$1000 Growing in Robinhood

The sixth and final account that I am using as part of the 2019 Grow Your Dough Challenge is with the mobile investing app Robinhood. The YouTube channels and financial websites I have visited these last few months have been saturated with ads, videos, or articles about Robinhood. The Grow Your Dough Challenge provided me with the perfect reason to check out the platform myself.

The no commission fees per trade that apply to Robinhood have allowed me to buy minimal amounts of shares in multiple companies without wasting money on fees. My investment strategy for this account is probably the most complex of the 6 accounts I have deposited money into for the Challenge. Let me explain.

I have recently read the classic financial tome A Random Walk Down Wall Street by Burton G. Malkiel, who espouses the benefits of investing in index funds. I decided to try an experiment based on this advice. Though, instead of investing in an index fund, I would create my own mini fund of stocks roughly based on the percentage of stocks held in the top sectors in an S&P 500 fund (cutting out paying the expense rate on a mutual fund or ETF).

Read this classic investment book

I used the iShares S&P 500 Value ETF (IVE) as my template. The sector holdings breakdown for IVE can be seen in the following image. I ended up going a little bit heavier in the real estate sector and sharing part of the percentage with financials in order to get some higher dividends and skipped buying in the basic materials and communications categories. One company is doing double duty in both the Energy and Utilities categories.

I researched stocks in these sectors and applied my usual criteria for choosing a company to invest in: value over growth, conservative to moderate risk, and reasonable dividends. As I was working with $1000 and trying to buy across multiple sectors, I wanted to invest in stocks with lower per share prices (the lowest per share price I paid was $6.25 and the highest was $71.55). I purchased the amount of shares that would be somewhat close to the percentage (for example, paying $162.90 for my tech stocks — so technology makes up 16.2% of my portfolio; it is 15.3% in the S&P 500 Value ETF).

It has turned out to be to my disadvantage starting the challenge a few weeks late as prices for the stocks I bought tended to be much lower at the beginning of January than early February. Here is the breakdown of the 10 stocks I purchased, plus the free stock I was given by Robinhood for following a Refer-a-Friend link (Sprint — not a stock I would have chosen myself).

Two of these stocks I also hold in my main portfolio, Pfizer (PFE) and Dominion Energy (D). All the others I only hold in this Robinhood account. I’ll breakdown more about each stock I purchased for the Robinhood account in future blog posts.

So far, I have been impressed with how easy it is to use Robinhood. The account creation was straightforward, with the onscreen instructions leading the investor through step-by-step. My only critique is that when going to “buy” a stock, the order form will auto-fill with a market price. You have to take an extra step to get to a limit order (which is how I always place my orders), by selecting “Order Types” from the right-hand corner of the menu (not by tapping on market price in the middle of the screen). Then you can choose “limit” and specify your maximum price.

If you are a beginner, looking to get your feet wet in the stock market or you want an account to play around in outside of your main holdings, Robinhood would be a good platform to use because of its simplicity and low cost. It certainly is not as robust a platform as E*Trade or TD Ameritrade, so if you are planning on having a large portfolio with less sought out investments or more complex trading, and would be holding investments long-term, well-established brokerages would be a better choice for you. If you would like to open a Robinhood account, please use my Refer-a-Friend link. We each get one free random stock in our Robinhood accounts (I got a $6 stock, but they there is a chance of getting a stock worth up to $200).