As Zero-Fee Losing Luster, Robinhood Launches Fractional Shares

Robinhood investment app, mostly used by millennials to trade stocks and cryptocurrency, is now offering its customers the ability to buy and sell fractional shares with as little as $1. The “fractional stock” feature allows small-bucks investors to diversify their portfolios by spreading their relatively small capital over a broader range of stocks.

The move comes as Robinhood tries to continue to woo its younger investors, which exploded to more than 10 million. Six years after Robinhood launched with no-fee trading, major brokerages were catching up with a wave of fee-eliminating announcements over the past two months. In the span of just a few weeks, nearly all US online brokers eliminated commissions, which could be a direct hit to the Startup Startup A company operating within its first stage of investing is known as a startup. While startups may give the impression that the company must be new, that is not always the case.Many companies can have this designation after nearly three years of existence. Typically, a company exits the startup status after a period between 3 to 5 years or after successful funding rounds where capital is acquired. Startups tend to derive out of the belief that there is a demand for a service or product which is c A company operating within its first stage of investing is known as a startup. While startups may give the impression that the company must be new, that is not always the case.Many companies can have this designation after nearly three years of existence. Typically, a company exits the startup status after a period between 3 to 5 years or after successful funding rounds where capital is acquired. Startups tend to derive out of the belief that there is a demand for a service or product which is c Read this Term that kicked off the trend in 2013.

Bigger online brokerage houses have already introduced fractional stock ownership as a way to lure younger retail investors. Charles Schwab was the first among US major brokers to announce it would be allowing investors to buy and sell fractions of stocks. As they look beyond the no-fee trading war, the move has set off a new rush among other brokers to do the same amid increased competition in the industry to attract the next generation of investors.

No legs up on Robinhood now

Before today, these brokers did have one leg up on Robinhood, as the Silicon Valley company hadn’t supported fractional share trading yet.

Robinhood, whose mobile app lets users buy and sell public stocks without trading ‎fees, said that move would be a win for investors who are handling small amounts of money. It also helps those who want to invest a certain amount of money each month into high-priced stocks like Apple, Amazon, Alphabet, and Tesla.

Considering the new bar set by Schwab, as well as responses of Interactive Brokers and Robinhood, other players, including E*Trade, TradeStation, and Fidelity, could follow suit on fractional trading in the next few weeks.

The move, geared toward attracting more young clients, eliminates the barriers that many investors face as the brokerage split whole shares intentionally so they can sell fractional shares to clients.