More importantly, Robinhood experienced outages on 3 days in one week in early March 2020, which they stated was due to “stress on our infrastructure which struggled with unprecedented load.” One of the outages lasted an entire trading day. Obviously this was extremely frustrating and concerning for users, especially since these were extremely high-volume, highly-volatile days in the stock market.
Since the fiasco, Robinhood users have filed a class-action lawsuit against the platform, alleging that “Robinhood had a duty to provide a system and platform ‘robust enough’ to handle that trading volume and have a backup system to handle outages.”
There are also many user complaints such as these of the site being “frozen,” orders not going through, inability to login, etc.
On the one hand, you could argue that these events may cause Robinhood to improve their infrastructure to make sure this type of thing never happens again in the future. On the other hand, it is disconcerting considering other brokers didn’t experience these outages and problems during that same time period. I’ve already seen many users running from Robinhood in droves and finding alternatives in platforms like Acorns, M1 Finance, etc. It will be interesting to see how the future plays out for the platform.
Acorns vs. Robinhood – Extra Features
- Acorns is unique in that it allows you to invest “spare change” automatically, letting you “round up” your purchases and invest the difference. This is great for people who have trouble saving. You can choose to apply a multiplier on these round-ups of up to 10x to consciously save and invest more. Acorns also lets you fund a retirement account like a Traditional or Roth IRA like you normally would.
- Both Acorn vs Robinhood offer an optional FDIC-insured checking account with debit card. Acorns offers a form of cash back as what they call Found Money, through which they’ve partnered with select stores where when you shop there, cash back goes into your Acorns account to be invested. Robinhood does not offer cash back but has a 0.30% APY.
- Acorns also features automatic rebalancing that keeps your portfolio’s target allocations on track. Robinhood does not offer automatic rebalancing.
- Both Acorns and Robinhood offer fractional shares, a feature that allows every penny to go to work for you faster. This means you can buy a fraction of a share of your investments. For example, if one single share costs $100 and you only have $10 to invest, you can buy 1/10 of a share with your $10 instead of having to wait to buy a whole share for $100. This is especially important for young investors with a small amount of capital.
- Being a full-fledged trading platform, Robinhood obviously offers an all-day trading window and order control. Acorns is a passive robo-advisor buy-and-hold investing platform, so there’s no trading or order control.
- Robinhood has a margin rate of 5.00%. Margin refers to a collateralized loan where your investments act as the collateral. In order to access margin with Robinhood, you must pay for the $5/mo. Gold account and have a minimum invested balance of $2,000. Acorns does not offer margin.
- Both platforms offer dividend reinvestment. A dividend is just a return of value to shareholders as a periodic cash payment by a company. Dividend reinvestment means that when your investments pay a dividend, that payment can be automatically reinvested instead of sitting idly as a cash balance.
Robinhood is definitely the better choice for active traders and/or those wanting to invest with margin. Keep in mind though that any gains with Robinhood are going to be taxed, since they don’t offer retirement accounts at this time. Perhaps most importantly, the customer service and overall stability of Robinhood as a broker seem questionable to say the least, given the widespread user complaints and pending lawsuit over its March 2020 outages. If you want an alternative on which to day-trade stocks but don’t need fractional shares, consider Webull