recommend starting with Robinhood if you’re interested in dipping your toes into trading. I started with an initial fund of just $500 and allow myself to purchase shares of companies I believe are undervalued. I plan to add $50 per month. It’s fascinating how market fluctuations can affect your emotions, even when dealing with relatively small amounts of money. I’m using Robinhood as a learning tool to understand the emotional roller coaster of trading, with minimal risk. The commission-free trading feature is advantageous, especially since I’m buying shares in small increments. However, it’s important to note that Robinhood doesn’t offer the full trading experience, particularly in terms of selling and trading quickly due to longer hold times. Despite this limitation, I find it worthwhile for gaining trading experience with minimal risk.

As an update, I’ve experienced a 15% loss on my Robinhood picks over the past few months, while my index fund investments have yielded a 7% return. This has been a valuable (albeit emotionally profound) lesson in stock picking. Although I trusted the US economy to rebound, I realized I lacked insight into the specific companies I invested in. Overall, the 15% loss serves as a relatively inexpensive learning experience in stock selection.

Robinhood is a robust product enabled by technology, allowing it to operate at a lower cost compared to traditional brokerages. However, I hold the belief that day trading is generally not advisable for most individuals. While banning it could impede free markets, it’s crucial to recognize that day trading carries significant risks and may not be suitable for everyone. Despite this, I believe Robinhood deserves its position as a leader in the industry, particularly as the landscape of brokerage services evolves.