Stash Invest vs Robinhood
Ever since Robinhood launched in 2015 with no-commission trades, the platform has transformed the fee structure of online trading. But is it better to pay for the educational resources and added perks offered by Stash? In this Robinhood vs Stash Invest comparison, we detail the pros and cons of each platform — breaking them down on every critical factor.
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This is a good time to be a first-time investor. Overcoming the psychological barriers to investing can be tough, especially when you are cash-strapped and knowledge deficient on the topic.
Fortunately, Stash Invest and Robinhood have emerged to eliminate the frustration that surrounds it, by making the process of participating in investing easier for new entrants.
These platforms are important and couldn’t have come at a better time. Recent studies highlights that only one-third of all millennials do any sort of investing.
Therefore, it is good news that micro-investing applications such as Stash and Robinhood have emerged to help budding investors dip their toes into the waters with minimal risk: they are allowed to start with as little as $5. For the avoidance of doubt, these new online investment services are not robo-advisors by any stretch of the imagination, so they don’t really help you manage your investments.
Nevertheless, they still provide beginners with many valuable services, including selecting investments that are aligned with their goals and corresponding risk tolerance level. They remove the complexity in building investment portfolios by constructing them from low-cost, diverse exchange-traded funds (ETFs).
The proliferation of micro-investing apps, and the creation of a new financial ecosystem has forced the investing public to confront some hard questions. In this Stash Invest vs Robinhood comparison, we go through it all — fees, benefits, educational resources, customer service, performance, and even more.
Brief Stash Review
- Account Minimum: None but requires $5 to start investing
- Fees: Between $1 to $9 monthly
- Ideal for: New investors looking to acquire some hands-on experience but still require some guidance.
- Automatic Rebalancing: Not applicable
- Tax-loss Harvesting: Not applicable
- Unique Feature: Offers socially responsible investing
What is Stash and How Does it Work
Stash doesn’t manage your accounts for you but it makes investment easy, fun, and convenient; especially for those new to the investing game. This personal finance and investing app touts as its goal, the mission “to create financial opportunity for all Americans, no matter their income.”
It does this mainly by providing a platform to prospective investors to enable them to select the best investment options for their needs by creating a portfolio of exchange-traded funds (ETFs).
These ETFs are a popular way to invest primarily because they are inexpensive, tradable funds. Generally, the annual fee for these ETF funds normally starts from 0.07% and ends around 0.95%, with an optimal average of 0.295%. Therefore, when you compare the fees Stash charges alongside those of many robo-advisors (often between 0.10% to 0.25%), it is obvious the Stash’s costs are at the higher end of the price spectrum.
The process of kicking off an investment portfolio with Stash is as simple as installing the app on your device, signing up for the service and answering the questions required to build your investor profile.
Unlike robo-advisors that consist mainly of ETFs, Stash strives to put more investing power in your hands. To provide more control to investors over what and how you invest, they consequently include individual stocks too.
Stash Invest provides customers with three subscription options: Stash Beginner, Stash Growth, and Stash+. The good thing about these plans is that they come with monthly flat-fees and don’t take into account asset-based pricing. In addition, all these three plans have similar features such as unlimited free trading and no add-on commissions.
The Benefits of Using Stash
The good thing about Stash is that it is as simple as it gets. Its initial plan, Stash Beginner, is perfect for beginner investors looking for low-cost investing options.
It only costs $1 a month and what you get with that insignificant amount is quite impressive. This monthly flat-fee doesn’t come with any asset-based pricing, so you can be sure of what your budgeting costs will look like pretty consistently.
It comes with a brokerage account that includes access to Stash’s online bank account and a debit card. This bank account charges no overdraft fees and promises a payday of up to two days earlier than usual. As if these weren’t enough incentives, it also comes with a rewards program.
In addition to the debit account and other goodies, it also comes with free financial education packages, personalized guidance, automatic saving and investing tools, and “stock-back” rewards.
If you’re feeling a bit extravagant and decide to up the ante to $3 per month, then you’ll be rewarded with Stash Growth for your efforts. In addition to the bank and brokerage account, Stash Growth will throw in a retirement account – either a Roth or traditional IRA, depending on your fancy. This tax benefit investing is the huge difference between Growth and the Stash Beginner.
For those who choose either retirement accounts, they will be given access to over 250 exchange-traded funds (ETFs) and stocks. Both these Roth IRA and traditional IRA retirement accounts have no minimums, but require a maximum contribution of $5,500 a year for clients under the age of 50. Those older need to contribute at least $6,500 each year.
For the customer who really feels like going overboard, then with the princely sum of $9, they will be upgraded to the Stash+ account, which is promoted as being capable of maximizing investors every dollar.
Stash+ will roll out the red carpet by providing all the benefits of the previous two account tiers, but it will also throw in two custodial accounts so customers can invest on behalf of minors (in case these customers are parents or legal guardians).
This account will be accompanied by a monthly market insight report, and metal card – instead of the usual plastic – which comes with 2x Stock-Back capability.
Some investors are able to put with Stash’s extra fees because of the ability to purchase fractional shares. Being able to purchase less than a full share of equity in a single trade, especially for blue-chip, albeit expensive stock that would have ordinarily have been out of reach for most investors is a huge attraction.
In line with its mission to help beginner investors make sense of the new terrain they are wandering into, Stash renames FTFs to better reflect the holdings that they represent. For instance, the Vanguard Small-Cap ETF is renamed Small but Mighty, while the SPDR S&P BioTech ETF is called Modern Meds. This makes otherwise complex and confusing names more meaningful and easy to comprehend.
Your investments in Stash are protected by holding them with Apex Clearing Corporation, which is a third-party SEC registered broker-dealer and also a member FINRA/SIPC. Apex, which is a part of the Securities Investor Protection Corporation (SIPC), ensures that each investor’s funds are insured for up to $500,000 total (including $250,000 for claims for cash).
It also maintains the Payment Card Industry Data Security Standard (PCI DSS) compliance that mandates all technical controls are evaluated to ensure data on the cards are protected from malicious actors.
- Robust research, educational content, and support.
- Low account minimums with value-based investing.
- Provides fractional shares.
- Lacks investment management tools or support.
- Burdened with high ETF expense ratios.
Brief Robinhood Review
- Account Minimum: None
- Fees: $0
- Ideal for: Customers who prefer to trade from a mobile device, including cryptocurrency
- Automatic Rebalancing: Not applicable
- Tax-loss Harvesting: Not applicable
Investor Warning: All securities trading, whether in stocks, exchange-traded funds (“ETFs”), options, or other investment vehicles, is speculative in nature and involves substantial risk of loss. Robinhood Financial encourages its Customers to invest carefully and to use the information available at the websites of the SEC at http://www.sec.gov and FINRA at http://FINRA.org.
Free is enticing and always has a good ring to it. The Robin Hood most of us are acquainted with is from childhood tales about a folk hero and his band of outlaws who robbed the rich to give to the poor.
While this Robinhood investment app under discussion has no intention of facilitating theft, Robinhood’s commission-free stock, Exchange-Traded Funds (ETFs), options, and even cryptocurrency trades mean that customers incur no fees while using the trading app.
Robinhood was created with a focus on Millenials, to enable them get started on the journey of investing without having to part with a bulk of their earnings through commissions. The app doesn’t demand a great deal of research to plunge in, making it ideal for those who just want to get started.
Imitation might be the best form of flattery, but when many of the big-time brokerage firms took a page out of Robinhood’s playbook and started eliminating trading commissions and fees, this somewhat dimmed Robinhood’s star-power.
However, Robinhood is finding other means to outduel the competition. It is one of the few that gives its customers the ability to trade cryptocurrencies such as Bitcoin, Ethereum, among others. Its mobile app is quite intuitive and user-friendly, frequently getting rave reviews for its usability.
Apart from cryptocurrencies, it recently introduced options into its lineup. However, one significant drawback is that Robinhood doesn’t include bonds or mutual funds in its offerings.
Robinhood provides three accounts that are designed to address different investing needs; namely Robinhood Instant, Robinhood Gold, and Robinhood Cash.
Robinhood Instant is free and is the account that users automatically get when they sign up. This account provides the following benefits:
- Instead of waiting the usual 5-6 days for ACH to clear, Robinhood Instant allows you to deposit up to $1,000 promptly.
- Robinhood Instant provides investors access to their funds immediately after selling.
- The luxury of extended trading hours.
Robinhood Cash is also a free account that doesn’t have either instant deposits or instant access to funds. Margin investing isn’t allowed, however, no restrictions are placed on day trading.
Robinhood Gold is Robinhood’s premier margin trading service. This service tier comes with the following fees and minimum requirements:
- Account Fee: $5 per month
- Minimum Investment: $2,000
- Annual Interest: 5%, based on how much margin you used
Since you’re first $1,000 of margin is included, if you borrow anything above that then you have to pay 5% interest on it.
This essentially means that it allows you to trade with borrowed money, which is also a good prospect in business and investing. You can even try it for free for 30 days before you decide to commit.
The premium features that are included in this account are:
1. Boost of Buying Power
It is capable of granting 2x buying power. So, for instance, if you have, say $5,000 in the account, then you can get the equivalent of $5,000 margin for a total $10,000 buying power. Users are empowered with the ability to set limits on margins so they can only borrow what they are comfortable with.
2. Instant Deposits that are Bigger
This is actually based upon your account balance and goes as follows:
- Limit of $5,000 for all Gold users
- Limit of $10,000 for balances over $10k
- Limit of $25,000 for balances over $25k
- Limit of $50,000 for balances over $50k
3. Morningstar Research
This affords account holders the ability to obtain investment and analysis from Morningstar on up to 1,700 stocks.
4. Level II Market Data
This provides visibility to real-time bids on stock exchanges like Nasdaq.
While its highly stripped-down but usable mobile app might be a draw for some who don’t want bells-and-whistles distracting them, it is glaringly lacking in research tools. Moreover, its barebones trading experience doesn’t make it very suitable for investors seeking a more robust platform.
One of the advantages of this minimalist design is that gives it a fast load time that enables it to function smoothly without delay. It eliminates the fluff and present stock’s vital statistics straight to the user.
Commission and Fees
There is no cost to using Robinhood. If this is so, then how do they make money?
Primarily through Robinhood Gold, which is an optional margin account for advanced users and charges $5 per month. With Robinhood Gold, investors are able to gain access to Level II streaming quotes, Morningstar reports, and margin trading (which charges a 5% annual interest).
Robinhood also generates revenue through interest earned on customers’ cash balances, including rebates from market markers plus trading avenues.
The pitfalls of Robinhood mainly revolves around the scope of its offerings. Users are limited because the only account available for customers to open is an individual taxable account. As a result, there are no retirement accounts or college savings options that are available on similar services.
Safety and Security
You can rest assured that your investments are safe with Robinhood because it is covered by the Securities Investor Protection Corporation (SIPC). The SIPC protects your investments by insuring the stocks and options in your account up to $500,000 (including $250,000 for claims for cash) in the event that Robinhood fails.
However, the SIPC doesn’t take responsibility for, nor does it protect against investment losses resulting from the market. Robinhood is also a part of the Financial Industry Regulatory Authority (FINRA), along with being SEC-registered broker-dealer.
- No minimums
- Commission free trades
- Bare bones but user-friendly app
- It is SIPC protected
- Offers free extended trading hours
- Provides real-time market updates
- no phone option for customer service
- $0 commissions are now standard, so it doesn’t hold the same appeal as it once did
- No IRAs
- Limited research available on platform
- No mutual funds or bonds are available
- Only individual taxable accounts are available
- No fractional shares offered
- Poor customer service
Stash Invest vs Robinhood Compared
So, which is better: Stash Invest or Robinhood? Both platforms share certain similarities, the most salient being that they attempt to provide a mobile-first approach to investing.
Stash provides some measure of hand holding for new investors with in-built educational content. But Robinhood is completely free to use, however, an investor needs to have enough cash in their account before they can buy a full share of a stock or ETF. But just because it’s free, is Robinhood better than Stash Invest?
Fees aren’t the sole factor to consider in trading stocks. If we look to security for example, Robinhood provides two-factor authentication while its counterpart doesn’t. But Stash is bolstered by implementing the Payment Card Industry Data Security Standard (PCI DSS) compliance.
Stash’s promise that you can start investing with just $5 is quite alluring. You can watch your portfolio grow over time just by putting only $5 or thereabout into a different type of ETF every week.
However, for the cash-strapped investor who wants to be frugal, the question to ponder is this:
Which One of These Apps Is Best If You Don’t Have Money?
Let’s take a look at Stash. On the surface, it appears to be quite cost-effective but delving deeper paints an entirely different picture.
For the money-conscious among us, you’re probably not going to be too enamored by paying “only” $1 per month for the privilege of using Stash Beginner. While it might seem low on the surface, it is actually more exorbitant than it looks – especially from the vantage point of a small-time investor just starting out.
Assuming you invest $5 a week for an entire year. Then your fees come up to $260 (based on 52 weeks comprising a year). Though this might not seem unduly onerous, but with a $12 annual fee, that means you’ll be paying 4.6% of your portfolio as a fee!
Even if your account grows generously by say 8%, which incidentally is the highest standard which the Stash’s “Potential” calculator allows you to go, your earnings still wouldn’t be able to cover half the fee.
When you compare this with the fact that with other competitors we’ve reviewed on this blog such as Betterment and Wealthfront also require no minimum deposit and only charge somewhere between 0.25% and 0.5% – which comes to about 65 cents on a deposit of $260.
Moreover, Stash snatches this fee directly from your bank account, instead of your portfolio which you have to be keenly aware of for budgeting purposes.
However, one advantage provided by Stash is that it ensures that every dollar in your account is invested, eliminating procrastination and the analysis paralysis that might afflict tepid, new investors.
However, because Robinhood is free to use you are likely to get a better return on your investment. Investing as little or as much as you want without having to worry about incurring a fee, though it comes with an optional paid service.
In addition, the Robinhood app can be found useful by any beginner with substantial capital to trade, especially on niche assets such as cryptocurrencies.
But unlike Stash, the risk associated with Robinhood is the possibility of your money just sitting there idling away while you try to save enough to purchase your initial ETF.
This type of delay and psychological drag is the last thing a fledgling investor needs. As a result, Stash is better at providing that important impetus a new investor needs to get started.
Stash is able to allow investors to begin with as little as $5 because unlike Robinhood, they employ what is known as fractional shares. Fractional shares allow for lower costs because they involve splitting a full share into smaller pieces after they are bought.
These partial-share increments allow investors with Stash to be able to invest in more and different funds, (for example, owning shares that they would otherwise be incapable of buying, such as those of Berkshire Hathaway that go for a king’s ransom of $300,000 per share) thereby increasing the quality, flexibility, and diversification of their stock portfolio.
In addition, Stash’s fractional shares help to ease new investors into the turbulent waters of investing by providing a smooth transition rather than having to buy high-priced shares.
Stash Invest and Robinhood Compared
|Annual Fee||STASH Beginner ($1/mo); STASH Growth ($3/mo); STASH+ ($9/mo)||Robinhood Cash (Free); Robinhood Gold ($5/mo)|
|Minimum Deposit||$0||Robinhood Cash ($0); Robinhood Gold ($2,000)|
|IRA||Both Roth IRA and traditional IRA accounts||None|
Summary: Stash Invest vs Robinhood
Do you need a little hand holding while you build an investment portfolio consisting of ETFs? Or can you go on your own, but are sensitive about fees and commissions?
Not to sound too simplistic, but these are the two overriding questions to answer when deciding to choose between Stash or Robinhood.
If you answered affirmatively to the first question, then Stash Invest is likely to be more appropriately suited for you at this stage of your investing life. While Stash is better for those who are brand new to investing, you should however beware that even the $1 costs adds up overtime and that these costs come out of your investing gains, eating into your margins.
Moreover, you can find investment management options that are cheaper, and provide advisors that are more comprehensive (whether human or robo).
On the flip side, Robinhood is a solid choice for those who are perhaps a bit longer in the investing tooth, who are able to comprehend its streamlined platform that emphasizes real-time data but not much else. There is no curation in Robinhood, unlike Stash, and so you have direct access to buy and sell listed stocks and ETFs directly like a pro.
Therefore, if you are at the point where you can invest without much in terms of in-depth research or guidance, then Robinhood is for you.
Irrespective of which of these apps you decide to use, they are likely the future of trading, so there are compelling reasons to get acquainted with them.