Robinhood will let users invest with as little as $1—here's what that means for you. (via CNBCMakeIt)
of stocks. Fin tech companies SoFi and Stash also feature fractional trades.
That's good for investors without a lot of money who would like to buy shares in expensive companies like Amazon or Alphabet. It's also a smart way for any investor to test out a company before committing a large amount of money. But experts say to be careful. If you aren't already investing in a diverse range of companies — typically via an index fund — that should be your priority before you devote a significant amount of money to investing in a single company, Greg McBride, chief financial analyst at Bankrate, tells"The individual investor is better suited by investing in mutual funds and exchange-traded funds," says McBride. "But the lure of individual stocks is always there.
Investing in individual stocks only, in other words, is not a smart strategy. That said, Robinhood also allowing users to buy fractional shares of ETFs is especially good news, because, and provide the diversification that stock-picking typically does not. That's the best of both worlds. "You can easily construct a well-diversified portfolio with a modest amount of money by buying exchange-traded funds," says McBride. "Every dollar is going to work for you."
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