I haven't used Robinhood, but welcome new fintech companies who lower the barrier of entry toward financial health for the average consumer. Good for them, and I hope they use this money well.
The barrier is already pretty low:
- Max out your 401-K (and collect your company match, if any).
- Invest in low-cost index funds from Vanguard.
- Pay off your credit card debt, if any (since you probably won't make 20+% a year on your other investments).
- Don't buy lots of stuff you don't need.
On average, you'll get much better results this way than by trading stocks.
Edit: Also, as the tax base gets smaller, I can see some of the tax advantaged accounts people have money in become not so tax advantaged. The money to replay all this debt (including infrastructure, environmental, and policy debt) has to come from somewhere, and I'd bet it's both from inflation and savings. Or someone hits the reset button with a revolution or war.
That's not because there is a high bar to investing, it's that most people are financially undisciplined. I see it all the time, people get a bonus and the very first thing they do is go buy a new car. Literally one of the worst things you can spend money on is a car, and a new one makes it even worse. Many people carry CC debt, which is absolutely crazy. Keep in mind I'm not talking about people who are struggling just to put food on the table, but people who should be able to save, but instead do really stupid things with their money.
2. If you only have $25 left at the end of the month, you shouldn't be investing in stocks at all. You should be putting your $25 in a savings account for emergency expenses.
But Robinhood's free. You can do $6 of trades in a year, still learn about stocks and not necessarily lose anything. Very hard to complain about that.
I think a little literacy is needed, since if you're lucky enough to have savings buying CMF+VXF is a much better deal than keeping it in a bank account.
Right now equities are priced very highly
Most of the traditional brokers also offer commission free ETFs like VTI and VOO. I would argue it is much better for new investors to be buying VTI over thinking about getting rich buying penny stocks.