Is the Robinhood 3% match free money?

[someguy29]

@fromsalemwithlove 5 years

 

[gracefulgalpal]

@fromsalemwithlove I’m in no hurry. A decade or so

 

[samuelcox003]

@gracefulgalpal Is RH going to be around in a decade?

 

[aliasaad697]

@samuelcox003 It’s FDIC insured. You don’t just lose the money if Robinhood goes bankrupt

 

[samuelcox003]

@aliasaad697 You're right. You lose money when their app glitches and you can't sell your securities, or they sell them for you because they are too risky.

Just feels like trusting robinhood for 3k is a highly regarded move.

 

[aliasaad697]

@samuelcox003 This is r/investing not wallstreetbets. If you are buying investments and holding them for years, how does that glitch (which I think hasn’t happened in years?) impact you?

 

[samuelcox003]

@aliasaad697 With robinhood you're the product, not the customer. If you're cool with that, go for it, but like I said it's highly regarded.

If your broker steals other clients money, why would you think they're not going to take yours?

 

[aliasaad697]

@samuelcox003 That’s a nice talking point and all, and yeah I agree they sell order flow. Which doesn’t really matter when you’re investing not gambling.

Is there anything wrong with Robinhood other than people being bitter that they blame Robinhood for what happened with GameStop? I’m open to being wrong but I don’t see any actual criticism in this thread other than the GameStop fiasco and selling order flow.

 

[samuelcox003]

@aliasaad697 Is there anything wrong other than that time they fucked over the majority of their customer base? Haha what? Is this satire lol?

They literally showed you what they will do in times of need. Throw your ass right under any bus they can find. Personally that's not where I would trust my money. If you're comfortable with that, go for it. Just don't be surprised when shit goes south.

 

[aliasaad697]

@samuelcox003 It’s an investment app, not a short squeeze app. It works completely as intended and you’re in this thread giving the OP bad advice as their strategy works exactly as they think it does. Please don’t let your gambling bitterness get in the way of people asking for legitimate investment advice.

 

[bambamikesell]

@samuelcox003 Do you have a crystal ball or something. They damn well could be

 

[midramble]

@gracefulgalpal Yes, this is the best deal I’ve ever seen. Also Robinhood Gold is $5 a month, not $10.

 

[miod]

@midramble Found Vlad

 

[logann]

@miod Can you point to a better deal than getting an automatic 3 percent on a transfer?

 

[heatz]

@gracefulgalpal Another Pro-Robinhood point:

Paying for Robinhood gold gives you $1,000 of zero-interest margin to use, which you can throw in a cash-management eft like BOXX to bring the annual cost of gold down to like 10 bucks.

 

[logann]

@heatz Can you explain that more? BOXX will get you $50/year on the $1k, is that what you're saying?

 

[resjudicata]

@logann To get Robinhood Gold you need to pay $5 per month, 60 per year.

Having RH Gold gets you the 3% match in the IRA

But you also get 1k of "free" margin access (note, you do need 2k in a regular brokerage account to access this margin which is standard in every broker)

You take this margin and buy a money market fund, bond fund or something similar (i personally use SGOV right now) to create some arbitrage. Currently it is easy to get about 5% near risk free return.

So you use the 1k to generate about $50 per year to offset the robinhood gold cost, essentially bringing down the real cost to about $10 per year

You can of course use your margin however you desire

 

[manders]

@resjudicata Curious, in this situation, how do you pay for gold? The dividend payout will just lower your margin and/or be reinvested. How is gold fee taken out of your account? The possibility of there being a lapse in gold and losing the match seems too great for this but genius idea.

 

[resjudicata]

@manders You turn off DRIP for that investment, so the money goes to your balance rather then reinvested.

The gold fee gets deducted automatically from your brokerage account.

One caveat to this process is you do need at least 2k in your normal broker account to get access to margin. That's just the base rules for any broker.

Assuming you have 2k and have RH Gold. The first 1k of margin used is at no extra cost. Currently a super safe investment is SGOV with 5.3% yield. Though you will have to keep an eye on the return rate.

You take your 1000 in margin and put it into SGOV. (though you could throw it into any stock of your choice, I'm just giving the safest example) turn off drip for SGOV.

Currently your 1000 used margin is now returning $4.3 a month and you use this to pay off most the gold fee. Just let it sit in the broker account.

A small deposit of an extra dollar per month more then covers the rest. If you put in some of your own money into SGOV, say $200 extra, then the whole Gold fee would be covered at the current return rate.

In full discloser, There would a very small bit of taxes owed at the end of the year because of the dividend payments but it even so still very much helps reduce the cost of Gold to a fraction of the $5 per month

For me, I personally have Gold, use the above trick and find it very worthwhile.

 

[manders]

@resjudicata Thanks for the detail, that all makes sense. The huge caveat being that you need the dividend to hit the account prior to the gold fee. Reminder, I think there is one month of no dividends for sgov off the top of my head (December, January?) so you want to make sure you're covered there.

Great strategy. For me, I'm worried either I, or RH will have a potential issue with the gold fee being either deducted or covered in the right order where I decided the $35ish or whatever savings (SGOV return minus taxes) is worth eating on the off chance something gets messed up and there is a mistake/lapse in gold and a loss of the 3%. I didn't want to potentially have to deal with that remediation with customer service.