Are Your Investments Safe with Robinhood?

Financial literacy is an essential aspect of survival in every era. Today, the development of many finance systems, including decentralised finances, has led to myriads of investment opportunities for individuals. 

Despite a large number of available investment options, many people desire to leverage their wealth by investing in it. However, they fail to proceed with the investment in response to many reasons, including the risk offered by investment platforms and massive crypto scams. 

Therefore, Robinhood emerged with a promise to curb such risks and enable newbies to invest in a safe and reliable platform. Nevertheless, the question persists in huge investors’ minds. This article will guide you on whether investing via Robinhood or other investing platforms is safe. Additionally, you will understand the safety measures alongside risks linked to Robinhood.

Also read: Is Cryptocurrency a Good Investment? Should I Invest in It?

Robinhood — A Platform for Would-Be Investors

Robinhood is an innovative financial services company that aims to revolutionise the financial industry by making it accessible to everyone. Co-founded in 2014 by two Stanford University batchmates, Robinhood has been a real game-changer for investors and traders. 

In simple terms, Robinhood is a one-stop shop solution for investors. You can trade fiat currency, stocks, and cryptocurrency using its mobile and online platforms. If you want to know about the best crypto projects to invest in, read here. Since many investment assets are available to purchase, including Exchange-Traded Funds (ETF), individual stocks, bonds, and more, Robinhood is the best choice for you to buy them. 

In addition, the perks of Robinhood are offering trade and investment opportunities for professionals and beginners without any commissions. Thus, it seems to be a free financial platform with accessibility across various devices. Furthermore, its monthly subscription plan will invest your idle assets in the platform by paying you interest on your funds. 

Are Your Investments Safe with Robinhood?

Robinhood ensures its users invest without fear as it has an in-built safety and security system for its investors’ funds. At this point, Robinhood seems to be a secure platform for investment without any hesitation for users. 

However, it does not guarantee robust security for users as users experienced many events mirroring the challenges of using Robinhood. Moreover, these protections are not foolproof safety for users to invest fearlessly. 

Here are some of the protection aspects to consider about Robinhood. 

#1. Regulatory Security of Robinhood

Like other financial services, Robinhood also comes under the supervision of regulatory authorities of the USA. A few of the regulatory bodies that govern Robinhood are the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Corporation (SIPC), and more. 

Each regulatory authority ensures safety regarding using such platforms on user ends. They provide a specific set of rules to platform owners that they can’t violate. Any violation from the user end or Robinhood team may lead to a fine they must pay. 

Another regulatory body, FINRA, looks after the transactions of brokers and trading platforms for secure money affairs. On top of that, Robinhood is an affiliated member of SIPC that takes care of investors’ accounts in terms of platform failure. Be mindful that SIPC protection is not subjected to crypto assets. 

#2. In-Built Protection of Robinhood

As Robinhood’s platform is on both smartphone devices and web browsers, Robinhood offers various degrees of security on its platforms. Its in-app protection enables users to avoid cyber threats and hacker activities, thanks to its bcrypt hashing algorithm. With the help of this technology, Robinhood offers password protection, keeping your account safer from any external threats. 

Further on, Robinhood has data encryption and robust security protocols. This way, investors have the protection of their personal information and a safe communication network between users. Additionally, Robinhood keeps its hands out of your bank account information. In case Robinhood needs your banking data, they will ask for your permission to access it. 

Thus, Robinhood is a safe financial service platform for investors to start earning profits on their funds. Though the platform is secure, you must take essential safety measures to avoid any security breaches and financial loss. 

Risks Associated with Robinhood for Investors

2021 was a bad year for Robinhood and its users in terms of the challenges faced by both. At one end, Robinhood placed some restrictions, making its users enraged. On the other hand, it got under attack from users despite its strong security systems. 

A few risks that investors may face when they invest using Robinhood are:

#1. Restricted Operability

Robinhood has integrated systems and technologies to allow users to trade and invest in any kind of financial asset – fiat, commodity, or cryptocurrency. However, in 2021, users faced a sudden restriction from Robinhood on the trade of various assets, such as meme stocks, GameStop, AMC, etc. 

Moreover, Robinhood has also come under the spotlight of FINRA for weak supervision of the technologies integrated with Robinhood. It is a risk for investors as it can take them to lose their money at different levels. However, Robinhood has clarified these cases recently through its press releases. 

#2. Fraudulent Activities

Robinhood has a robust and top-notch security system, both in-built and regulatory. Still, investors faced devastating hacking and fraudulent activities on the platform, causing substantial financial losses. One such activity was getting into the Robinhood customer support system from a hacker, leading to unauthorised access to the data of millions of its users. 

Frequently Asked Questions

Is Robinhood a Free Platform?

Robinhood is an entirely free financial service platform for investment and trading. You will pay zero money when you open your account with it. Plus, account maintenance comes at zero cost. However, it may take some fees due to its affiliation with some self-regulatory bodies that charge it for its services. 

What Will Happen to My Funds if Robinhood Goes Down?

The answer to this question depends on the amount of your investment. If your investment is under five hundred thousand USDs, you are safe, thanks to its affiliation with SIPC. Thus, if Robinhood goes down, you will get your funds back under this threshold value. 

Is Robinhood the Right Choice for Me?

Robinhood offers many benefits to investors when it comes to fees and overall services. The first appealing thing about Robinhood is its negligible or zero commission on transactions of any financial assets. Moreover, you don’t need any minimum amount to get started with an investment, making it the best platform for newbies.