THIS is how to make money with Robinhood [2022]

What is Robinhood?

Robinhood is a financial technology company that makes investing friendly, approachable, and understandable for beginners and experts alike.

Robinhood disrupted the financial industry for the better by offering zero commission fees, no account minimums, fractional shares, crypto exposure, and a simple, mobile-friendly sign-up process. It has an easy-to-use and sleek design that feels like social media. The platform also uses user networks to create a large volume of trades. 

Robinhood incentivizes its users in different ways. It celebrates your trades with bursts of confetti after each transaction. It also gives you free stock if you refer friends to the platform. Essentially, Robinhood offers gamification of the stock market.

Now that you know what Robinhood is, let’s look at how to make money with Robinhood. 

2. What is a Dividend? Robinhood


Date Submitted: 06/18/2020 01:14 AM

Average star voting: 5 ⭐ ( 17997 reviews)

Summary: Investors in stocks earn returns primarily in two ways: dividends and stock price increases. Dividends are when a company returns a portion of its profits to shareholders, usually quarterly.

Match with the search results: How do I get started? · Go to the Account tab (person icon) · Tap Investing · Scroll to Dividend Reinvestment section · Tap Enable Dividend Reinvestment · Toggle the ……. read more


The relationship between dividends and market value

Dividend-paying stocks provide a way for investors to get paid during rocky market periods, when capital gains are hard to achieve. They may provide some hedge against inflation, especially when they grow over time. They are tax advantaged, when compared to some other forms of income, such as interest on fixed-income investments. Dividend-paying stocks, on average, tend to be less volatile than non-dividend-paying stocks. And a dividend stream, especially when reinvested to take advantage of the power of compounding, can help build wealth over time.

However, dividends do have a cost. A company cannot pay out dividends to shareholders without affecting its market value.

Think of your own finances. If you constantly paid out cash to family members, your net worth would decrease. It’s no different for a company. Money that a company pays out to shareholders is money that is no longer part of the asset base of the corporation. This money can no longer be used to reinvest and grow the company. That reduction in the company’s “wealth” has to be reflected in a downward adjustment in the stock price.

A stock price adjusts downward when a dividend is paid. The adjustment may not be easily observed amidst the daily price fluctuations of a typical stock, but the adjustment does happen. This adjustment is much more obvious when a company pays a “special dividend” (also known as a one-time dividend). When a company pays a special dividend to its shareholders, the stock price is immediately reduced. 

What Is the Fastest Way To Make Money in Robinhood?

The fastest way to make money on Robinhood is by buying exchange-traded funds (ETFs). They give you exposure to the stock market without you having to buy an individual share.

Of course, it would help if you bought an ETF that tracks the market index — for example, Vanguard’s Total Stock Market Fund. After buying the ETF, you should hold on to the funds for a long time because the stock market yields around 10% every year.

Every time you sell stock to make a profit, you will have to pay capital gains tax. To avoid this, you can hold on to your funds for the long term.

Robinhood’s Dividend Reinvestment (DRIP)

If you use the dividend reinvestment feature, dividends earned will be reinvested back into the issuing stock. Robinhood will purchase fractional shares of the stock or ETF, so you don’t need to worry about the share price.

On the app, all you have to do is turn on Dividend Reinvestment Plan or “DRIP” for short.

Here’s how to enable dividend reinvestment on the Robinhood app:

  1. Go to the account tab by clicking on the person icon
  2. Click on investing 
  3. Scroll down until you see dividend reinvestment and click on it
  4. Toggle the switch to on to enable dividend reinvestment

Keep in mind, however, that Robinhood requires you to enable fractional shares to use DRIP.

How to Mitigate Risk on Robinhood

The least risky way of trading on Robinhood is to not do any margin trading.

If you’re dead set on margin trading, follow the following advice to mitigate your risk:

  • Make sure you have enough cash in your account. If you ever have a margin call where Robinhood needs to cover your losses, it will pull from your cash reserves. This way you won’t have to sell any stocks to cover the call.
  • Know the stock’s Maintenance Base Requirement. If the margin maintenance requirement is set at 30% and you own $10,000 worth, you must have at least $3,000 in account equity backing the investment.
  • You should be extremely confident in the expected value of your investment to even consider margin. The expected return should far outweigh the cost of interest on the loan.
  • Pay off the interest incurred on the margin amount you used. Robinhood charges its users 5% yearly interest on the settled margin amount above $1,000.

Investing is unforgiving. Be smart, play the long-term game, and invest in quality assets.

How Much Can You Make on Robinhood?

You earn a 0.30% annual percentage yield on the uninvested cash. This means that if you start with $1,000 on Jan. 1 and you do not withdraw or deposit any funds for a year, you will earn $3 annually.

Collecting Dividends in Robinhood

Once you’ve chosen dividend stocks to invest in, you can purchase them from within the Robinhood app just like you would with any other investment. To collect your dividends, you then simply hold the stocks for the long term. Each quarter (or at different intervals depending on the company), eligible companies will pay you a cash dividend. You can see your dividends in the Messages tab in the app.

Where do the dividends actually go? By default, you’ll see them added to your Buying Power on the home screen of the Robinhood app. Once they’re paid to you, you can invest them however you’d like, or transfer them back out to your bank account to spend on whatever you want. Once a company has paid you a dividend, it’s your money!

There’s another option, too. You can click on a dividend in the Messages tab, and then select View Dividend, and choose the Dividend Reinvestment option. If you enable reinvestment, your dividends will be automatically reinvested into the same stock that generates them. This can be a great way to grow your investments automatically over time.

Which should you choose? If you’re planning to use dividends as a source of passive income that you’re going to spend right now, keep the default setting and let your dividends flow to your Buying Power, and then transfer them out to your bank as cash. If you’re investing for the long term and don’t need the money now, reinvestment can be a great way to automatically add to your investment portfolio over time.

One thing to keep in mind: no matter what you do with your dividends, there are tax implications. Talk to a tax professional advisor to understand how dividends will impact your taxes, and to learn how to report dividend income properly.

Next steps to consider

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What are the Dividend Aristocrats?

The Dividend Aristocrats refers to a group of companies from the S&P 500 that have increased dividends per share for at least 25 consecutive years. The S&P 500 Dividend Aristocrats ETF (NOBL) allows investors to easily purchase these companies that have consistently rewarded shareholders.

To be included in the dividend aristocrat group, certain criteria must be met:

  • Companies must be a member of the S&P 500.
  • Must have increased the annual total dividend per share for at least 25 straight years.
  • Must have a float-adjusted market capitalization of at least $3 billion.
  • Must have an average daily trading amount of at least $5 million.

The list of dividend aristocrats comprises 65 companies (as of March 2022) and includes well-known brands such as Coca-Cola (KO), Walmart (WMT) and International Business Machines (IBM), as well as lesser-known companies like Illinois Tool Works (ITW) and Expeditors International of Washington (EXPD).

Things to watch out for

Taxes: It’s important to remember that dividend income is typically taxed at ordinary income rates if the shares are held in taxable brokerage accounts. To avoid this, you might consider owning the shares through a tax-advantaged account like a traditional or Roth IRA.

Dividends can be cut: Dividends are not guaranteed and sometimes companies are forced to cut them or eliminate them entirely due to financial difficulty. That’s why you need to watch out when a company pays a very high dividend. Sometimes that high yield really is too good to be true, and the high yield may be a signal that investors expect the company to cut the payout.

But owning a diversified group of companies through an index fund can be a great way to avoid the risk of picking the wrong company. In the past 50 years, the only meaningful decline in dividends per share of the S&P 500 index came during the financial crisis of 2008 and 2009 when many banks were forced to cut their payouts. Dividends fell 21 percent during that time frame, but have since surpassed the prior peak by a wide margin.

Rising interest rates: When rates go up, it could also pose a risk to funds and ETFs with high dividend yields. As rates rise, investors who have purchased dividend funds to boost their income may rotate out of high-yield stocks toward bonds or other assets, causing stock prices to fall.

5. THIS is how to make money with Robinhood [2022]


Date Submitted: 03/31/2020 09:35 AM

Average star voting: 4 ⭐ ( 55461 reviews)

Summary: Having a hard time making money on Robinhood? Use this guide to learning everything you need to know about making money with Robinhood!

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