Robinhood is rolling out its latest feature, automatic investments, which allows users to automatically buy cryptocurrencies for their portfolios on a schedule of their choice. Robinhood is one of the largest online trading platforms and apps available to consumers with a user base in the tens of millions. While the application is well known for commission-free trades of stocks, in 2018 Robinhood added the ability to trade cryptocurrencies much to the joy of investors everywhere.
Cryptocurrencies have seen something of a boom period as of late. Reasons why interest has been heavily stoked include large companies, like SpaceX, announcing plans to take cryptocurrencies as payment. However, unlike traditional investing, cryptocurrencies are extremely volatile and can plummet in value at the drop of a hat. Stories such as China’s recent crackdown and subsequent ban on Bitcoin mining, for example, fractioned most cryptocurrencies’ value overnight. These risks are not typically present with normal stock trading which, although carries risk, has not shown nearly as much volatility. Like any investment, proper research into cryptocurrency needs to be made and prospective investors must be prepared to lose some or all of the money they invest.
The new feature on Robinhood, titled ‘Crypto Recurring Investments,’ is exactly that – a recurring option for purchasing cryptocurrencies. The feature allows users to invest as little as $1 in a cryptocurrency of their choosing and, unlike other platforms, completely commission-free. Users can also choose how frequently the automatic purchases are, whether it be weekly, biweekly, monthly, even yearly. To do this users need to order their preferred cryptocurrency and then select whether to purchase outright, limit the order to purchasing at the lowest or highest price, or opt for the new recurring option.
Is It Smart To Make Recurring Orders?
A potential benefit of the recurring order is ‘dollar cost averaging.’ Essentially, an investor purchases small increments over time through dips and highs to minimize the risk while lowering the price of purchasing in general, compared to someone who purchases a large amount in bulk. However, with any investment portfolio, it is common practice to diversify bonds instead of dumping all resources into one, and especially one as risky as the crypto market. The idea is that several investments in reputable companies can really help to offset the risk.
Whatever the case, cryptocurrencies continue to grow in popularity after catching more mainstream attention this year. There was even the suggestion recently that Amazon might be preparing to accept cryptocurrencies as a form of payment in the future. While the company has since stated that’s not the case, Amazon also doesn’t seem to be ruling out the possibility either. If Amazon does start to accept crypto at some point, that is something that will likely affect the price for buyers and investors.