Robinhood does not offer mutual funds

Robinhood's platform does not support mutual fund purchases. You can buy individual stocks, exchange-traded funds (ETFs), options, and cryptocurrencies through Robinhood, but mutual funds are not available as an investment choice on the platform.

This is a deliberate design choice by Robinhood. The platform was built around commission-free trading of individual securities and ETFs, not pooled investment products like mutual funds. If you want to own mutual funds, you will need to use a different brokerage or investment platform.

Key Takeaways

  • Robinhood does not allow you to purchase mutual funds through its trading platform.
  • ETFs available on Robinhood can serve a similar purpose to mutual funds by holding a basket of stocks or bonds in a single investment.
  • Other brokerages like Fidelity, Vanguard, and Charles Schwab offer mutual funds alongside stocks and ETFs.
  • You can own mutual funds through a retirement account like an IRA or 401(k) even if you use Robinhood for other investments.

Why Robinhood excludes mutual funds

Robinhood's business model centers on low-cost, commission-free trading of individual securities. Mutual funds typically come with management fees, sales charges, and minimum investment amounts that do not fit this model. The platform prioritizes direct ownership of stocks and ETFs, where you pay no commission to buy or sell.

Mutual funds also require different regulatory handling than stocks and ETFs. They are sold through prospectuses and often involve fund companies as intermediaries. Robinhood chose not to build the infrastructure to support this product type, keeping the platform focused on direct stock and ETF ownership.

ETFs as an alternative to mutual funds on Robinhood

If you want the diversification that mutual funds provide, ETFs available on Robinhood can accomplish the same goal. An ETF is a basket of stocks or bonds that trades like a single stock. You can buy and sell ETFs commission-free on Robinhood, just like individual stocks.

Many ETFs track the same indexes that mutual funds do. For example, you can buy an ETF that holds the 500 largest U.S. companies (similar to an S&P 500 mutual fund) or an ETF that holds bonds (similar to a bond mutual fund). The main difference is that ETFs trade throughout the day at changing prices, while mutual funds are priced once per day after the market closes.

ETFs on Robinhood typically have lower expense ratios than mutual funds because there is no fund manager taking a cut, and you pay no commission to buy or sell. This makes them a cost-effective way to build a diversified portfolio on the platform.

Mutual funds through retirement accounts

Even though Robinhood does not offer mutual funds for regular brokerage accounts, you may be able to own mutual funds through a retirement account. If you have a Robinhood IRA (either traditional or Roth), the rules are the same: mutual funds are not available. Robinhood's retirement accounts follow the same investment menu as its standard accounts.

If you want to hold mutual funds inside a retirement account, you will need to open that account at a different brokerage. Fidelity, Vanguard, Charles Schwab, and most other major brokerages offer mutual funds within IRAs and other retirement accounts. You can still use Robinhood for your taxable brokerage account while holding mutual funds elsewhere in a retirement account.

Brokerages that do offer mutual funds

If mutual funds are important to your investment strategy, several major brokerages make them available alongside stocks and ETFs. Fidelity offers thousands of mutual funds, including its own proprietary funds and funds from other companies. Vanguard specializes in mutual funds and also offers ETFs. Charles Schwab provides access to mutual funds from multiple fund families.

These platforms typically charge no commission to buy or sell mutual funds, though some funds carry internal expense ratios or sales charges depending on the fund type. Many also offer fractional share purchases of ETFs, which gives you similar diversification benefits to mutual funds with lower costs and more flexibility.

Moving from Robinhood to a platform with mutual funds

If you currently use Robinhood and want to add mutual funds to your portfolio, you have two options: open a second account at a brokerage that offers mutual funds, or transfer your Robinhood holdings to that brokerage.

Most brokerages allow you to transfer stocks and ETFs from Robinhood without selling them. This process is called an ACAT transfer (Automated Customer Account Transfer). You initiate the transfer through your new brokerage, and they handle moving your positions. The transfer typically takes three to five business days. Once your holdings are at the new brokerage, you can buy mutual funds alongside your existing investments.

Alternatively, you can keep your Robinhood account open and straightforward open a mutual fund account elsewhere. This lets you use both platforms for different purposes without moving existing positions.

Frequently Asked Questions

Can I buy index funds on Robinhood?

No, Robinhood does not offer index mutual funds. However, you can buy index ETFs that track the same indexes. For example, you can purchase an ETF that tracks the S&P 500 or the total stock market, which provides the same diversification as an index mutual fund but with lower costs and no commission.

Does Robinhood have any funds at all?

Robinhood offers ETFs, which are funds that hold baskets of stocks or bonds. You cannot buy mutual funds, but ETFs serve a similar purpose and trade like stocks with no commission. Robinhood also offers fractional shares of individual stocks, which lets you build a diversified portfolio without needing large amounts of money.

What if I want both stocks and mutual funds?

You can use Robinhood for stocks and ETFs, then open a separate account at Fidelity, Vanguard, or Charles Schwab to hold mutual funds. Many investors maintain accounts at multiple brokerages to access different investment options. There is no rule against this, and it may actually give you more flexibility.

Are ETFs better than mutual funds?

ETFs and mutual funds each have advantages depending on your situation. ETFs trade throughout the day and typically have lower costs, while mutual funds offer automatic reinvestment and may be easier to set up for regular contributions. Since Robinhood only offers ETFs, that choice is made for you on the platform.