Charles Schwab vs. Robinhood: Which Is Best? - SmartAsset

Investors looking for online investing platforms choose Charles Schwab or Robinhood for two very different experiences. With Charles Schwab you will get a full-featured investment platform, with all of the opportunities and complexity that this entails. Investors using Schwab’s tools can trade almost any way they want to but will have to learn how to wade through the data-rich world of a serious trader. Robinhood, on the other hand, offers an intuitive trading experience through an investment platform almost entirely devoid of complexity. Yet in the process this eliminates most of the tools and assets that serious traders rely on to navigate the market. You also may have heard about both platforms during the Gamestop-fueled trading mania in January 2021. Here’s how the two stack up.

Charles Schwab vs. Robinhood: Fees

There are usually four types of fees to look out for when choosing a trading platform. You should look out for these when evaluating any investment or trading service:

Trading Fees – Any fixed charge attached to each trade that you make. This can come in the form of a flat fee or what’s known as the “spread.” This is when your broker charges you based on the difference, if any, between the buying and the selling price of an asset.
Trading Commissions – This is when a broker will charge you a percentage based on the volume or value of each trade.
Inactivity Fees – Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account.
Non-Trading/Other Fees – Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or signing up for additional services.

When it comes to fees, Robinhood and Schwab are mostly identical in the services and products that both platforms provide. Neither service charges anything to trade stocks, exchange-traded funds (ETF) and related exchange-traded products. Similarly, neither service charges for inactivity, depositing money, withdrawing it or other common transactions.

The most significant difference is that Robinhood charges nothing for users to trade options while Schwab charges $0.65 per contract.

Robinhood’s only main fee is the $5 per month upgrade charge for Robinhood Gold. This service allows you to make margin trades at interest rates starting at 5%. Schwab also charges $50 per trade for mutual funds unless you select one from the service’s “no-fee” list. As this list is expansive, with several thousand choices, most retail investors will be able to find funds on Schwab’s no-fee list to meet their financial strategy.

Ultimately, for most users, both Robinhood and Schwab will likely be completely or almost completely free to use.

Charles Schwab vs. Robinhood: Services & Features

The Schwab and Robinhood platforms are out to capture entirely different markets and are quite open about this fact. Robinhood offers a feature-light experience aimed directly at new investors. The goal of Robinhood is to make investment easy, and even a little bit fun, with virtually zero barriers to entry. While the firm has released a web-based version of its platform, it is clearly built around its app. Everything about Robinhood is designed to be easy to understand and easy to use while on the go.

To meet this goal Robinhood offers fewer services and features than most trading platforms. Users can trade stocks, ETFs (which hold equities, bonds or both), American Depositary Receipts and options contracts. On its partner service, Robinhood Crypto, Robinhood users can also trade some cryptocurrencies. Most importantly for retail investors, this means that you cannot trade safer assets such as bonds and mutual funds.

Robinhood also eliminates most forms of information and data available through comparable investment platforms. Instead of the technical indicators, side-by-side graphs and candlestick charts common to the industry, Robinhood offers only basic trading data to its users. An asset’s screen will offer information such as price, trading volume and price history going back five years. Users can buy or sell, and can enter basic trading instructions such as stop-loss or limit orders.

Schwab, on the other hand, offers a full-featured trading platform. This means that users can trade almost all commonly available assets, including both common products such as mutual funds or bonds and sophisticated products such as foreign currencies or futures. Investors can also access all commonly used trading data, with information that goes back for the lifetime of most assets. Schwab’s platform also offers sophisticated tools for analytics, from bespoke analysis provided by the firm itself to customizable charts that allow you to compare different assets or technical indicators side by side.

Traders who want still more sophistication can use Schwab’s second trading platform, StreetSmart. This is an investment platform that Schwab runs specifically for highly sophisticated and professional traders. It provides benefits such as quicker access to real-time information and a greater degree of customizability to your data, although that comes at the cost of significantly greater complexity.

Note that both Charles Schwab and Robinhood were implicated in the January 2021 short-squeeze mania when the two platforms announced restrictions on trading certain stocks like Gamestop, AMC and Nokia. The platforms made it more difficult or even impossible for users to buy new shares, driving share prices down and ultimately helping hedge funds who had large short interests in many of these stocks.

Charles Schwab vs. Robinhood: Online & Mobile Experience

The Schwab investment platform is more complicated than Robinhood. Understanding Schwab’s platform requires a basic knowledge of investing, not just how the market works but the concepts and mechanics of trading. To pull just one example, Robinhood gives user’s price history in the form of a line chart. This graph tells you the price of any given asset on any given day. Schwab uses candlestick charts. These are the market standard for reading asset prices over time and provide significantly more information than a line graph, though they are also more complex and intimidating unless you know how to read them.

Beyond the complexity inherent to these two products, Schwab is a well-designed trading platform that investors will find mostly easy to use. Information is well laid out. You can find your investment portfolio, research assets and even compare prices with a few fairly self-evident clicks. The only real drawback to Schwab’s design is what it calls the All-In-One Trading Ticket. As users make trading decisions, Schwab’s platform collects them on a separate screen (the Trading Ticket). Then users have to confirm all of their trades at once on this window.

Users may be divided on this feature, with some finding it an unnecessary extra step while others may appreciate the big picture overview of their activity.

Robinhood, on the other hand, has much less complexity. Assets are easy to find. To aid in this process the app organizes assets by category, nudging users to similarly situated products in the same way that Netflix might suggest additional streaming options. It is easy to read the price and trading information on each asset (in part because Robinhood provides so little information to review), and equally easy to execute trading decisions.

Charles Schwab vs. Robinhood: Who Should Use It?

Schwab is the better trading platform for virtually every investor. This is both because Schwab is a well-designed, full service platform. Schwab is one of several full service trading platforms that will do well by just about anyone in the marketplace. Alongside other brand names like E*TRADE, Fidelity and Ameritrade, this platform is a good choice whether you are a highly active investor or one who just touches up his or her mutual funds once or twice per year. While this reviewer finds Schwab’s All-In-One Trading Ticket both unnecessary and disruptive, other investors might find it a valuable tool to their own trading.

Other than this, Schwab offers a consistently strong trading experience. Experienced investors will find all of the information they could want on this platform, from its customizable charts to high-quality news and analysis, while extremely sophisticated investors will likely graduate to StreetSmart’s near-professional quality trading interface.

Novice investors will absolutely face a learning curve while using this service. Someone who is new to the market absolutely should slow down before making any decisions, and it’s important to understand this process before you commit any money. While that doesn’t mean you need to deeply study particularly complicated subjects, taking the time to learn a candlestick chart can help make sure you know exactly what you’re getting into.

The Robinhood trading platform isn’t just designed to make trading easy. It’s designed to make trading low-information. Robinhood gamifies trading by trying to eliminate virtually all friction in the investment process. Its platform encourages high-volume trading in some of the riskiest assets on the market, such as stocks and options contracts, and it targets this at the people least qualified to invest this way (novice investors). Robinhood even includes a list of other recommended stocks or options you can purchase at the bottom of each asset’s screen, like an Amazon algorithm prompting you to just spend a few dollars more.

Experienced investors might have the savvy to use this kind of quick-trading system well, but they would quickly bump up against the limited information and limited asset classes that Robinhood provides.

Novice investors, on the other hand, will not know enough to miss the depth of information that Robinhood omits from its trading platform. However, these are also exactly the investors who should not approach investing as they might Tinder, nor should they exclusively invest in high-risk assets that Robinhood predominantly limits them to.

Ultimately, experienced investors will want more information than Robinhood offers, while novice investors should take more time and caution than Robinhood allows.

The Bottom Line

Schwab is a full-service investment platform which offers access to just about all mainstream assets and data. It is an unambiguously better option than the limited, “gamified” trading platform offered by Robinhood.

Tips for Investing

Don’t make a choice just yet. Now that you’ve read our overview of these two options, dive into the details: In our review of Robinhood’s platform we go into the nitty-gritty of what this service has to offer, and we do the same while reviewing Schwab.
Which platform you invest with matters, but so does what you invest in. In other words, a financial plan is essential. And that’s where a financial advisor can be immensely helpful.
Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.