Robinhood or Loyal3: Commission-Free Investing. Invites Available!

I’d like to quickly touch base on two of the most popular commission-free trading platforms.

First Loyal3. Loyal3 has become popular among the dividend investing crowd. While it doesn’t offer the largest selection of stocks (currently 64), there are plenty of high quality options on it. It also offers some growth stocks that do not pay a dividend. And, it is one of the cheaper ways to participate in an IPO.

I’m currently investing $75/month into Loyal3 dividend among three stocks, Berkshire-Hathaway, Disney, and Unilever. I’ll likely up that amount over time, but I don’t want to take too much away from accumulating cash in my Schwab account to purchase larger numbers of shares.

Loyal3 used to offer the ability to make stock purchases on a credit card (thereby collecting rewards), but too many people were abusing that option by buying and selling shares on credit card just to game the system and collect all the rewards. Loyal3 had to wisely turn off funding via a credit card, I’m sure, in order to stay a viable company. Purchases and sales made on Loyal3 can’t be timed as each order is grouped together. This cuts down on their costs.

Loyal3 offers web access as well as an iPhone app.

Robinhood is a newer brokerage account that is currently invite only. Unlike Loyal3, it is currently iPhone access only. They say they are also working on a web interface. It is also commission-free, but unlike Loyal3, you have access to the all the stocks traded on US exchanges. Purchases and sales are made as close to realtime as possible.

I funded my Robinhood account with a small amount of money, but have yet to make my first purchase. So far as I’ve used it, it seems to be exactly like the more traditional brokerage accounts at places like Schwab, TD Ameritrade, etc but with a flashier iPhone app. Research options for stocks are, however, extremely limited. In fact, Yahoo Finance or Seeking Alpha provides way more stock information than is available from the Robinhood platform. However, that’s a price that I’m sure many people would be willing to pay to have zero commission costs.

My first thought when I heard about Robinhood and got my invite to join was how in the world is Loyal3 going to survive! Loyal3 only offers a handful of stocks while nearly the entire stock universe is available commission free on Robinhood.

The catch for Robinhood is that, like a traditional broker, only full shares can be purchased. And, at this point you can’t set up a recurring investment plan. Through Robinhood I would no longer be able to devote a small amount each month to purchase partial shares of Berkshire-Hathaway, for example.

For people that trade often or in smaller amounts, Robinhood is a great option. The commission costs would really eat into any profit for them.

When I choose to make a stock purchase I wait until I have accumulated at least $1,500, meaning that my initial commission cost is less than 0.6% (for a $8.95 commission). Yes, those expenses add up, but I trade so little that in the long run having my portfolio be as consolidated as possible is best for me.

Therefore, I’d recommend Robinhood for those people interested in opening their first brokerage account, those that want to diversify into a few accounts, or those people that want to have the entire stock universe available but can only do small purchase at a time.

I’d recommend Loyal3 for those investors interested in dollar-cost averaging into a few select stocks via small monthly amounts debited from their checking account. These people should like accumulating partial shares of companies that are perhaps too expensive for them to buy full shares in.

I am currently out of invites. But, a few people should hopefully be getting back to me with more. Request one in the comments below. Please just include your email in the form…you don’t need to display it publicly in the comment. Thanks!