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Fractional Shares

blog.robinhood.com

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Re: Fractional Shares

#71

Post by hrez »

atombender wrote: post #7
zymhan wrote: post #2

So, what is the actual "vehicle" with which the shares will be purchased? And is this something that exists outside of Robinhood?

There's a bunch of brokerages offering fractional shares, such as Betterment, Motif, M1, Stash, Stockpile, and others. Schwab has also announced they'll be adding it. There's also DRIP (Divident ReInvestment Plan) plans, a feature brokerages offer to allow fractional reinvestment of dividends. Not sure how it's actually implemented as a financial product.

Most of them are implemented through Apex clearing.

Re: Fractional Shares

#72

Post by tempsy »

Ambele wrote: post #62
tempsy wrote: post #47

Earlier quoted context omitted.

Why not? Mainstream personal finance advice is pitiful. There's wide consensus that ETFs are a bubble. On the other hand, the notion that buying an individual stock is equivalent to gambling is nonsense.

2/3rds of hedge fund managers underperform the S&P500 index so it's recommended for all investors to keep some index fund ETFs around (like VTI or VOO) as a benchmark to outperform.

Yeah not saying that part of your portfolio cannot just be the broad market, but I also often see people suggesting that doing anything other than just buying the index is somehow irresponsible and akin to "gambling".

Re: Fractional Shares

#73

Post by tempsy »

throwaway34241 wrote: post #65
tempsy wrote: post #47

Earlier quoted context omitted.

Why not? Mainstream personal finance advice is pitiful. There's wide consensus that ETFs are a bubble. On the other hand, the notion that buying an individual stock is equivalent to gambling is nonsense.

Can you expand on how index ETFs are a bubble? You say that there's wide consensus, but when I researched it the consensus seemed to be that indexing was the right strategy for most people (and even sophisticated investors like Warren Buffett have instructed his trusts to use an indexing approach). Beating the index is a zero-sum game, for every winner there must be a loser. Of course you can make educated choices ba…

If everyone just buys the index, then the underlying stocks that make up the index are propped up in a way that wouldn't be the case if that individual stock was not a part of said index.

(This is not hypothetical it is actually happening)

Re: Fractional Shares

#75

Post by desine »

Gunax wrote: post #70

I don't quite understand the appeal of investing via phone app. Investing my life savings (any any amount really) is one of the few things I would absolutely not want to do on a phone touchscreen. When I heard of Robinhood I thought it would fail for sure... I guess that shows how much I can predict startup success.

I don't see how the phone format is so much worse? To be honest, most of my recent investments have been limit orders submitted from the can. Of course by that point I've already done a lot of research on a desktop computer, but if I get a price movement alert I'm double checking for recent news (often with a twitter cross reference) and submitting an order as fast as I can... which often means using the closest device, which more often than not is my phone

Re: Fractional Shares

#76

Post by throwaway34241 »

tempsy wrote: post #73
throwaway34241 wrote: post #65

Earlier quoted context omitted.

Can you expand on how index ETFs are a bubble? You say that there's wide consensus, but when I researched it the consensus seemed to be that indexing was the right strategy for most people (and even sophisticated investors like Warren Buffett have instructed his trusts to use an indexing approach). Beating the index is a zero-sum game, for every winner there must be a loser. Of course you can make educated choices ba…

If everyone just buys the index, then the underlying stocks that make up the index are propped up in a way that wouldn't be the case if that individual stock was not a part of said index. (This is not hypothetical it is actually happening)

The idea with index investing is usually to buy a total stock market index. The whole stock market is in the index, so saying the index is in a bubble is basically the same as saying the stock market itself is in a bubble.

Which could be, but isn't an argument for buying individual stocks instead of the index, since that doesn't avoid the problem.

Re: Fractional Shares

#77

Post by dmurray »

tempsy wrote: post #73
throwaway34241 wrote: post #65

Earlier quoted context omitted.

Can you expand on how index ETFs are a bubble? You say that there's wide consensus, but when I researched it the consensus seemed to be that indexing was the right strategy for most people (and even sophisticated investors like Warren Buffett have instructed his trusts to use an indexing approach). Beating the index is a zero-sum game, for every winner there must be a loser. Of course you can make educated choices ba…

If everyone just buys the index, then the underlying stocks that make up the index are propped up in a way that wouldn't be the case if that individual stock was not a part of said index. (This is not hypothetical it is actually happening)

This is a pretty reasonable theory. And it's true, if everyone indexes then stocks generally become mispriced. But this theory only applies at the extreme, not at the margins if say 50% or 90% of money is in index funds. If a few savvy traders buy the good stocks and sell the bad ones, they make a profit and the stocks become "correctly" priced again.

In one view of the market, this is what all those hedge funds are paid to do. They keep the prices correct and extract some money, while everyone else indexes and pays them a small fraction of their returns. Of course, hedge funds aren't getting much of that pie these days.

Re: Fractional Shares

#78

Post by bransonf »

Gunax wrote: post #70

I don't quite understand the appeal of investing via phone app. Investing my life savings (any any amount really) is one of the few things I would absolutely not want to do on a phone touchscreen. When I heard of Robinhood I thought it would fail for sure... I guess that shows how much I can predict startup success.

I don’t use Robinhood anymore, but it’s definitely had an effect on retail brokerages. Foremost, it has attracted a younger crowd than most other brokerages have been able to.

The $0 commission is now pretty universal, and most brokerages are pushing better mobile apps. I don’t really trade from my phone, but you have to admit it’s convenient for when you’re not always near a desktop.

Re: Fractional Shares

#79

Post by georgeecollins »

skybrian wrote: post #37
crazygringo wrote: post #34

Earlier quoted context omitted.

Actually I think this is huge, not for existing investors but precisely for people who aren't . For a teenager who wants to invest $100 to "dip their toes in" when a share of Amazon is over $1,700?!?! And Google over $1,300? Back in the days when stock regularly split it wasn't a big issue. But now that a bunch of companies think it's somehow unfashionable to split their stock (e.g. Amazon and Google), all this does…

Do we want to encourage teenagers to buy stock in individual companies? Index funds I could see.

I set up a small custodial account that my teenager can trade stocks in. Yes, I know it is smarter to invest in ETFs.. Buying an individual stock gives a kid a reason to read balance sheet, a P&L, understand what a dividend is, a share is, and so forth. Also, he learns what risk feels like, that it is really hard to outsmart the market. Better to do these things with small amounts of money.

So yeah, I do want to encourage my teenager to buy stock in individual companies. Mostly because he doesn't have a lot of money to lose, and its a great way to learn.

Re: Fractional Shares

#80

Post by nradov »

The whole idea of "shares" is a pointless legacy concept. What really matters is the fraction of the company you own. Back when trading was conducted using physical paper stock certificates it made sense to have discrete individual shares but the concept has now outlived its usefulness. In the future it would make more sense to just say, for example, that you can invest $12345.67 to purchase 0.0000000058% of company XYZ.
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