Last updated on March 31st, 2021

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Schwab vs Robinhood Comparison

schwab vs robinhood

Whether you are a beginner or advanced investor, thorough research before getting into any online investment platform is crucial. There are so many platforms established nowadays, and falling into cons' hand is very easy.

For rewarding online investment, quit going for cheap, luring companies that have only begun their journey. You can hardly tell how stable they are and how they can handle the stock market's uncertainties.

Instead, go for companies with deep roots in this field, the likes of Schwab or Robinhood.

Schwab and Robinhood have been the talk of every individual interested in online investments.

Discussions on which one is better in terms of services, exposure, and fees will be taking over the discussions. Here is a guide to ending all your all curiosity between these two platforms. You will have to read through every line to get details of each.

Schwab's Investment products

Schwab offers diversified investment products you can choose from to make your investment journey worthwhile. Let's have a look at some of them and why you would want them.

1. Mutual funds

A mutual fund is an investment platform that is full of funds from numerous investors globally. You can buy securities like stocks and bonds on this platform. It is an excellent investment platform as it offers investment whizzes that can take you through your investment journey.

This way, you evade the need to do tiring research. It also provides high-level security for investors' funds.

2. Stocks

When you invest in stocks, you become a partial owner of a company. Stocks give you the right to claim a portion of the company's assets and monthly earnings. They mark the most successful investment tools over other securities.

3. Exchange-Traded Funds (ETF)

This is a platform that holds securities such as bonds and stocks that functions by tracking an index.

Trading happens on the grounds of the market value. This is contrary to mutual funds, which investors buy from the value of a company's closing net asset value of that specific day.

It offers an inexpensive platform to grow your portfolio and a chance to get gain from the daily high asset liquidity levels.

4. Options

Options work in the form of a contract. One company sells a financial asset while the other buys it. The buying party has the right to buy or sell a financial asset at a price they agree on. The contract ends in the expiry of the stated date. Compared to stocks, this strategy is more flexible.

5. Futures

This is a contract between two companies, one obligated to sell and the other to buy a financial instrument for a certain amount and specified date in the future. They offer investors an affordable and straightforward way to secure financial instruments and markets.

6. Income investments

They include bonds and CDs geared to generate interests at specified ties of the year. Investing in fixed-income investments gives an individual a guaranteed source of income, low rates of tax, and a secure place to conserve your cash.

7. Money market funds

Investors can get short-term debts associated with low risk. It is a dependable source of funds to ensure the free running of the investors' activities.

8. Global investing

This is basically investing in foreign financial assets. You get to leverage any investment opportunity emerging anywhere in the world.

Robinhood's Investment Products

Double your earnings by investing in Robinhood's numerous assets. At Robinhood, you can invest in more than 5,000 stocks. It does not end there.

You can also diversify your portfolio with options, United States listed equities and ETFs, as well as American Depository Receipts for more than 650 known companies worldwide.

Robinhood does not offer investment opportunities like mutual funds, closed-ended funds, foreign exchanging stocks, and fixed-income trading.

Although it won't support foreign exchange trading stocks, it exempts exchanges in Canada and Israel and ADRs. Besides, Robinhood has a Robinhood Crypto account where people in other nations can trade with cryptocurrencies.

1. Fees payable

Explicit payment terms are significant in online investment. A company should put them out in a way that the investor understands to avoid conflicts.

When comparing trading platforms, an investor should consider four key types of payments: trading fee, trading commission, inactivity fee, and other fees apart from those involving trading.

Trading fees: Just as the name suggests, this fee comes with any trade you make, often when there is a spread. A spread or flat fee is the charge a broker will demand when the buying and selling price vary.

Trading commissions: This is what a broker charges the traders based on the volumes involved in each trade.

Inactivity fee: Such fees include charges on preserving your money in a brokerage account. They are fees charged to account for the time you don't take part in trading activities.

Other fees: Any fee that doesn't fit in the three categories above falls under non-trading expenses.

Schwab provides no limit on the cash investors can have in their accounts. This company charges no annual fees, inactivity fees r trade commission on stocks, ETFs, and options. However, options have a per-contract price which almost all online brokers will demand.

At Schwab, they maintain this fee at its minimum, $0.65 for each contract. This equates to $6.5 for ten contracts.

When investing in Schwab's mutual funds, there are three main expenses to consider. These are the operating expenses, loads ad transaction fees. The operational costs are expressed in passively or actively managed funds.

For the passively managed funds, the rates range from 0.02% to 0.39%. The variance happens from fund to fund or the third-party service provider.

The expense ranges from 0.22% to 1.92% of funds' average net assets in actively managed funds. Schwab's mutual funds are loading and transaction cost-free.

Like Schwab, Robinhood's stocks, ETFs, and exchange trade products are free of inactivity and transaction fees. Also, Robinhood charges nothing for options. The most outstanding fee in Robinhood is the $5 charged per month when an investor upgrades to Robinhood Gold. At the Gold level, you can take part in margin trades whose earning interests start at 5%.

While Robinhood won't charge anything to deposit or withdraw money from your account or for the account's maintenance, the investor pays a charge to cater for self-regulatory organization charges like Financial Industry Regulatory Authority, which is necessary when making sell orders.

All FINRA members, which includes Robinhood, are supposed to pay the Security and Exchange Commission. This is a fee associated with all activities for maintaining security markets.

To raise this money, FINRA passes the amount required to its members, who set the amount for their clients. FINRA members also pay trading activity fees for all sales made above 50 shares and ADR fees.

Services and features

Schwab

Opening a brokerage account with Schwab marks the beginning of an enjoyable investing experience. After the Security and Exchange Commission's revision on brokerage account commissions, many platforms reacted by hiking their commissions.

On the contrary, Schwab reduced its rates and even offered discounts for the latter. Schwab seeks to achieve high-levels of customer delivery which will guarantee their satisfaction. Unlike any other companies, Schwab is willing to return any commission or fee to the client in case of dissatisfaction.

They have a phone support team 24 hours all week long to answer any clients' queries. Be it matters to do with equity awards and compensation or financial planning; this team is always ready to offer guidance and helpful resources.

Schwab is even willing to offer a financial consultant to help you begin a smooth investment journey. In case you have one already, the company designs a plan to accommodate your advisor. You even get a full report with all details about your account's activities and any prediction in the future happening.

Besides, investors can open the High Yield Investor Checking account, which allows the clients to check their account status, deposit, or invest in mutual funds without incurring any costs.

Earlier on, mutual fund investors faced lots of charges on their sake are paid high transaction fees via the brokers. To maintain low costs, the investors had to open numerous mutual funds accounts with different companies.

Seeing all these struggles, Schwab created the Schwab Mutual Fund OneSource account. Users of this account can invest in vast loads of mutual funds at no transaction fees. All these outstanding services are all at zero monthly service fees.

Other Schwab services include;

  • Online advisory service thanks to the Schwab Intelligent Portfolios.
  • Personalized retirement plan enabled by the Schwab Retirement Plan Services, Inc.
  • Commission-free online stocks, ETFs, and option trades.

Robinhood

Robinhood's main aim currently seems like getting closer and closer to their clients by integrating the best tech and a robust workforce. Lately, their focus has been on expanding their live phone support.

They seek to be available to their clients 24 hours, 365 days, to be helpful in urgent matters. They have advanced their phone support system with the development of the new in-app contact feature.

It allows the clients to have direct contact with financial professionals. Recently, they have launched their live phone support for customers who have account security queries.

Robinhood customers no longer have to wait for long hours to connect with a professional, thanks to the click-to-request callback tech.

This feature enables the caller to identify the exact place they have trouble with, and thus, he is connect got the right professional. In the near future, they seek to make development s for the trading and transfer issues.

Robinhood is also investing in automation to reduce the pressure on its workforce. Automating its services enables them to have a more proactive measure on predicted issues and allows a more strategic routing and ranking.

Automaton also helps solve the clients' problems more efficiently, with urgent cases solved first.

Even better, the company has created a self-service system geared towards resolving clients' issues without needing someone's assistance. So far, this service enables the cancellation of queuing deposits and the deactivation of accounts.

In future, Robinhood seeks to improve this service by offering personalized texts to inform clients about happenings in their accounts.

With platforms like Help Centre, Robinhood Learn, and in-app news, Robinhood can attend to their customers' problems on time. The end goal of Robinhood is to offer flawless services to its customers, which is why they highly value the clients' feedback.

Security Measures

Robinhood utilized high-end security measures to ensure that their clients' data is always safe. For instance, it makes your account password untraceable using the in-house BCcyrpt hashing algorithm. Also, any critical information shared with us is encrypted before storing.

Whether it is a video or regular phone call, Robinhood servers secure means of communication with our clients via Transport Layer Security protocol.

As far as banking information is concerned, Robinhood does not access the account again. When required, they partner with a trusted third-party crew to give such information.

Schwab ensures that their clients' data is secure by ensuring that their customers have their part of the deal complete. This involves setting up security alerts on your phone. This will alert them whenever there is a hideous activity going on in their accounts.

Another advanced security option is allowing Schwab to send you a password to use every time you visit your account. The last option is to use the voice ID when accessing the account via the phone.

On the company's end, Schwab is always advancing its technology, hiring professionals who are vast security field and setting up protocols. With encryption features and notification alerts sent to the clients, there is no possibility of unauthorized access to the accounts.

They also have a strict privacy and security policy to safeguard all financial and personal information. To ensure that the person inquiring about the account is the real owner, Schwab professionals always confirm the password before going into details about the account.

Schwab and Robinhood are companies that can take your investment journeys notches higher. Each is unique in its service delivery. Before choosing one at random, consider reading through this article to find what out suits your financial and investment needs the best.

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