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Here’s how to use Robinhood to buy stocks for less.
Most important points:
- Robinhood offers commission-free investing and fractional shares.
- Fractional shares allow you to buy a portion of a company’s stock, meaning you only need a few dollars to get started.
Robinhood changed the investment landscape by being one of the first to offer commission-free trading. After its launch in 2015, other brokers started to follow suit by offering $0 trading fees as well. According to the Business of Apps website, Robinhood has nearly 16 million investors. Despite some hits for its brand due to trading restrictions, Robinhood is still the go-to for many investors, including novice investors looking to get started with a small amount of money. And one way they can do this is with fractional shares.
How Fractional Shares Work
Fractional shares are partial shares or part of the shares of a company. They can be bought and sold just like whole stocks, but you can get started with a few dollars instead of paying the full price of a stock. Fractional investing in stocks makes investing more accessible to investors with little capital.
The share price of some companies, such as Tesla, can be quite high. At the time of writing, Tesla’s stock price averaged about $920 per share. But with fractional shares, you can invest in Tesla for as little as a few dollars. And Robinhood requires a minimum of just $1, making it suitable for many new investors.
Another advantage of fractional stocks is that investors with an average dollar price (investing a certain amount over a regular interval) can diversify their investments without large amounts of capital. Prior to fractional stock, you would have had to save nearly $1,000 before you could invest in a stock like Tesla. Now you can immediately make your money work for you by buying fractional shares.
Robinhood debit card
In addition to offering fractional shares, Robinhood has introduced the Robinhood Cash Card. It offers a rounding rewards program, which allows you to round your purchase amounts to the nearest dollar on debit card transactions.
For example, if you spend $4.80 on a latte, Robinhood rounds up the payment to $5. The extra $0.20 can be used to buy a stock, such as Tesla, or crypto of your choice. When your roundups are transferred to your investment brokerage account each week, you will receive a bonus equal to 10% to 100% of the total value of your roundups for that week. Bonuses are limited to $10 per week.
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The Robinhood Cash Card can be a great way to earn some extra cash for investments just by making your regular purchases. And if you’re interested in investing in fractional stocks, those little roundups can even go toward your fractional stock budget. Getting started with Robinhood is relatively easy, and if you’re looking for more information about investing in general, check out our beginner’s guide to brokers to learn the basics.