Robinhood does fractional shares, users can invest just 1 cent

Written by Ruby Hinchliffe
16th December 2019

Robinhood, the US-based digital stock broker now worth $7.6 billion, has launched fractional share trading which will allow customers to invest as little as 1 cent into any stock.

This means a $1,700 Amazon stock, the firm claims, would become as cheap as $1 because you can invest a fraction of the stock value instead.

Through the US trading platform, you can now buy a millionth of a share rounded to the nearest penny, or $1 of any stock with no fees.

Robinhood: “We believe that fractional shares have the potential to open up investing for even more people”

In a bid to open up the investing world to less wealthy players who have until this year been locked out by uncompromising stock prices, Robinhood’s co-CEO Vlad Tenev tells TechCrunch the fintech can finally live and breathe its “participation is power” core value.

“Everything we do is rooted in this,” Tenev adds. “We believe that fractional shares have the potential to open up investing for even more people.”

Charles Schwab bank and investment firm, mobile payments fintech Square and personal finance app SoFi have all launched fractional shares this year, and New York-based fintech Stash has offered them since it was founded in 2015. Aware of its competition, Robinhood has also been rolling out other features.

These include its cash management feature, live as of last week, which offers 1.8% annual percentage yield (APY) interest on Robinhood cash balances and a Mastercard debit card for spending or ATM withdrawal.

The digital broker will also offer a dividend reinvestment plan (DRIP) which will automatically reinvest into stocks or exchange-traded fund (ETF) cash dividends, and recurring investments which will let users schedule daily, weekly, bi-weekly or monthly investments into stocks.

Despite the set back at the end of this month which saw the challenger pull its US banking application from the Office of the Comptroller of the Currency (OCC), the challenger seems to be all-steam ahead in its product development road map.

Also this month, UK-based digital broker Freetrade launched its fully-owned investment platform, pitting it alongside Robinhood’s own full stack solution which is set to go live in the UK next year. Freetrade is also due to catch up Robinhood on fractional shares too in early 2020.