Is the Robinhood 3% match free money?

[gracefulgalpal]

Is the Robinhood 3% match free money?

I have about $100k in an IRA with Fidelity. It’s mostly invested in the default target date fund and I barely touch it. Robinhood is advertising a 3 percent match if I transfer assets as long as I keep it for 5 years and pay $10 per month in Robinhood gold.

What’s the catch or risk here? It looks like I could earn a cool $3k with this without risks.

I know Robinhood earns money on margins during trading but if I don’t do that and keep my IRA money untouched does that mean it’s essentially the same as keeping it in fidelity?

What happens during the transfer as I move to some fund in Robinhood? Is that where I may lose some money even for an equivalent index fund?

 

[hannahgrace]

@gracefulgalpal The downside is that Fidelity will liquidate your position in the target date fund then transfer the money as Robinhood doesn’t yet have access to the target date funds. Does liquidating your target date mutual fund position cost money? Are you willing to manage your own money instead of using a target date mutual fund? Robinhood will match the fees you incur, but it may be a pain in the ass to actually get it.

 

[logann]

@hannahgrace Does betterment not have auto-allocations/investing?
edit - shit sorry I mean Robinhood

 

[inhimbyhim]

@logann This is Robinhood we're taking about, no?

 

[hannahgrace]

@logann They do, kinda. OP would have to crunch the numbers themselves then rebalance periodically to match what the target date fund does.

 

[reborn777]

@hannahgrace This is how Blackrock/Vanguard make most of their money anyways - rebalancing target date funds at scale. A target retirement fund expense ratio costs you ~4-10x the indexes they’re comprised of.

 

[basirnia]

@reborn777 So this is always something I thought and never went with the retirement year portfolio. There were fees on top of fees. Never thought about the auto balance.

So I would just select some of the funds in the retirement portfolio and call it good

 

[onetruechurch4]

@hannahgrace The other enormous downside is that you're then stuck being Robinhood's client.

 

[tpham0716]

@onetruechurch4 Never forget that Robin Hood screwed thousands of people by shutting down trading multiple times when retail investors were beating hedge funds in a short squeeze. They will screw you.

 

[einekleinestimme]

@tpham0716 Wow now that is a misunderstanding and a half

 

[tpham0716]

@einekleinestimme Ok robinhood bot

 

[einekleinestimme]

@tpham0716 Seems to me the bot is the one without nuance and struggles to understand basic things. Seems you qualify

 

[tpham0716]

@einekleinestimme Typical bot response

 

[einekleinestimme]

@tpham0716 Beep boop beep

 

[resjudicata]

@tpham0716 They didn’t have enough money for the clearing of those trades

 

[tpham0716]

@resjudicata Sure they didn’t.

 

[kbupdike]

@hannahgrace Robinhood offers target date funds, see $ITDF for example.

 

[honeyedlight]

@gracefulgalpal One disadvantage off the top of my head is that Fidelity has more investment options than RH such as bonds, CDs, and mutual funds if you care about those.

 

[candycehill]

@honeyedlight Also it’s quite possible that they charge a hefty fee for moving your account elsewhere later.

 

[elijahrhodes]

@candycehill Right... its interesting, they would be paying $10/month or $600 to get $3,000, so robinhood is paying them $2,400 to use them, except if they shut down or you have to move for any other reason you just paid them money for no reason.