Robinhood vs Interactive Brokers: Which Broker Is Best?
Choosing the right brokerage account can feel overwhelming, especially with so many options available. Two popular choices, Robinhood and Interactive Brokers, each offer unique features and cater to different types of investors. This comparison dives deep into these platforms to help you decide which one aligns best with your financial goals.
Robinhood has become synonymous with commission-free trading and a user-friendly interface, attracting a large following of beginner investors. Interactive Brokers, on the other hand, is a powerhouse, known for its sophisticated platform, diverse investment options, and competitive pricing, making it a favorite amongst professionals and experienced traders.
Whether you’re just starting your investment journey or you’re a seasoned trader, understanding the strengths and weaknesses of both Robinhood and Interactive Brokers is crucial. We’ll explore commissions, investment choices, platform features, and more to provide a comprehensive comparison, empowering you to make an informed decision.
Specs at a Glance
| Feature | Robinhood | Interactive Brokers |
|---|---|---|
| Stocks | Yes | Yes |
| ETFs | Yes | Yes |
| Options | Yes | Yes |
| Futures | No | Yes |
| Forex | No | Yes |
| Fractional Shares | Yes | Yes |
| Margin Accounts | Yes | Yes |
| Research Tools | Limited | Extensive |
| Mobile App | Yes | Yes |
| Web Platform | Yes | Yes |
| Trading Platforms | 1 | Multiple |
| Customer Service | Limited | Available |
Feature-by-Feature Breakdown
Commission Fees
- Robinhood: Offers commission-free trading for stocks, ETFs, and options. This makes it highly attractive for beginners and frequent traders. However, it can generate revenue from payment for order flow, which might affect execution prices.
- Interactive Brokers: Provides tiered and fixed commission structures. Tiered commissions are volume-based and can be very competitive for active traders. Fixed commissions are per-share or per-trade.
- Winner: Tie
Account Minimums
- Robinhood: Has no minimum account balance required to start trading. This low barrier to entry is a significant advantage for new investors.
- Interactive Brokers: Requires a minimum account balance, though it varies. It’s generally higher than Robinhood, which can be a deterrent for smaller investors.
- Winner: robinhood
Trading Platform & Tools
- Robinhood: Features a simple and user-friendly mobile app, ideal for beginners. It lacks advanced charting and research tools, which can limit its appeal for experienced traders.
- Interactive Brokers: Offers a sophisticated and powerful trading platform (Trader Workstation) with advanced charting, research tools, and order types. However, the platform can be complex for beginners.
- Winner: interactive brokers
Investment Products
- Robinhood: Supports stocks, ETFs, options, and cryptocurrency trading. Limited access to mutual funds and fixed income.
- Interactive Brokers: Offers a wide range of investment products, including stocks, ETFs, options, futures, forex, bonds, and mutual funds. Provides global market access.
- Winner: interactive brokers
Margin Rates
- Robinhood: Offers margin trading, but margin rates can be relatively high compared to some competitors.
- Interactive Brokers: Generally has very competitive margin rates, especially for larger account balances, making it favorable for leveraged trading.
- Winner: interactive brokers
Research & Education
- Robinhood: Provides limited research and educational resources. Primarily focuses on ease of use rather than in-depth market analysis.
- Interactive Brokers: Offers a wide array of research tools, market data, and educational resources, catering to experienced traders.
- Winner: interactive brokers
Customer Service
- Robinhood: Customer service can be slow and primarily accessible through in-app chat or email. This can be frustrating for users needing immediate assistance.
- Interactive Brokers: Provides more comprehensive customer service options, including phone support, although wait times can vary.
- Winner: interactive brokers
International Trading
- Robinhood: Primarily focuses on US markets, with limited international trading capabilities.
- Interactive Brokers: Provides extensive access to global markets, allowing trading in numerous countries and currencies.
- Winner: interactive brokers
Winner by Category
| Category | Winner |
|---|---|
| Ease of Use | Robinhood |
| Tradable Assets | Interactive Brokers |
| Trading Tools | Interactive Brokers |
| Commissions | Interactive Brokers (for high-volume traders) / Robinhood (for casual traders) |
| Research | Interactive Brokers |
What They Have in Common
- Stocks and Etfs: Both platforms offer trading in stocks and Exchange Traded Funds (ETFs), allowing users to diversify their portfolios and invest in a wide range of assets.
- Mobile App: Both platforms provide mobile applications, enabling users to trade and manage their accounts on the go from their smartphones or tablets.
- Fractional Shares: Both Robinhood and Interactive Brokers offer fractional share trading, allowing investors to buy a portion of a share, making investing more accessible.
- Margin Accounts: Both platforms offer margin accounts, allowing traders to leverage their positions by borrowing funds to increase their buying power.
- Web Platform: Both platforms have web-based trading platforms that can be accessed from any device with an internet connection.
Robinhood Vs Interactive Brokers Buying Guide
Account Opening and Funding
Robinhood offers a streamlined account opening process, typically completed within minutes. Funding is also straightforward, with options for bank transfers and instant deposits (for a small fee). Interactive Brokers, while offering a wider range of account types, has a more complex setup. The application process can take longer, and funding options include bank wires, ACH transfers, and checks. The minimum deposit requirements also differ; Robinhood has no minimum, while Interactive Brokers may have requirements depending on the account type and country of residence. Consider your investment experience level and the urgency with which you need to begin trading when comparing these aspects.
Trading Platform and Tools
Robinhood’s platform is known for its simplicity and user-friendliness, ideal for beginners. It provides a clean interface and easy-to-understand charts. However, its tools are limited, lacking advanced order types and sophisticated charting capabilities. Interactive Brokers provides a powerful and customizable platform, Trader Workstation (TWS), offering a wide array of tools, advanced order types, and real-time market data. TWS caters to experienced traders but can be overwhelming for newcomers. The choice depends on your trading needs and technical expertise. Consider the level of analysis and control needed.
Investment Options
Robinhood primarily focuses on stocks, ETFs, and options. It has expanded to include cryptocurrencies, but the selection is still limited compared to specialized crypto exchanges. Interactive Brokers offers a far more extensive range of investment options, including stocks, ETFs, options, futures, forex, bonds, and mutual funds, across numerous global markets. This breadth makes Interactive Brokers suitable for diversified portfolios and advanced trading strategies. Think about the asset classes you wish to trade and whether international markets are of interest to you.
Fees and Commissions
Robinhood gained popularity with its commission-free trading model for stocks and ETFs. However, it generates revenue through payment for order flow and other services. Interactive Brokers offers low commissions, especially for active traders, and transparent pricing. It also provides tiered and fixed commission structures. Other fees, such as inactivity fees or margin interest rates, should also be considered. Evaluate your trading frequency and the size of your trades to determine which fee structure is more beneficial for your trading activity.
Customer Support
Robinhood’s customer support has historically been criticized for its limited availability and reliance on email and in-app chat. Response times can be slow, especially during periods of high trading volume. Interactive Brokers offers more comprehensive customer support, including phone and email, though response times can still vary. Consider the importance of prompt and reliable support, particularly if you’re new to trading or require assistance with complex issues. Accessibility of support is crucial for resolving any trading-related concerns.
Research and Education
Robinhood provides basic market news and limited educational resources aimed at beginners. Its research tools are not as robust as those offered by other brokers. Interactive Brokers offers a broader range of research tools, including market data, analyst ratings, and news feeds from various sources. It also provides educational materials, such as webinars and tutorials, catering to both novice and experienced traders. If you value in-depth research and comprehensive educational resources, Interactive Brokers is the better choice. Assess your need for market insights and learning resources.
Who Should Buy What?
Buy Robinhood If…
- You are a beginner investor looking for a simple and easy-to-use platform.
- You prioritize a user-friendly mobile experience.
- You primarily trade stocks and ETFs with limited needs for advanced trading features.
- You are looking for commission-free trading.
Buy Interactive Brokers If…
- You are a more experienced trader or investor.
- You need access to a wide range of tradable assets, including futures, forex, and options.
- You require advanced trading tools and research resources.
- You are looking for low margin rates and potentially lower commissions for high-volume trading.
Frequently Asked Questions
What is the minimum deposit required to open an account?
Robinhood has no minimum deposit requirement. You can start trading with as little as you want. Interactive Brokers may have minimums depending on the account type and country of residence. These minimums are often lower if you are applying for a margin account.
What investment options are available on each platform?
Robinhood primarily offers stocks, ETFs, options, and some cryptocurrencies. Interactive Brokers provides a much wider range, including stocks, ETFs, options, futures, forex, bonds, and mutual funds, across numerous global markets. Interactive Brokers offers much more flexibility for diversification.
How do the platforms handle fees and commissions?
Robinhood offers commission-free trading for stocks and ETFs. However, it generates revenue through payment for order flow. Interactive Brokers offers low commissions, with tiered and fixed structures, and transparent pricing. You will have to analyze your trading frequency and your trading volume to assess the best option.
Which platform is better for beginners?
Robinhood is generally considered more beginner-friendly due to its simple interface and ease of use. Interactive Brokers, while powerful, can be overwhelming for newcomers. The platform’s more advanced features require a steeper learning curve.
Which platform offers better research tools?
Interactive Brokers provides more comprehensive research tools, including market data, analyst ratings, and news feeds. Robinhood’s research capabilities are more limited. Interactive Brokers offers more in-depth research to inform your trading decisions, and has more advanced tools.
How is customer support handled by each broker?
Robinhood’s customer support is primarily email-based and may have slower response times. Interactive Brokers offers phone and email support, which tends to be more responsive. The support options are more accessible with Interactive Brokers, making it a better option overall.
Which platform offers a wider range of account types?
Interactive Brokers offers a more extensive selection of account types, catering to various needs, including individual, joint, retirement, and margin accounts. Robinhood’s account options are generally more limited. The account type options with Interactive Brokers are much more diverse.
Final Verdict
Robinhood’s simplicity and commission-free trading make it attractive for beginners. However, its limited features, research tools, and customer support are drawbacks. Interactive Brokers provides a powerful platform, comprehensive research, and a wider range of investment options, appealing to experienced traders. While more complex, its low fees and global market access offer greater potential for diversification and advanced strategies.
Winner: Interactive Brokers