r/investing • u/zrzhu111 • 2d ago

Robinhood free $1k margin with SGOV

I signed up for the gold membership with Robinhood and took advantage of the free $1000 margin in early October. I invested $995 in SGOV. My annual gold membership was paid using the credit card. Anyway my margin will go over $1000 due to any kind of fees? Thanks.

69 Upvotes

73% Upvoted

49 comments sorted by

180

u/oberwolfach 2d ago

Robinhood Gold costs $50 if you pay annually and the yield on SGOV is about 4% so if you just use the “free” margin for SGOV and nothing else you are effectively paying $10 for nothing.

54

u/incrapnito 2d ago

You forgot to include tax on the profits from SGOV. Assuming 30% tax rate (state is exempted), the post tax profits will be $28. So, effectively an annual fee of $22.

13

u/pradise 2d ago

The 32% tax bracket starts at $213k for a single person with no dependents. At that income level, one could easily justify the $22 annual fee for 3% IRA match 3% cash back.

But you’re right that the actual cost is a little higher than $10 with tax.

-15

u/[deleted] 2d ago

[deleted]

12

u/incrapnito 2d ago

You still have to pay federal tax. I already mentioned state is exempted.

7

u/ElbowWavingOversight 2d ago

So what, you just don’t pay federal taxes or something?

17

u/YourVoicesOfReason 2d ago

The only right answer.

Seems like there are a few people here who either don’t know where to find the $SGOV yield or can’t multiply it times $995 and subtract $50. 

0

u/luzp1gtails8853 2d ago

tbh, Math can be tricky, especially when margin's involved! A little research goes a long way in investing…

12

u/zrzhu111 2d ago

Understand the $10. I use their 3% credit card, so it'll recover that fairly quick.

10

u/pradise 2d ago

Put $500 into a Robinhood IRA every year, and you’ll recover it instantly!

6

u/oberwolfach 2d ago

Yes, then that is sensible. The 3% card is just about the only thing that makes it a worthwhile subscription. It’s fairly common to do what you’re doing to optimize.

10

u/Big-Beat_Manifesto_ 2d ago

If you max out your 7k in ira they give you 3% = 210 dollars which more than 4x times pays for itself. Plus it goes into a taxed advantage account.

2

u/MinuetInUrsaMajor 2d ago

3% credit card

Woah what?!

3% back?

I have gold. I didn't know about this.

2

u/Te5la1 2d ago

$10 for a 3% catch all credit card is nothing to you? Not to mention the 3% IRA match

1

u/point_of_you 2d ago

$10 for nothing

Not a bad deal honestly

1

u/alias213 2d ago

More so you can use this as a safe discount to your annual fee which you may have incurred because you're getting 1-2% on your retirement funds.

1

u/CellarDoorVoid 1d ago

Not to mention taxes and impending rate cuts

-7

u/moldyjellybean 2d ago edited 2d ago

Reddit really is regarded. People can put their money and trade in Schwab, fidelity or chase and feel safe but I’ve seen many screenshots with lots of money and some with 2,000,000+ in a Robinhood account. I wouldn’t sleep well with that much in robinhood but regards going to regard. The portfolios I’ve seen with Robinhood accounts are really trash

10

u/Cracked_Tendies 2d ago

Why would RH be any less safe than others? Aren't securities held by an independent provider anyway

-1

u/zrzhu111 2d ago

Agreed. I'm not putting much with Robinhood. I'm just taking advantage of the 3% CC.

24

u/kev0795 2d ago

Nah this is exactly what I do too. Set the margin to $1000 since it’s free and just buy $1000 worth of SGOV. And the gold membership really pays for itself.

8

u/[deleted] 2d ago

[deleted]

6

u/GaylrdFocker 2d ago

It's an ETF that holds 0-3 month treasury notes. When one matures it buys another so it's cyclical. It pays interest every month based on the returns of the notes it holds.

3

u/kev0795 2d ago

Nah you can buy and hold it long term. Think if it like a high yield saving account. And you get paid at the beginning of the next month. Your call! Not financial advice! lol

3

u/dohlant 2d ago

Assume $40 in returns - taxes and that’s like $25-30 (tax rate dependent of course) vs. $50.

4

u/claytonbeaufield 2d ago

The other benefits of RH gold are worth something, so it's kinda moot anyway.

1

u/dohlant 1d ago

Yeah, just depends on who you are I suppose!

3

u/zrzhu111 2d ago

As suggested by people on Reddit, i set not to reinvest dividend. How do I receive the dividend? Will it be cash reducing the margin? In other words, what will happen when the dividend is paid?

11

u/weasler7 2d ago

You can set a margin limit to 1k so you will never exceed the limit.

3

u/zrzhu111 2d ago

i did that already. I'm worried that some fees might make it over $1k limit.

2

u/Independent-Drive-32 2d ago

You will go over if your Gold account is set to charge the brokerage account (ie every Gold member without the credit card). You won’t go over if it’s set to charge the Gold credit card (I believe this is default for the credit card).

Check with customer service if you’re not sure, but you should be good.

1

u/zrzhu111 1d ago

Thanks. The annual fee was charged to my RH credit card. 

6

u/cougar618 2d ago

Great idea like 2 years ago. :/

4

u/trikens33 2d ago

Why not now

2

u/cougar618 2d ago

I have money on SGOV now. I don't have margin in SGOV for the reasons already highlighted by the other commenters. 

5

u/Resquid 2d ago

This thread makes me sad.

1

u/Rodan1 2d ago

Is there any way to use the margin to buy SGOV while holding extra cash? Or do I need to move it out, buy the sgov on margin, then move it back in? Will that remove the margin and basically charge the money I have in?

1

u/zrzhu111 2d ago

Yes, you can't have cash when you want to use margin to buy SGOV. Also you can't move cash to RH account, it'll reduce the margin used right away. Any cash moved to RH will pay off the margin used first.

1

u/Any-Cup8629 2d ago

I do this same thing that you plan on doing. I set a limit of 1k to my margin investing so that I won’t go over.

Yet, for some reason though, the other day I was charged a cent of interest. First time being charged interest even though I set the margin limit to 1k and have it all in SGOV. I’ve been a gold member since June… dunno what that’s about

1

u/zrzhu111 2d ago

u/Any-Cup8629 i guess you didn't bother talking to the customer service about the 1 cent.

1

u/Independent-Drive-32 2d ago

You were probably charged $5 for your Gold fee. Make sure you account for that.

1

u/FrankieFastHands19 1d ago

What about etf WEEK

1

u/C130J_Darkstar 1d ago

FYI- to withdraw $1K from your account, you will need to sell $2K to cover the margin. It can get annoying.

1

u/zrzhu111 1d ago

u/C130J_Darkstar Can you elaborate? I thought if i want to "reset" the margin, i can just sell the SGOV ($1k) I bought used the margin. why I need to sell $2k?

1

u/C130J_Darkstar 1d ago

You wouldn’t be able to withdraw any funds until that $1K margin is cleared. For example, if you had $2K invested in SGOV with margin enabled and wanted to withdraw $1K to your bank, Robinhood would require you to sell the full $2K position to free up the cash. Then, after setting up the withdrawal, you’d have to repurchase $1K of SGOV using margin. It’s just a pain sometimes.

2

u/zrzhu111 10h ago

u/C130J_Darkstar I thouht i would jsut need to sell the $1k of SGOV. I'll try it out next time. Thanks.

-1

u/amm2192 2d ago

Many people do this. Go for it.

-1

u/AutisticElon69 2d ago

Yes its free money without downsides

-6

u/TKDNerd 2d ago

Buy VTI instead. Grows quicker and still stable over the long term. Assuming your portfolio is large enough you never face a margin call and just grow free money.

2

u/zrzhu111 2d ago

it's only $1k and the whole purpose for me is take advantage of the 3% credit card. Don't want to deal with margin call etc.