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Robinhood Can Be the Difference Between Profit and Loss in Your Portfolio

By September 24, 2016February 25th, 20214 Comments

robinhood-logoThe Savings That Can Be Achieved With Robinhood’s $0 Commissions:

As a part-time stock trader, I prefer to use Robinhood as my brokerage of choice. And there’s one major reason for this – there are no commission fees. With your typical brokerage firm, you’ll end up paying at least $5-10 per trade (every time you buy or sell a stock), and if you have a rather small portfolio, that can eat into profits much quicker than you think. Before you know it, your gains are cut in half or more, and you’re left wondering how you can make this whole stock trading thing work.

Personal Example of How Commission Fees Could’ve Limited My Trading Profits:

Let me give you a quick example of the savings that can be achieved with Robinhood from personal experience. Over the last three months, from 6/23 to 9/23, my modest Robinhood account has grown $444.62 (20.26%) – keep in mind that’s without any commission charges. I made about 83 trades during that timespan. As mentioned earlier, a “trade” is completed and a commission is charged (with a classic stock brokerage) every time you buy or sell a stock.

Brokerage Commission Per Trade ($) Trades (Past 3 Months) Total Commissions ($)
Total Profit/Loss ($)
Robinhood 0 83  0 444.62
TradeKing 4.95 83 410.85 33.77
E*Trade 9.99 83 829.17 -384.55

If I used a discount brokerage like TradeKing, for example, I could’ve expected to pay $4.95 per trade or $410.85 in total commission fees ($4.95 per trade x 83 trades) – that would’ve wiped out over 90% of my trading profits during that stretch. And if I used E*Trade which charges $9.99 per trade – forget about it. My entire profit would be down the tubes, and in fact, it’d turn into a $384.55 loss. This is a big deal for all traders, especially beginners, and it’s important to be aware of the cost-friendly options available – Robinhood opens up the market to traders who never thought it was financially possible for them to participate.

The Wrap Up – Robinhood is Most Advantageous For Active Traders With Small Portfolios:

If you’re making a lot of trades with a small portfolio, that’s obviously a situation where commission fees can become a mountain to overcome. If you’re working with a rather large $100,000+ portfolio then a $5-10 commission charge per trade seems like a drop in the bucket, but with $5,000 or less it feels a lot different.

|See How Robinhood Aims to Make the Markets Accessible to Everyone|

Robinhood Logo

|Want to Learn How I’ve Grown My Portfolio Over 20% in Just Three Months?|

As you can see in my example above, a $400 profit (with no commissions) is a lot different than a $400 loss (with commissions) – an enormous $800 swing. That’s the disparity between using a commission-free service like Robinhood and other stock trading brokerages that charge you for each and every trade you make.

Stop Paying Up to (and Sometimes Over) $10 Per Trade and Take Advantage of Robinhood’s Commission-Free Structure.

Written by Matt Thomas (@MattThomasTP)

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  • Shawn says:

    This is very interesting. How can they make any money by not charging and commissions? I know commissions can eat away at profits but I did not realize how fast they can add up. I see the difference between Robinhood and E-Trade is huge, so how do they do it at Robinhood? It seems they would have to make money somehow?


    • Matt Thomas says:

      Hi Shawn – that’s a popular question. Robinhood is able to make money without charging commissions in a couple different ways. First, they earn interest on customers’ uninvested cash balances (it’s important to note that customers aren’t charged for this at all). Second, they earn revenue on what’s known as Robinhood Gold – a premium version of the Robinhood platform which unlocks extended hours trading capabilities, additional buying power, and larger instant deposits. And third, Robinhood doesn’t take on the same expenses as traditional brokerage firms thanks to their technological-focus and lack of storefront locations, expensive advertisements, manual account management, etc. You can view the commission rates, fees, and tiers of Robinhood Gold pricing here.

  • John says:

    Hi Matt, thank you for your article and I am glad that I came across your website. I am in Australia and visited the Robinhood site to find out if they are available in Australia. After searching I found that they are setting up later this year in Australia and have signed up on their waiting list. I look forward to being able to start trading with them. My broker currently charges a fair bit on my trades but now I will be able to have a better profit margin with your help. Thanks very much. John

    • Matt Thomas says:

      No problem, John. Happy to help. That’s exactly what Robinhood is for – reducing fees and increasing profit margins for traders and investors alike. Their ultimate goal is to make the markets accessible to absolutely everybody, and I’m sure Australia is just one of many countries that Robinhood will enter and make a huge impact in. Commission fees can be a thing of the past with a Robinhood account. Take care!

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