How to Invest Money with Fractional Shares
Huge announcement from Robinhood, so let's cover their new features and I'll let you know what I love about it and what I really hate about it as well. Hey, I'm Jarrad with an A, and on this channel we like to talk about all things p-p-personal finance and investing, and we try to have some fun in the process. It's been a really big year for Robinhood, which is one of the most popular investing apps out there for us hip millennials, and our younger peers.
As a recap, just this year, Robinhood has raised an additional 323 million dollars, which has increased their evaluation to 7.6 b-b-billion with a B, dollars. I don't know about you, but I smell an IPO in the future. Now hopefully they can turn a profit somehow, because the last thing that they need is to crash and burn like WeWork did when they tried to go public. Yes WeWork, when you go public, people wanna see that you actually make money, whoops!
But seriously though, at some point, Robinhood is going to go public because their investors are gonna want a big payday for all of those millions and millions of dollars that they've invested in the company. Think about it, then you'll be able to purchase Robinhood stock through the Robinhood app, wearing a Robinhood shirt that you bought through the Robinhood store, while you eat, I don't know, a free Robinhood cookie that they sent you because you opened an account with them. Sounds to me like they're gonna turn into a full-fledged bank at some point in the future.
Also this year, they launched their cash management account which will let you earn 2% interest on your money that's sitting in your Robinhood account. And we can't forget that they're gonna give you a pretty cool looking MasterCard debit card as well. I'm still debating whether I want the green or black card, but that American flag one gets me all hot and bothered just thinking about it. They also launched to their Gold Experience for those investors who wanna spend $5 a month for access to premium features, which is basically a bunch of additional data.
But these new features that they just announced, I mean, wow, wow, we wow, let's get into those right meow, so I can let you know what I think about 'em. If you haven't done it already, please Hulk smash (bell dinging) that thumbs up button. The first and most exciting feature in my opinion is that they are now offering fractional shares. This is a game changer for them and something that a lot of people were waiting for and it goes perfectly with their beautifully constructed experience of an app, which is very pleasing on the eyes.
But as my mom always said, "It's not about what's on the outside, "it's also about what's on the inside." Ha ha, awe, that's such a cute thing to say, Mom. I told her that my investing app needs to look super smokin' hot on the outside before I check out what's goin' on in the inside. With Robinhood's fractional shares, it makes the insides very, very, purty. If you're not familiar, fractional shares allows you to buy a fraction of every individual stock or ETF offered on the Robinhood investing platform with a minimum of $1. Let's play pretend so I can explain. If there was a company out there by the name of, we'll say Footie Pajamas, their stock price was $100 per share and you only had $20 to invest, then you could not own any of that hot, new, Footie Pajama stock because you don't have the full $100.
But with fractional shares, you're able to. I need you to remember $100 in Footie Pajamas because we're gonna use that example throughout this whole video. Footie Pajamas for everyone. With that $20, you could buy 20% of a share of that $100 Footie Pajama stock. This goes one step further with dividends as well. If Footie Pajamas was making money hand over fist because everyone wanted to get their paws on a pair of Footie Pajamas, and they paid out a $5 dividend per share, then you would collect 20% of that dividend. If you've ever worn Footie Pajamas in your life, then let me know down in the comments below.
If not, then you should let your parents know that they have set your life up for failure. M1 Finance was one of the first investment companies to offer fractional shares, and since I've personally been investing through them, I've been able to experience the power of fractional share investing, and I'll tell you what, I love it! This makes me really happy that Robinhood has finally been able to roll this feature out to its users. The next new feature is DRIPs, capital D-R-I-P lowercase S. No, that's not a type of liquid that rappers are drinking out of styrofoam cups nowadays. It stands for dividend Reinvestment Plan.
These are simple to understand. When a company pays out a dividend, your account is credited with however much that dividend is for. Now in the past, that money would just sit in your account until you actually did something with it. But with a DRIP, that money can be automatically reinvested without your little fingers having to do anything. If you're doin' the math in your own head, that is less for your brain to think about, and it also lowers your risk of the carpal tunnel, since your fingers can find better things to do with their time.
The DRIP feature goes hand-in-hand with fractional shares as well. In the past, if you received, we'll say a $5 dividend, then that money would just sit in your account because $5 usually isn't enough to purchase an additional share of a decent stock like Footie Pajamas. To put that dividend to distribution to work, you'd either have to wait until you had enough paid out in dividends to buy one full share of Footie Pajamas, which is $100 per share. Or you'd have to deposit another $95 into your account to buy one full share of that Footie Pajama stock. Does anybody else wanna buy Footie Pajamas right now?
With fractional shares and DRIPs, you can put that $5 to good use by purchasing 5% of one share of Footie Pajamas. Robinhood now offers recurring investments. Now this is pretty self-explanatory, but let me talk about it real quick. You pick an amount to invest. You pick the timeframe, and the money will be invested for you without doing anything. Let's show Robinhood some love right now. I'm really glad that Robinhood has rolled out these new features. With fractional share, they're giving more people a chance to start investing. In the past, it made it tough for a beginning investor to really get started because if you wanted to buy something like Amazon, then you'd need over $1,700 just to buy one share.
If I was a betting man, I'd imagine that this feature will be rolled out across all other investing platforms at some point in the future, and will become an industry standard because it just makes sense. What do we love about the DRIPs? Well DRIPs are perfect for those dividend investors who wanna make sure that their money is continuously working for them. Even if you aren't a dividend income investor, that's tough to say. Dividend income investor like I'm not, then some of the ETFs you invest in pay out a dividend and instead of letting that money just sit around, it's nice to know that it can be put back into the market as quickly as possible.
I am curious to see Robinhood's DRIPs in action though, because I have some questions around the whole process. Like for example, if I received a dividend from Apple, then does that dividend have to be reinvested into Apple stock? Or can I use that dividend to automatically invest in something else like a low cost index fund ETF? AKA really nerdy questions like that. The recurring investing feature is something that should have been available all along, but it wasn't and now it is. In my opinion, any kind of way to turn on any automatic investing is a good thing because it removes the chances that you'll be trying to time the market and purchase at the perfect time and the perfect price, and kind of let's the robots handle it all for you.
I'm a big fan of removing as much human decision as possible if you're investing for the long-term because we think that we're so good at investing at the right time and the right price, but statistics show that we are not very good at all. Time in the market is more important than timing the market. Recurring investments allows us to set it and forget it. I still really like Robinhood for the promotion that they have going on where if someone uses your invite link to open an account, then they get a free stock and so do you.
It is a great incentive to open an account and start investing. If you want a free stock, then use the link in my bio to to open an account. Once you put money into that account or fund to that account, you will get a free stock worth between $2.50 and $200, and I'll get a free stock as well. There really aren't many bad things I can say about Robinhood because they've done an amazing job at getting more people involved and interested in investing. But, I do notice some problems. The first issue that I have is that they don't offer any retirement investing accounts, like a traditional or Roth IRA. Look, taxable accounts are something that we all need access to, but my worry is that it promotes the wrong behavior with investors, especially new investors.
My thought is that before any taxable accounts are invested in, someone needs to at least max out something like the Roth IRA first because of the savings that you get from the taxes. Going for the taxable account right of the rip is a horrible, horrible habit to get into. Offering an IRA should have been at the top of their list of features to roll out to their users. Now I know it's not as sexy and cool, but it is way more important than just a taxable account. If you wanna learn more about investing in a Roth IRA, then I'll link up my playlist in the description so you can learn more about it. Next, investing needs to be looked at as a long-term play as opposed to something that you hop in and out of.
The best investing strategy for the majority of people is buying and holding their stocks and ETFs for basically ever. Jumping in and out of the market as it goes up and down is an investor's worst enemy, if they're trying to grow their money consistently over a long period of time. It seems as though Robinhood is like a social media app. You kinda just wanna log in and check out what's goin' on with your money.
And the more that you log in and check your account, the more you're gonna wanna make trades and just kinda do things, which is not always a good thing for the majority of average investors. This is a losing strategy for the vast majority of investors out there. I've gotta give it to Robinhood though, when it comes to education around investing though, because they offer some decent resources on their website around this type of thing. But just because it's there does not mean that people will actually look at it, which kinda gets back to the whole, it's your responsibility to educate yourself on investing because no one's gonna do it for you.
Overall, I like what Robinhood is doing and it is one of the few platforms that I personally recommend to people. Make sure to check out these videos to your left. Check out the description for different resources and playlists to help you all for both your personal finance and investing needs. Please Hulk smash that thumbs up button. I'll see you in the next one, friends, adios.
As a recap, just this year, Robinhood has raised an additional 323 million dollars, which has increased their evaluation to 7.6 b-b-billion with a B, dollars. I don't know about you, but I smell an IPO in the future. Now hopefully they can turn a profit somehow, because the last thing that they need is to crash and burn like WeWork did when they tried to go public. Yes WeWork, when you go public, people wanna see that you actually make money, whoops!
How to Invest Money with Fractional Shares
But seriously though, at some point, Robinhood is going to go public because their investors are gonna want a big payday for all of those millions and millions of dollars that they've invested in the company. Think about it, then you'll be able to purchase Robinhood stock through the Robinhood app, wearing a Robinhood shirt that you bought through the Robinhood store, while you eat, I don't know, a free Robinhood cookie that they sent you because you opened an account with them. Sounds to me like they're gonna turn into a full-fledged bank at some point in the future.
Also this year, they launched their cash management account which will let you earn 2% interest on your money that's sitting in your Robinhood account. And we can't forget that they're gonna give you a pretty cool looking MasterCard debit card as well. I'm still debating whether I want the green or black card, but that American flag one gets me all hot and bothered just thinking about it. They also launched to their Gold Experience for those investors who wanna spend $5 a month for access to premium features, which is basically a bunch of additional data.
But these new features that they just announced, I mean, wow, wow, we wow, let's get into those right meow, so I can let you know what I think about 'em. If you haven't done it already, please Hulk smash (bell dinging) that thumbs up button. The first and most exciting feature in my opinion is that they are now offering fractional shares. This is a game changer for them and something that a lot of people were waiting for and it goes perfectly with their beautifully constructed experience of an app, which is very pleasing on the eyes.
But as my mom always said, "It's not about what's on the outside, "it's also about what's on the inside." Ha ha, awe, that's such a cute thing to say, Mom. I told her that my investing app needs to look super smokin' hot on the outside before I check out what's goin' on in the inside. With Robinhood's fractional shares, it makes the insides very, very, purty. If you're not familiar, fractional shares allows you to buy a fraction of every individual stock or ETF offered on the Robinhood investing platform with a minimum of $1. Let's play pretend so I can explain. If there was a company out there by the name of, we'll say Footie Pajamas, their stock price was $100 per share and you only had $20 to invest, then you could not own any of that hot, new, Footie Pajama stock because you don't have the full $100.
But with fractional shares, you're able to. I need you to remember $100 in Footie Pajamas because we're gonna use that example throughout this whole video. Footie Pajamas for everyone. With that $20, you could buy 20% of a share of that $100 Footie Pajama stock. This goes one step further with dividends as well. If Footie Pajamas was making money hand over fist because everyone wanted to get their paws on a pair of Footie Pajamas, and they paid out a $5 dividend per share, then you would collect 20% of that dividend. If you've ever worn Footie Pajamas in your life, then let me know down in the comments below.
If not, then you should let your parents know that they have set your life up for failure. M1 Finance was one of the first investment companies to offer fractional shares, and since I've personally been investing through them, I've been able to experience the power of fractional share investing, and I'll tell you what, I love it! This makes me really happy that Robinhood has finally been able to roll this feature out to its users. The next new feature is DRIPs, capital D-R-I-P lowercase S. No, that's not a type of liquid that rappers are drinking out of styrofoam cups nowadays. It stands for dividend Reinvestment Plan.
These are simple to understand. When a company pays out a dividend, your account is credited with however much that dividend is for. Now in the past, that money would just sit in your account until you actually did something with it. But with a DRIP, that money can be automatically reinvested without your little fingers having to do anything. If you're doin' the math in your own head, that is less for your brain to think about, and it also lowers your risk of the carpal tunnel, since your fingers can find better things to do with their time.
The DRIP feature goes hand-in-hand with fractional shares as well. In the past, if you received, we'll say a $5 dividend, then that money would just sit in your account because $5 usually isn't enough to purchase an additional share of a decent stock like Footie Pajamas. To put that dividend to distribution to work, you'd either have to wait until you had enough paid out in dividends to buy one full share of Footie Pajamas, which is $100 per share. Or you'd have to deposit another $95 into your account to buy one full share of that Footie Pajama stock. Does anybody else wanna buy Footie Pajamas right now?
With fractional shares and DRIPs, you can put that $5 to good use by purchasing 5% of one share of Footie Pajamas. Robinhood now offers recurring investments. Now this is pretty self-explanatory, but let me talk about it real quick. You pick an amount to invest. You pick the timeframe, and the money will be invested for you without doing anything. Let's show Robinhood some love right now. I'm really glad that Robinhood has rolled out these new features. With fractional share, they're giving more people a chance to start investing. In the past, it made it tough for a beginning investor to really get started because if you wanted to buy something like Amazon, then you'd need over $1,700 just to buy one share.
If I was a betting man, I'd imagine that this feature will be rolled out across all other investing platforms at some point in the future, and will become an industry standard because it just makes sense. What do we love about the DRIPs? Well DRIPs are perfect for those dividend investors who wanna make sure that their money is continuously working for them. Even if you aren't a dividend income investor, that's tough to say. Dividend income investor like I'm not, then some of the ETFs you invest in pay out a dividend and instead of letting that money just sit around, it's nice to know that it can be put back into the market as quickly as possible.
I am curious to see Robinhood's DRIPs in action though, because I have some questions around the whole process. Like for example, if I received a dividend from Apple, then does that dividend have to be reinvested into Apple stock? Or can I use that dividend to automatically invest in something else like a low cost index fund ETF? AKA really nerdy questions like that. The recurring investing feature is something that should have been available all along, but it wasn't and now it is. In my opinion, any kind of way to turn on any automatic investing is a good thing because it removes the chances that you'll be trying to time the market and purchase at the perfect time and the perfect price, and kind of let's the robots handle it all for you.
I'm a big fan of removing as much human decision as possible if you're investing for the long-term because we think that we're so good at investing at the right time and the right price, but statistics show that we are not very good at all. Time in the market is more important than timing the market. Recurring investments allows us to set it and forget it. I still really like Robinhood for the promotion that they have going on where if someone uses your invite link to open an account, then they get a free stock and so do you.
It is a great incentive to open an account and start investing. If you want a free stock, then use the link in my bio to to open an account. Once you put money into that account or fund to that account, you will get a free stock worth between $2.50 and $200, and I'll get a free stock as well. There really aren't many bad things I can say about Robinhood because they've done an amazing job at getting more people involved and interested in investing. But, I do notice some problems. The first issue that I have is that they don't offer any retirement investing accounts, like a traditional or Roth IRA. Look, taxable accounts are something that we all need access to, but my worry is that it promotes the wrong behavior with investors, especially new investors.
My thought is that before any taxable accounts are invested in, someone needs to at least max out something like the Roth IRA first because of the savings that you get from the taxes. Going for the taxable account right of the rip is a horrible, horrible habit to get into. Offering an IRA should have been at the top of their list of features to roll out to their users. Now I know it's not as sexy and cool, but it is way more important than just a taxable account. If you wanna learn more about investing in a Roth IRA, then I'll link up my playlist in the description so you can learn more about it. Next, investing needs to be looked at as a long-term play as opposed to something that you hop in and out of.
The best investing strategy for the majority of people is buying and holding their stocks and ETFs for basically ever. Jumping in and out of the market as it goes up and down is an investor's worst enemy, if they're trying to grow their money consistently over a long period of time. It seems as though Robinhood is like a social media app. You kinda just wanna log in and check out what's goin' on with your money.
And the more that you log in and check your account, the more you're gonna wanna make trades and just kinda do things, which is not always a good thing for the majority of average investors. This is a losing strategy for the vast majority of investors out there. I've gotta give it to Robinhood though, when it comes to education around investing though, because they offer some decent resources on their website around this type of thing. But just because it's there does not mean that people will actually look at it, which kinda gets back to the whole, it's your responsibility to educate yourself on investing because no one's gonna do it for you.
Overall, I like what Robinhood is doing and it is one of the few platforms that I personally recommend to people. Make sure to check out these videos to your left. Check out the description for different resources and playlists to help you all for both your personal finance and investing needs. Please Hulk smash that thumbs up button. I'll see you in the next one, friends, adios.
0 Response to "How to Invest Money with Fractional Shares"
Post a Comment