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Earlier quoted context omitted.
AFAIK Vanguard doesn't offer anything like this, unless you're buying into a mutual fund.
Vanguard has fractional shares because it supports DRIPs. (Robinhood does not support DRIPs.)
So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?
It exists outside of Robinhood: - Sofi: https://www.sofi.com/invest/fractional-shares/ - Schwab: https://www.wsj.com/articles/schwab-in-bid-for-younger-clien... I'm not totally sure how it's structured, but I imagine RH "owns" the shares and offers you the corresponding fractional amount of value/dividends, etc.
Earlier quoted context omitted.
Vanguard has fractional shares because it supports DRIPs. (Robinhood does not support DRIPs.)
Isn't this only for mutual funds? AFAIK, Schwab is the only major old-school brokerage that currently offers fractional shares.
Do you really own anything, or are you just lending money to Robinhood? Does your fractional buy get reported to the transfer agent for the stock? Do you get the annual report? Voting rights?
Most retail investors don’t want an annual report or voting rights, nor do they mind if they own the share if the asset they buy tracks it sufficiently well.
This is good if you want to invest in BRK.A.
Don't get me wrong, I love some of what they're doing....I just don't trust them with my money.
Do you really own anything, or are you just lending money to Robinhood? Does your fractional buy get reported to the transfer agent for the stock? Do you get the annual report? Voting rights?
Earlier quoted context omitted.
AFAIK Vanguard doesn't offer anything like this, unless you're buying into a mutual fund.
Vanguard has fractional shares because it supports DRIPs. (Robinhood does not support DRIPs.)
So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?
My understanding is that the way this works is that the broker will generally already have an inventory of all of the stocks that are regularly traded through them and simply carve up your fractional allocation from this inventory. When you purchase shares through a broker they can simply sell you the shares directly out of their inventory if they can match the market price. They will even get a small incentive to do this since it produces order flow (volume) without hitting the exchange directly.
This also helps with order clearing (the T+3 rule for ownership transfer). Since the broker is selling out of their inventory, it is virtually guaranteed that your order will clear. When transferring shares between institutions, it's possible that this process will fail and you will be notified that your order wasn't able to be fulfilled. It's rare, but can happen.
While purchasing fractional shares outright is somewhat new, the concept itself has been around for a while and I've had DRIPs at multiple different brokers. I was even able to get fractional shares of high priced preferred stocks going for $1,000+ market per share.
Anyways, that's my experience.