Robinhood now lets you invest on autopilot

Posted: 14 May 2020 3:27 pm
News

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New Recurring Investments feature allows you to schedule consistent trades in the stock of your choice.

What was once the exclusive realm of mutual funds and robo-advisors is now available for individual stocks and ETFs. Another new feature launched by investing app Robinhood on Thursday lets you put your investing on autopilot by putting a set amount of money into the stock or ETF of your choice on a set schedule, according to an announcement from the company.

For example, you can now invest $100 every Monday in Amazon stock (AMZN) and Robinhood will buy as much of a share of the stock as possible at the market price on that day.

The feature is called Recurring Investments and works on the stocks and ETFs within Robinhood that are enabled for fractional shares — which itself is a recent feature addition released in December 2019 that allows you to buy any portion of a share of a stock or ETF instead of having to buy a full share.

Another first for Robinhood

This style of automatic investing has previously only been offered by various investment platforms for mutual funds, dividend reinvestment plans (DRIPs) or entire preselected portfolios — not individual stocks or ETFs. For example, you can regularly invest in mutual funds directly through the mutual fund issuer, like Vanguard or T. Rowe Price, or through some brokerage accounts like Fidelity. DRIPs only allow you to automatically invest the dividends you receive back into the stock you received it from. And robo-advisors like Betterment or SoFi require you to preselect a full portfolio that you can regularly contribute to.

The closest thing to Robinhood’s new Recurring Investments is likely M1 Finance, whose automated investing feature requires you to create a portfolio, but lets you pick which stocks to include and weight them as you wish.

The benefit of automated investing

The concept of automated investing is a key component of the dollar cost averaging philosophy, which asserts that consistent, recurring investments are a hands-off approach to building wealth because you’ll be buying both in bull markets and bear markets. And the stock market has historically risen by an average of around 7% per year over time.

Just remember that you’re taking a risk with any investment and there’s no guarantee that future returns will look anything like the past.

How Robinhood’s Recurring Investments works

Robinhood lets you choose the start date of your recurring investment, its frequency — daily, weekly, biweekly or monthly — and the source of funding. You can use your trading account balance or deposit money directly from a bank account. Once set up, the automatic investment will be executed at the market price at noon EST on the day you selected or, if the market is closed, the next day the market is open.

To get started with Recurring Investments, open a new Robinhood account or log in to your account and search for the stock or ETF you want to buy. The new feature will be one of the trade type options. On the mobile app, tap Trade > Buy > Shares/Dollars > Recurring Investment. On the website, click “…” > Recurring Order.

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