I'm Looking For an Online Broker. Is tastyworks or Robinhood Better?
Though online brokerage accounts are the investing platform of choice for many retail investors, they can come with significant fees and trading costs. Robinhood and tastyworks are advertised as low-cost options for those who want to begin investing. However, choosing the right brokerage means you have to look for more than cost efficiency. Research can tell you whether investment platforms’ promises are as good as they say they are. With that in mind, here are a few ways tastyworks and Robinhood stack up against each other.
You can always speak to a financial advisor about picking the brokerage that best fits your financial goals, experience and risk profile.
Overview of Robinhood vs. tastyworks
When you compare some online brokers, they can seem like very similar platforms. You may have a slight variation in asset classes or minimum account balance requirements, but they share more similarities than not. While tastyworks and Robinhood have comparable costs, they are distinctive from each other.
Tastyworks was founded by the creators of tastytrade, a financial network, in 2017. It’s a limited-feature platform that targets a specific type of trader. In particular, it focuses on those with active strategies who trade options.
Robinhood also has a target audience. It aims its services at new investors and mobile traders. Its goal is to make investing easy, and its lack of barriers to any trader shows it. It is somewhat limited in the features it offers, although it puts more emphasis on stocks and exchange-traded funds (ETFs) than tastyworks.
Despite these two platforms’ appearances, neither should be used by the novice trader, although for different reasons.
Robinhood vs. tastyworks: Fees
Robinhood advertises free commissions for all U.S.-listed securities, including stocks, options, ETFs and cryptocurrencies. This policy does not extend beyond the borders of America, though, as foreign-listed securities call for a $50 fee per trade. Also, if you make a trade via an over-the-phone broker, you’ll be charged a per-trade rate of $10.
It does not charge you for inactivity, nor does it charge fees for adding or withdrawing money to or from your account. (It is able to afford this because the company’s business model generates revenue from third-party brokers each time you make a trade, profiting off of what’s known as the bid/ask spread to the tune of $0.01 or less per share traded.) It offers margin trading for users who sign up for Robinhood Gold. This service costs $5 per month, and margin loans start at a 5% interest rate.
There is no minimum amount of investable assets necessary to become a customer of Robinhood, nor is there a certain account size you need to maintain to retain your eligibility. Initially, funding your account is also free. Because it is a web-based firm, Robinhood does not charge for electronic statements.
Tastyworks charges nothing to trade stocks and ETFs, while options contracts have a more complex pricing scheme. Different options will incur different charges. Options on stocks, for example, have a commission of $1 per contract, while options on futures cost $2.50. There is a cap, however, of $10 per leg on equity options, maximizing the amount you can spend on any given trade regardless of how many contracts you actually buy.
Futures contracts cost $2.50 per contract, broken into a $1.25 commission to open and another $1.25 commission to close the position. Margin rates start at 11% and decline based on your account balance.
There is no minimum balance required, nor does tastyworks charge for any standard account activity like depositing or withdrawing money. It does charge for certain less common account management practices, and you can see the full list of charges here.
Robinhood vs. tastyworks: Services & Features
Robinhood Gold is Robinhood’s premium service that’s available for an extra fee, though your first 30 days are free. This opens a multitude of benefits to customers, such as increased buying power by borrowing from Robinhood, extended trading hours, larger instant deposits and instant access to funds following the sale of stocks. For customers who borrow under $50,000, there’s just a single monthly fee. If you borrow more than $50,000, you will incur a sizable 5% APR.
In an effort to keep up with modern investing trends, Robinhood has created a cryptocurrency service called Robinhood Crypto. This provides a convenient way for customers to invest in digital currencies like Bitcoin. Similar to the rest of its products, this service holds steady on $0 commissions and instant access to your money.
Robinhood is limited in its features and relatively streamlined, although it also tries to put out educational resources. Articles and related content about investing are available through the site. In terms of asset classes, you can trade in stocks, ETFs, options and cryptocurrencies through its Robinhood Crypto platform.
There aren’t many investment analysis tools and information only offers basic details such as pricing and purchasing data. You do have the option of the premium account: Robinhood Gold. This $5 service allows you to begin margin trading and opens up access to Level II market data.
Tastyworks offers four asset classes to trade: options, futures, stocks and exchange-traded funds (ETF). There are no mutual funds, bonds or currencies. This is fitting for tastyworks’ overall emphasis on high-volume, high-speed trading. This is not a service for your buy-and-hold accounts, and it trends away from the assets that would support this style of investing.
Like most platforms built around high-volume trading, tastyworks emphasizes technical anaylsis. Investors will find very little (if any) fundamental analysis, news or third-party information in the tastyworks trading screen. However, this system does provide you with an enormous amount of technical data on which to make your decisions. This is particularly geared towards volatility, and you can quickly and easily find just about any amount of information a trader could want on pricing, volume, volatility, critical ratios, Greeks and more.
Robinhood vs. tastyworks: Online & Mobile Experience
Robinhood’s online experience lets view series of stocks the firm aptly calls “collections.” These are organized into some unique categories — those helmed by female CEOS, for example, or those in the entertainment sphere. In an effort to assist you in ironing out your investments further, Robinhood provides the average price that other customers bought a stock at, along with a related purchase list. Prior to investing, you can view Wall Street and Morningstar analyses of an investment, along with a particular company’s earnings reports for the preceding two years and any news related to it.
It’s mobile experience app gets high ratings from users. It allows you to purchase stocks and other investments. It also maintains the ability to access in-depth investment information, like past performance charts, news, average prices and the aforementioned “collections.”
Tastyworks has three main portals you can use: desktop, browser and app. All of them provide access to the same trading platform but with varying depths. The desktop provides the most comprehensive experience. It has the largest number of tools to use and data.
The mobile version is lightweight in comparison to the others, but that means it’s leaner with its features. You either have the full range of tools which are dense or the slimmed-down version.
Who Should Use tastyworks?
There are platforms that you could recommend to beginners, but neither tastyworks nor Robinhood qualify. Tastyworks does not have the risk factor Robinhood does, but it’s on the other side of the spectrum. The platform can be too data heavy for some newcomers to handle. Plus, it’s not as intuitive as other options can be, so you have a learning curve ahead of you.
However, that isn’t necessarily a fault. Tastyworks is designed for sophisticated traders who work with high-volume trades and derivatives. It’s a valuable choice for anyone who fits that category who wants to trade options, since it’s relatively cheap.
If you want to focus on stocks or long-term assets, you should try out other available online brokers.
Who Should Use Robinhood?
Robinhood targets novice investors with a priority for buying and selling equities or options trading as an alternative. Both of these are high-risk areas of investment and Robinhood does not do much to encourage caution. Its mobile layout encourages traders to invest based on impulse by gamifying its system, although some measures have been taken to cut back on that following their controversy – they removed the confetti feature when traders hit milestones.
While it’s designed for beginners, the platform’s clean-cut way to trade high-stakes without guidance make it hard to recommend. At least, beginners should opt for trading platforms that offer more education. If you have trading experience under your belt, it may be an easier tool for you.
Bottom Line
Both tastyworks and Robinhood are best suited to experienced traders who have investment knowledge. While they offer cheap alternatives to trading versus some competitors, their systems are not built for beginners. However, either system can be adjusted to with education. While tastyworks requires a learning curve, Robinhood needs wisdom. It’s up to each trader to decide if he or she can make responsible choices using either service.
Tips on Investing
Both tastyworks and Robinhood offer unique trading experiences but not enough guidance. You don’t have to look online for that, though. SmartAsset’s matching tool can help you pair up with financial advisors in your area. In minutes, you have someone on your side who can give you solid financial advice tailored to your situation. So, if you’re ready to begin your investment journey, get started now.
Whether you’re considering getting started with investing or highly experienced, an investment calculator can help you figure out how to meet your goals. It can show you how your initial investment, frequency of contributions and risk tolerance can all affect how your money grows.
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