I think Robinhood is great for that! Zero commission means you can afford to buy small amounts without worrying about fees eating into your principal too much.
You can put in $250 every pay period and buy a share of $SPY without losing ~3% to fees.
With commissions involved you'd want to wait until you could afford a larger trade, at which point you've lost time in the market.
There's a broad spectrum of public companies obviously, but it's hard to see $AAPL as speculative in the same sense that people call penny stocks or cryptocurrencies speculative (i.e. much, much more risk involved in the latter two). Investing in large cap equities isn't the stupidest thing you could be doing as a new investor - that award would certainly go to buying derivatives.
And indeed if I have criticism of RH it's that they're trying to appeal to all investor types at the same time, new and experienced alike. It's easy to see how new investors can get confused when RH offers the ability to sign up for cryptocurrency trading and options trading, two things new investors obviously should not be doing (though admittedly there's obviously a questionnaire involved before you can be approved for options trading, not sure about cryptocurrencies).
More than 90% of my investments go into index funds and 10% into individual stocks, but if hindsight was 20/20 it would be 100% into my individual stocks and I’d be retired on my own private island today.
In which case, of course, you should invest entirely in the highest rate-of-return investmentd that the rest of the market currently undervalues.
The problem is people are prone to overrate their own foresight.
But yes most people are better off buying index funds. That's where most of my money goes.
I don't think Robinhood is terrible. I just think someone who doesn't know what they're doing would be better off starting with Betterment or Acorns, which are just as user friendly as Robinhood.
Viewed another way, I would say the Vanguard fund costs are low for a reason. It seems unfair to expect a Mercedes experience for a Honda worth of expense ratio.
If you sign up with Vanguard, you still have to pick which fund(s) to buy. If you don't know anything about investing, that can be a daunting task. With Betterment, the only decision you have to make is the percentage split for stocks vs. bonds.
With regards to my friends though, my priority was to get them to invest in the first place, and the user friendliness of Betterment helped a lot.
The lack of financial education in the US really makes me sad sometimes. And it pisses me off that companies like RH will take advantage of that.
This is literally what happened to me. I lost out on 20%+ in gains because I procrastinated a year after reading about how much Betterment fees eat into your gains. In hindsight the amount of money I missed out on was WAY more than any fee Betterment would have hit me with.
I think for most people this actually ends up producing better long term returns.
Even a slight difference in fees is worth thousands in the long run.
Robinhood's encouragement of the instant gratification, poorly researched trades is going to end badly for many of it's customers when we enter a bear market.
Edit: I also forgot an increasingly important diversification by asset manager as well.
Vanguard has long offered commission-free trades of their ETFs and mutual funds. Same for many index fund providers.