Posted by Chuck on December 12, 2019
Brokerage Bonuses

Published on December 12th, 2019 | by Chuck

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Robinhood Announces Fractional Share Trading

The Robinhood trading platform announced the ability to buy partial stock shares. Some stocks and ETFs cost hundreds or thousands of dollars for a single share. This means that many people may not be able to invest in their favorite companies or funds. With Fractional Shares, you can invest in stocks including Amazon, Apple, Disney, Berkshire Hathaway, and thousands of others with as little as $1.

Get added the Waitlist here.

Lots of newer/younger investors are always interested in the fractional share option. Schwab recently announced they’ll soon be offering that as well. Robinhood is likely strategizing to stay relevant as their primary draw – no fee trading – became the standard over the past few months.



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Lrdx
Lrdx

Woohoo, I can’t wait to own 0.00000295 of BRK.A !

RAM
RAM

You can buy a class B anyway

Lrdxgm
Lrdxgm

What’s the fun in that.

scott
scott

I was thinking the same thing!

Josh
Josh

Schwab announced this as well Robinhood. Just die out gracefully!

wsb
wsb

Robinhood is still the only game in town to offer completely free options

NotInOnTheJokeApparently
NotInOnTheJokeApparently

Schwab already has this, no “waitlist”. Also from RH’s announcement, “Starting early next year, we’ll support Dividend Reinvestment Plan (DRIP) and Recurring Investments” — How did they not have this stuff already?

JoeHx

Wahoo! I’m on the list with 278,195 others!

A M
A M

lol

Jackson Rogers
Jackson Rogers

Stupid concept. If people can’t afford full shares of a stock they shouldn’t be investing in the first place.

jrc
jrc

are you serious?

Brandon
Brandon

this is a silly comment I hope no one is taking it seriously

Jackson Rogers
Jackson Rogers

Of course I am serious. People who can’t pay $35 or $250 for a share of stock shouldn’t be investing in the market. If buying full shares of stock is so difficult for them they need their money liquid in a checking or savings account. If people aren’t going to do something the right way they shouldn’t. The mental energy of dealing with paperwork and 1099s for a $20 fractional investment (.10 dividends and another line on the tax return) isn’t worth it. Their time is better spent in other areas until they have real money to invest. It’s the same with buying a savings bond or ounce of silver for a kid’s birthday. A $100 bond that pays ~2-3% interest, why go through the hassle with social security numbers, treasury direct accounts and make the kid jump through hoops years later to redeem. It’s not worth the effort. Just give cash.

Steve

What about $1000? That still won’t buy 1 share of GOOG.

Ryan Goldstein

Or BRK.A – one share currently costs $338,000+.

Steve

Yeah but I didn’t mention that since BRK.B is only $225.

Ryan Goldstein

But what if you want a class A share?! 😛

whodidntante
whodidntante

Then you would only have a piece of it.

Superman
Superman

Lots of misinformation. Assumes people don’t max retirement accounts prior to starting taxable account. We do exist. Although I suspect such Robinhood users are the slimmest minority.
Myth #2: It’s stupid concept, thinking should be narrow, so partial shares cannot combine w/ whole shares. Alternatively, use $1K to buy 5-1/2 Apple shares or 6-3/4 of Disney shares.
Myth #3: If buying a partial share of stock suits your risk tolerance then money needs to be kept in bank for zero risk. Alternatively, stocks could earn higher returns than banks, albeit come at higher risk, partial shares fit exactly the amount your willing to risk.
Myth #4: Old concept of buying a stock in whole shares is better. Alternatively, diversify by buying partial shares of multiple stocks to earn the highest return for the least risk.
Myth #5: Stock trading has paperwork not worth the mental energy for fractional shares. Alternatively, try buy and hold or other strategies to limit tax documents. My partial shares of stocks, Alphabet and Amazon, do not return dividends but rather reinvest and have had solid growth.

Jackson Rogers
Jackson Rogers

The talk about risk tolerance, diversifying and returns is farcical when talking about fractional shares. 5 1/2 shares of Apple is peanuts and again, not worth the mental energy to think about the above.

AllwaysLearning22
AllwaysLearning22

To Jackson Rogers: You keep insisting your logic is the only valid one.

Does that mean that anyone else is ‘illogical’ or ‘stupid’ or something … ?

There are a thousand reasons for someone to do things differently than what you think ‘is right’ or ‘is correct’. It does not make it ‘wrong’. Maybe in your eyes it does, but it is not.

You have to learn to respect other peoples choices and opinions. It is their money and they can choose to spend/invest however they like

Jackson Rogers
Jackson Rogers

Sure it is an opinion but the choice to buy fractional shares is still stupid according to any basic level of comprehension, logic and financial literacy. You’re right, the government should not prevent anyone from doing anything to themselves or with their own property and the government should not be preventing companies from offering products to consumers. But it would be nice if people didn’t make stupid choices. Fractional shares appeal to people who can’t rub two cents together. If they can’t afford to buy 1 share they shouldn’t be in the stock market in the first place (they shouldn’t even be in with less than $5000). They probably have little saved and are one night out of drinking away from being red for the month. People buying fractional shares in individual stocks when they have trouble paying rent is ridiculous. On a $35 stock, even a 100% gain is going to provide an amazing $35 return. That’s just silly.

How does this affect me: as a serious investor in financial companies I see the waste and yearly expense of maintaining accounts for people who have $1000-$2000 in the brokerage account who now pay no trade fees. These firms offer or will offer fractional shares not because it makes sense but because their competitors offer them. It’s more risk and regulatory compliance costs. As a customer it means more wait for customer service whether phone or chat, maybe a slower platform at times, and greater risk of fraud.

Steve

Maybe fractional shares will have other benefits. e.g., how much time & money is spent by companies and shareholders dealing with stock splits? If companies don’t need to worry about a $50,000 share price preventing many people from investing, there may be fewer stock splits.

JohnnyBoyJr
JohnnyBoyJr

It’s there a way to give the 12:32 PM post a thumbs down? I think it’s great that people have the opportunity to invest I a fractional shaft of a company. You’re not even bothering to think of a 14 year old kid who has a very strong interest in the stock market, but who has very limited resources (eg. they can’t rub 2 cents together. Nor do they even pay rent. And if you’re worried about him drinking away his money, well, he still needs to have a 50% return on his age until he’s 21, ha) It’s great that some kid wants to invest in a bunch of different companies to see what it’s like to actually own a small part of that company. But you want him to spend all his money on 1 stock, rather than investing in multiple companies. Maybe his dad died and left him a few thousand dollars, but he can’t really buy that many shares of any company because it has become the trend to have high share prices and not split your stock. ORLY at $440? Please. They should do a 10/1. Actually 20/1. AZO at $1,226? Kill me now. Maybe you even want him to have a margin account so he has to pay interest to borrow money so he doesn’t need to buy ‘odd lots.’ Yes, if everybody purchased nice, even lots of 100, 1000 shares, etc. then this world would be a much fuzzier place. Wouldn’t it have been nice if the kid could’ve purchased 1/4 share of MA last year, only to have it almost double in 1 year? I mean, it’d only be a $40 profit — which may be more than he earns during a regular week of school+work. But gaining that experience over the year of watching that stock grow, reading about their quarterly earnings — that’s big. Then being able to invest in a lot of other companies? That’s huge. And the other nice thing? Commissions are going away. So now if this kid has an exit strategy that will net him $50, he doesn’t need to set his limit order and wait for his holding to increase by $70, then have $20 eaten up by the buy & sell orders. Not everybody can be a big winner. Why would you want somebody to only invest in FOGO, for example when they could’ve… Read more »

Superman
Superman

Question: How many peanuts can Mr. Partial buy more of than Mr. Whole? If…

Mr. M. Partial’s initial stock purchase is 5-1/2 shares. He continues to set aside exactly the same portion of his monthly salary to buy more stock, without ever rounding down shares. His contributions stop after 40 years and he holds the stock for an additional 10 years.

Mr. A. Whole’s initial stock buy is 5 of the same shares. He also takes the identical amount from his monthly salary, but only buys whole shares during same time frame. To prove fractional share buying is farcical and stupid, he deposits the remainder at Integer Bank where savings accounts are always 2.000% APY. The deposits of monthly remainders total approximately $1,100 each year. After 50 years, the stock had an average annual return of 7.4%.

The answer: It’s $432,218.78, and further proof that if you’re not M. Partial then you might be an A. Whole.

RJ
RJ

Your point is good and your ending made me actually LOL!

Sodium
Sodium

I have used M1Finance to buy fraction of shares every month and automatic DRIP made profit as well….

jrc
jrc

does anyone know if they will have a trading window like M1?

SamL
SamL

I wanna buy BRK.A one cent at a time every second, for a few years. I wanna penny cost average my way into this holding. Can I do this?

Also, do they do Spec Id, for when I sell, so I can select the best tax lots for most advantageous cap gains tax treatment.

Matt
Matt

Given the language of the press release (“with as little as $1”), your ‘Penny Cost Average’ scenario would seem to not be possible. You would need a minimum order of one dollar.

Matt
Matt

And just because I was curious, there would be ‭5,934,600‬ seconds of trading during a year. That excludes weekends and holidays (and it accounts for days when the market is open, but scheduled to close earlier than a normal trading day). And that also excludes pre-market and after-market trading. And finally, that also excludes leap days and leap seconds.

So if you could buy one cent of BRK.A every second available to buy BRK.A, that would be $59,346 dollars a year.

That’s assuming my math is correct. I have double-checked nothing (lol), so I could have made a mistake somewhere.

SamL
SamL

You calculation looks ball-park correct. But it seems I should do a dollar a minute instead.

whodidntante
whodidntante

The number of lots would be fun for the tax year you sell.

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