Robinhood's app design may incentivize risky investing. The financial expert pointed to the case of 20-year-old Alexander Kearns, who died by suicide after thinking he lost $730,000 on Robinhood. That, according to Boneparth, may be a disservice to its users.

The risks of using Robinhood to buy, sell, and trade stocksĪnyone can sign up and create a trading account with Robinhood within minutes, without any real training on the stock market or educational resources on how investing works. Once you verify your banking information, Robinhood states it will 'never access them again.' The app also offers two-factor authentication via SMS text message and third-party authentication apps for additional security protection.īut of course, you should always take your data security into your own hands by using a strong password that you change regularly. However, investments in cryptocurrency are not protected by either the SIPC or Robinhood.įinally, Robinhood ensures its users that their passwords and 'sensitive details' are encrypted. So if Robinhood went bankrupt, as an investor on that brokerage platform, your funds could be transferred to another brokerage firm or refunded to you. The SIPC can replace up to $500,000 for both securities and cash, including a $250,000 limit for cash only, in missing customer property. Note:Īdditionally, Robinhood is a member of the Securities Investor Protection Corporation, which offers financial protection if a brokerage firm were to fail. Otherwise, they face being hit with fines or civil lawsuits. And just like any other brokerage firm, Robinhood must abide by the fair practice regulations set by the SEC, including providing proof of fair dealings. The Securities and Exchange Commission requires these details to avoid fraud and especially risky investments. 'If you want to invest, even at the most reputable firms, you are going to have to give underlying personal information.' 'This isn't a Robinhood-specific requirement,' he said. According to Nickolas Sanchez, a certified financial planner at Financial Architects, this is an entirely normal process to trade stocks under SEC guidelines. When setting up an account with Robinhood, users give their personal information, like their age, net worth, income, and social security number. The short answer? 'Trade at your own risk,' Boneparth said. Robinhood's rise has been rocky, leading many to wonder whether it's safe to use.

The company is currently facing 50 active lawsuits and increased regulatory scrutiny, in part because it restricted trading during the GameStop stock saga in January. According to Douglas Boneparth, certified financial planner and president of investment advising company Bone Fide Wealth, Robinhood is 'geared toward the next generation of investors.'īut that forward focus has led to the company being investigated for 'gamifying' investing.

Robinhood app safe