Robinhood is one of the easiest and most user-friendly investing apps on the market today.
It’s free to join, and you also earn a free stock when you sign up. But where do you go from there?
In this article, I’ll outline how to make money on Robinhood in 3 ways.
As a disclaimer, no one can predict the future, including what the market will do.
Stocks and index funds have historically been great ways to make money, but there’s always the chance to lose money too.
Always make sure to diversify your investments (have many different investments instead of putting all your eggs in one basket) to minimize your risk.
Combined with researching before you buy, this gives you the best chance at earning profits over time.
How to Buy Stocks on Robinhood
First, let’s quickly cover the logistics of buying and selling stocks on Robinhood. This is the easy part!
Once you’ve signed up for Robinhood, you’ll first get to choose your free stock to start your portfolio.
Then, you can begin buying your own. It’s best to decide what stocks you want to buy before you get on the app, so you know what you’re looking for.
Robinhood does have a paid version (Robinhood Gold) that includes research tools, but I prefer to just do free online research.
I’ll use my app with one of my stocks to show you how to find, buy, and sell stocks!
First, how to search for stocks:
When you’ve chosen a stock, its main page looks like this.
Toggle between the time charts to see how the stock has performed over the past week, month, 3 months, 1 year, or 5 years—which can help inform your buying decisions.
Click Trade (the button will just say “Buy” if you don’t own any yet).
Once you do own some of a stock, you’ll be offered a sell or buy option once you click trade.
If you’re buying a stock, you’ll get a screen prompting you to choose a number of shares. You’ll click to review your purchase,
then swipe up on your phone to confirm it.
The screen to sell your stock looks the same:
Finally, at the bottom of the stock screen, there’s a History section where you can see your past orders, plus any dividends you earn while you own it:
It’s that simple! Now that you know how to buy and sell stocks on Robinhood, let’s get into the main question: how to make money on Robinhood!
How to Make Money on Robinhood
Here are three strategies to make money on Robinhood. In this section, I’ll explain each investing method and outline their pros and cons.
Strategy #1: Buy and Hold Exchange-Traded Funds (ETFs)
Exchange-traded funds, abbreviated ETFs, are a type of investment fund allowing you to effectively own a lot of stocks with a single purchase. Each ETF contains a different collection of stocks that usually belong to a specific category. When you buy a share of an ETF, you’re buying a fractional amount of every stock inside it.
Pros of ETFs: You get automatic diversification since you own a lot of stocks at once. Investing in ETFs is a smart way to minimize your investment risk and grow your money over time.
Cons of ETFs: Their growth tends to be more slow and steady, so if you’re looking for the “next big thing” investment that blows up to 10x its value in a year, that probably won’t happen. But this isn’t really a bad thing, since trying to gamble on hot stocks often doesn’t work out that way either.
ETFs you can buy on Robinhood
On Robinhood, you have about 500 ETFs to choose from. Here are some examples to look into:
- VTI – a total U.S. stock market index fund diversified with large, medium, and small American companies. If you just want to buy one ETF, this one gets you just about everything!
- VOO – an S&P 500 ETF that includes every stock in the S&P (all large US companies)
- VWO – an ETF for international companies in emerging markets like China, South Africa, Taiwan, Brazil, etc.
- VNQ – a real estate ETF
- VGT – a technology ETF
- VHT – a healthcare ETF
- ICLN – a clean energy ETF
If you’re interested in a certain sector of the stock market, there might be an ETF to match. You can just Google, for instance, “top technology ETFs” to get a list and keep researching them from there.
Strategy #2: Buy and Hold Stocks
Buying individual stocks can be a good idea if you’re willing to do your research and invest in companies that have a good chance of surviving in the future and growing over time. Like with ETFs, you want to think about these stock investments in terms of years, and not worry so much about their daily, weekly, or monthly fluctuations.
Pros of buying and holding stocks: If you’re confident in certain companies, buying and holding individual stocks can be a good way to supplement your ETF holdings. If you’re thinking about the future and buying stock in companies that have a solid business plan, you can make good money this way.
Cons of buying and holding stocks: Even companies that look solid when you buy them are capable of losing value. For example, Enron was once a huge and popular company, but their stock crashed when it was revealed that they were secretly in debt and declared bankruptcy.
This is why you don’t want to put all your investment money in just a few stocks. If you own a lot of different company shares, it doesn’t matter as much if one of those companies fail. If you only have a limited amount of money to invest, it’s better to buy ETF shares, since you’ll be less able to diversify your own portfolio by purchasing individual stocks.
Strategy #3: Swing-Trade Stocks (But Don’t Day-Trade)
Day-trading means that you buy and sell the same stock on the same day, trying to profit from the small value differences during that time. However, you can’t really day-trade on Robinhood, since your account will be flagged if you make four day trades within a 5-day period.
What you can do is “swing trade,” which is similar to day-trading, but means you wait anywhere from a few days to a few weeks between buying and selling. The ideal scenario is to buy a stock when it’s low, sell it within a few weeks when it gets higher, and then wait to re-buy the stock if it gets lower again. However, knowing what stocks to buy and when to buy them is the tricky part of this, and is definitely prone to failure.
Pros of swing-trading stocks: There’s the chance to make money by “riding the rapids” of the market, if you buy and sell the right stocks at the right time. It’s also not as intense as day-trading, since you don’t have to constantly watch your stock values hour-by-hour.
Cons of swing-trading stocks: Market timing is difficult to impossible, even for seasoned investors. You might buy a stock intending to sell it when it goes higher—but it crashes instead. Or, you might sell a stock (intending to re-purchase it later at a lower value), only to watch it go higher and higher, so you missed out on all that growth. A lot of this strategy comes down to luck, so I wouldn’t recommend it as your main way to invest. If you want to do it, think of it like gambling and give yourself a “fun money” budget dedicated to trading. Also, note that you’ll pay higher capital gains taxes on stock sales when you’ve held them for less than a year.
What’s your favorite way to invest? Sign up here to earn a free stock on Robinhood and start making money with investing!
Kate is a writer and editor who runs her content and editorial businesses remotely while globetrotting as a digital nomad. So far, her laptop has accompanied her to New Zealand, Asia, and around the U.S. (mostly thanks to credit card points). Years of research and ghostwriting on personal finance led her to the FI community and co-founding DollarSanity. In addition to traveling and outdoor adventure, Kate is passionate about financial literacy, compound interest, and pristine grammar.