When I wanted to start investing, I looked for a discount broker instead of wasting my money on costly fees from expensive brokerage firms. However, I found so many options that I could choose from.

In doing my research, I discovered the two major players in the discount broker space that focus on young investors are Ally Invest and Robinhood.

Here, I take a deep dive into these platforms, looking at how they work, the fees they charge, and much more. With this information, you can decide which one is right for you.

What are Ally Invest and Robinhood?

Ally Invest is a full-service online investment platform that offers self-directed or “robo-advised” managed portfolios. Ally had no-fee commissions before other brokers caught onto the trend, and they’ve built a solid reputation as a discount brokerage.

Robinhood, designed for young traders new to investing, emerged first as a stock trading app and grew into a web platform. The name echoes the legendary hero who robbed the rich to help the poor. While Robinhood trades aren’t that radical, they do promote equality of access with a $0 account minimum and no transaction fees. Users who opt for the premium account Robinhood Gold pay $5 a month for access to extra perks like after-hours trading.

Like Ally, Robinhood used its commission-free status as a claim to fame. Partly in response to Robinhood’s initial popularity, most other brokers have now dropped fees on commissions.

Robinhood has fewer account types – your only choice is a taxable account – and limited asset classes to trade. Ally’s offerings are much broader by comparison, and Ally has more educational features and personalized recommendations for trading newbies.

Advanced investors will find plenty of choices at both brokerages, however, and those who want a straightforward stock trading experience will find one at Robinhood. Robinhood also has a few features Ally lacks, such as cryptocurrency trading.

Ally Invest vs. Robinhood overview

  Ally Invest Robinhood
Account fees No fees: self-directed or managed accounts, ETFs, some mutual funds, inactivity
$50: full outgoing transfer
No annual, inactivity or ACH transfer fees. $75 ACAT outgoing transfer fee.
$5/month: Robinhood Gold
Minimum investment No minimum: self-directed account,
$100: managed account
$0 for brokerage account and for Robinhood Gold account, $2,000: for a margin account (regulatory minimum)
Investment choices Stocks, bonds, ETFs, mutual funds, options, margin accounts, Forex (foreign exchange), retirement, futures Stocks, ETFs, options, cryptocurrency, ADRs (American Depositary Receipts), margin accounts (for Robinhood Gold members)
Account types Taxable, joint, IRA (Traditional, Roth, Rollover, SEP, SIMPLE), Trusts, Partnerships, Limited partnerships, money market, CDs, checking, saving Taxable, cash management (coming soon)
Options trades 50¢ per contract No fee
Number of no-fee ETFs 115 All available ETFs are fee-free
Where to access IOS or Android app, Desktop/Web based IOS or Android app, Apple Watch, Desktop/Web based
Customer service 24/7 live chat, e-mail, phone E-mail and social media

About Ally Invest

Ally investors can open a taxable account, which combines multiple investments, or a retirement account with several IRA options. Self-directed portfolios don’t have a cash minimum, so you can get started right away. Investors with at least $100 can get more guidance through a managed portfolio, where a robo-advisor tailors selections to your financial goals and acceptable risk level.

Traders can keep it simple with the “core” portfolio, a standard diversified mix of investments. You can also grow tax-exempt income with a “tax-optimized” portfolio or focus on mission-driven companies with a “socially aware” portfolio. While Robinhood portfolios are more one-size-fits-all, Ally has opportunities to customize.

Additional banking services

Interest checking and high-yield savings accounts are available to all investors through Ally Bank, a good option if you want to combine banking and investing services.

For beginners

The smartest way to start investing, even for young investors, is to focus on retirement. With multiple IRA options and 401(k) rollovers, Ally will get you on the road to retirement savings.

If you’re feeling less than confident about your trade selection skills, a managed portfolio will make picks for you based on your preferences. This is a feature many online brokers offer. Ally adds an extra level of security with the Cash Enhanced Managed Portfolio, which keeps 30% of your investments safely in cash.

For advanced investors

Varsity-level investors can get into options trading – buying assets at a fixed price for a certain period of time. Ally charges 50¢ per contract fee on options. This is a low rate compared to most other brokers, though not as low as Robinhood’s fee-free options trades. Ally gives you some help with the news and strategies in their Options Playbook.

You can also venture into forex (foreign exchange) and futures trading; Ally has customizable platforms for both. Bond trading is reasonably priced at $1 per bond with a $10 minimum.

Tools for trading

Ally investors get the following tools for free:

  • Customizable dashboards.
  • Profit/loss and probability calculators.
  • Maxit Tax Manager, which shows how trades impact your taxes.
  • Real-time streaming charts and market data for investors who trade over 10 times a month.
  • Stats and metrics on individual companies.

Except for the real-time charts and data, these tools are available to investors at all levels. 

Research and education

I don’t have to tell Money Under 30 readers about the benefits of researching your financial decisions; you’re clearly doing something right. Ally agrees. The “Do It Right” section on Ally’s web-based platform has investment-focused advice along with guidance for other money milestones like home and car purchases. A live stream of investment news gets weekly updates.

Mobile app

Ally Mobile lets traders check and analyze their portfolio on the go, though it lacks some of the streaming capabilities in Robinhood’s mobile app. If you bank with Ally, though, you get the convenience of an app that handles both banking and brokerage services.

About Robinhood

Robinhood is set up for simple, self-directed trading. It offers taxable accounts only—no retirement or joint accounts. Investors manage their own portfolios.

Compared to Ally and most other brokerages Robinhood doesn’t offer many asset classes, so you’re limited in what you can trade. But for investors who want to stick to ETFs and stocks, Robinhood’s offerings should be more than enough. And Robinhood protects up to $500,000 in securities and $250,000 for cash claims.

Cryptocurrency trading is one of the platform’s biggest perks. Robinhood Crypto isn’t available everywhere yet, but if you live in an eligible area or state, you can buy and sell six different cryptocurrencies including Bitcoin and Ethereum. And Robinhood users in all locations can see cryptocurrency market data. Since cryptocurrency investments aren’t regulated or protected like other stocks, traders need to be extra comfortable with risk.

Like many brokerages, Robinhood is expanding its offerings to include savings-style accounts. In late 2019 Robinhood rolled out their Cash Management account to a few users (interested traders can join a waiting list). Account-holders get 0.30% APY, a debit card free to use at eligible ATMs, and insurance up to $1.25 million through the Financial Deposit Insurance Corporation (FDIC).

also plans to offer dividend reinvestments—automatically reinvesting cash dividends into stocks or ETFs for bigger returns—and scheduled recurring investments. As a startup they’re growing quickly, so stay tuned.

For beginners

The commission-free model on all trades is a great feature, especially if you’re just getting started. And Robinhood, unlike Ally, is starting to offer fractional shares where you pay a smaller amount for a portion of a share—making diversification much easier.

Brand new investors should note Robinhood tends to promote stock trading, which comes with a higher risk than investing in ETFs. And for most investors, the main priority will be a retirement account, which Robinhood doesn’t offer. I’d suggest establishing a retirement fund at another brokerage first.

For advanced investors

If you have the experience for options trading, Robinhood is the cheapest place to do it; they don’t charge any contract or commissions fees on options. You can get trade strategies and place complex orders. Despite the savings, some users find Robinhood options trading frustrating, with a delay in market data compared to other brokers.

Margins trading – buying securities with borrowed funds – is another varsity-level option that gives investors some flexibility. Like options trading, trading on margin is highly volatile (you can gain a lot or lose everything). You need a Robinhood Gold subscription ($5/month) to trade margins and the minimum starting amount is $2,000.

Tools for trading

Both the web version and the mobile app keep things simple. It’s easy and quick to set up an account and it’s relatively easy to trade stocks and ETFs. You can organize stocks by sector or category to find companies you want to invest in (a nice feature for a self-directed account).

Though Robinhood lacks the customization capabilities of Ally and other brokers – you can’t personalize your charts or dashboard – you’ll have all you need to get the job done.

Robinhood Gold

Robinhood’s enhanced feature charges a $5/month subscription (with a 30-day free trial) for perks like:

  • After-hours and pre-market trading.
  • Margins trading (with a $2,000 federally mandated minimum balance.)
  • Market data from Morningstar and NASDAQ Level II streaming reports.
  • A line of credit.
  • Instant deposit access.

For active, frequent investors who want margins trading opportunities, Robinhood Gold may be a useful upgrade.

Mobile app

Since Robinhood was originally designed as an app, its mobile trading platform works smoothly. You can trade and see watchlists just as you would on the website. Other features include an ongoing news feed and customizable alerts – you’ll get notifications about earnings announcements and other stock news on the go.

Research and education

Compared to other brokers, Robinhood is light on research and data. You’ll still get basic info you need to be a smart investor, including earnings calendars and calls, candlestick charts, and lists of popular stocks in case you’re curious about what others are buying. The thorough research in NASDAQ and Morningstar reports is only available through Robinhood Gold. 

For general investment knowledge, Robinhood has helpful articles explaining basic terms you’ll hear in investment spaces. Their “Snacks” feature gives a three-minute daily rundown of essential finance news.

Advertiser Disclosure – This advertisement contains information and materials provided by Robinhood Financial LLC and its affiliates (“Robinhood”) and MoneyUnder30, a third party not affiliated with Robinhood. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Securities offered through Robinhood Financial LLC and Robinhood Securities LLC, which are members of FINRA and SIPC. MoneyUnder30 is not a member of FINRA or SIPC.”

Ally Invest

Ally is transparent about their investment performance statistics, which you’ll see when you set up a managed portfolio. Investors pick a goal-saving for retirement, building wealth, making a big purchase, or generating income. Then you choose a time horizon and risk tolerance level. After entering your financial stats and picking your portfolio type, you get a personalized recommendation including asset allocations and a view of typical returns.

Here’s a representative look at Ally’s stats for core and tax-optimized portfolios ranging from conservative (super low risk) to aggressive (super high risk).

FYI: Annualized returns are estimated annual returns over a typical year (or years) for an account.

  Core Conservative Core Moderate Growth Core Aggressive Tax-Optimized Low Risk Tax-Optimized Conservative Tax-Optimized Moderate Growth Tax-Optimized Aggressive
Annual returns 2014 4.91% 4.49% 4.08% 4.74% 5.79% 4.94% 4.14%
Annual returns 2018

0.03% 3.17% 5.97% 0.27% 0.09% 1.50% 5.96%
Annualized return [eight years 2011-8] 3.14% 4.38% 5.36% 3.10% 3.42% 3.11% 5.38%
Cumulative return [eight years 2011-8] 28.02% 40.90% 51.90% 27.65% 30.91% 42.52% 52.12%

Robinhood

Robinhood doesn’t publish their investment performance stats for the public. They report trades on a per-dollar basis, not a per-share basis, which is far more common.

Investors can see their own portfolio value, including unrealized gains and losses, but they don’t get much other analysis from the Robinhood platform.

Ally Invest vs. Robinhood – Investment performance conclusion

Nondisclosure from Robinhood makes comparing investment performances tough. Investors who value full data transparency might want to go with Ally. For casual, infrequent investors and those willing to do outside research, Robinhood’s lack of statistics may not be a problem.

Ally Invest and Robinhood pros

Ally Invest

  • Stellar customer service – Ally’s 24/7 online chat and phone lines get your questions answered quickly with speedy routing to representatives.
  • All-in-one banking and investing – Ally investors are eligible to open Ally bank accounts, and they can move money between the two accounts with ease. Ally Bank has decent rates and perks with a 1.90% APY on savings accounts – an unusually high yield.
  • Customizable platform – The Ally browser’s InvestLIVE platform can be customized based on the stats you want to see first. And you have control of your dashboard on both the browser and web.

Robinhood 

  • Instant access to funds – Any deposits of $1,000 or less, and any funds you get from selling stocks, are available immediately without a three-day lag time. Robinhood works with major banks to get instant verification on your deposits.
  • Simplicity – The no-frills web and mobile platforms make account setup and maintenance a breeze.
  • Cryptocurrency trading and tracking – Not every broker offers this feature.
  • Free options trading – For the high-level trader, it’s hard to beat this deal.

Ally Invest and Robinhood cons

Ally Invest 

  • No stock or ETF screeners – To search for and filter stocks based on specific criteria, you’ll have to go to another platform.
  • Some commission charges – While all Robinhood trades are commission-free, Ally charges a few fees. Penny stocks and low priced securities — anything under $2 per share — come with a $4.95 cost per trade.

Robinhood 

  • No retirement accounts – This fundamental savings goal isn’t available through Robinhood investments.
  • Minimal data and research – Compared to Ally – and to most other brokers – Robinhood doesn’t provide much analysis, tools to maximize your profits and get trading ideas, or in-depth investor education.
  • Encourages high-frequency trading – Since the platform focuses on stocks, it highlights stock trades rather than lower-risk choices, and investors might feel pressured to make rapid decisions.
  • No bonds or mutual funds – Robinhood lacks these common asset classes.
  • Delayed quote data – The streaming on price quotes is delayed, making timely trading more challenging.

Why choose Ally Invest?

If you’re new to trading and want to stick with the basics – whether you’re learning the ropes or opening your first retirement account – Ally will start you off on the right foot. More experienced traders will enjoy the site’s low-cost structure and the opportunity to explore different asset classes like futures and forex.

Traders who have (or want) an Ally Bank account get an extra level of convenience and security.

Why choose Robinhood?

Investors who want a simple, streamlined platform for stock trading will appreciate Robinhood’s no-frills approach. The platform’s also a good choice for extremely independent investors who aren’t looking for much guidance, or those who prefer to trade in small quantities.

Cryptocurrency and options traders should also check out Robinhood. The lack of fees makes these risky trades more affordable than they might be otherwise.

Summary

Ally offers better guidance to the novice investor and many more account options. For a customized portfolio and ongoing research, Ally’s your best pick.

Robinhood is ideal for investors who know what they want and don’t need much help. The platform’s simplicity makes trading a snap. And if you’re ready to explore high-level asset classes like options and margins, Robinhood offers good deals.

Both brokerages keep their fees low and offer no-commission trades, so the most cost-friendly option will depend on the type of trading you’re doing.

Ally Invest is for you if…

  • You want a managed portfolio and personal recommendations.
  • You’re using your investments to save for retirement.
  • You’re new to investing and need some guidance.
  • You’re an Ally Bank customer.

Robinhood is for you if…

  • You prefer a self-directed portfolio.
  • You’re sticking to stock and ETF trades in small quantities.
  • You’re interested in trading cryptocurrency.
  • You want to explore options trading.

Read more:

  • The Best Robo-Advisors Of 2020
  • Ally Invest Review