Robinhood Launches Fractional Stock Trading

Users can now invest as little as one cent to buy one millionth of a stock on the popular fintech trading platform.

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Need to Know

  • Stock trading app Robinhood launches fractional share trading, allowing users to buy a millionth of a share.
  • Users can order shares for an investment as low as $1 (the average Amazon share is worth $1,700).
  • Robinhood is dedicated to democratizing the financial system by improving access to all.

Analysis

This week, the stock trading app Robinhood launched fractional share trading, allowing users to buy a piece of a share for as little as one cent.  

Fractional share trading allows a user to by a millionth of a share, which lowers the barrier to entry for the “not-yet-rich” to get started in the stock market. 

Users can order shares in dollar amounts as low as $1 or share amounts as low as 0.000001 shares rounded to the penny during market hours. Stocks worth more than $1 per share with a market capitalization above $25 million are eligible, and 4,000 different stocks and ETFs are also available for commission-free, real-time fractional trading.

As some stocks are prohibitively expensive even to buy one unit (such as Amazon at $1,765 or Alphabet at $1,349), fractional trading allows consumers to buy into even the richest options.

The Robinhood app, best known as a free stock trading tool, also features a scrolling news feed that allows users to check the news and get updates on the companies that they’re watching and are invested in. The algorithm ensures that news related to the companies a user is invested in and the sources they like to watch are prioritized in the feed. 

Robinhood made news recently by launching a feature called Cash Management that allows users to earn 2.05% APY interest on uninvested money in their account and spend it through a special debit card. Once users deposit cash into their Robinhood account and opt into the program, they begin earning interest. Any balance on their account is put into the debit system using a number of insured partner banks.

Robinhood is dedicated to democratizing the financial system and making the stock market accessible to everyone.

“One of our core values is participation is power,” says Robinhood co-CEO Vlad Tenev. “Everything we do is rooted in this. We believe that fractional shares have the potential to open up investing for even more people.”

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