Robinhood Will Let You Invest With As Little As $1 With Fractional Trading

Many companies in the U.S. have stock prices that less affluent investors can't afford. A stock like the class A shares of Warren Buffet's company, Berkshire Hathaway, is possibly beyond the reach of investors without the capacity to cough up $338,800 for a single share. Even Amazon's stock that trades at $1,700 may still be too expensive. But fin-tech startup Robinhood changes all of that.

Robinhood announced its new offer on Thursday: fractional shares. It's a new service that stands to compete against a similar feature that companies like Charles Schwab, Square, Stash and SoFi have launched recently.

Founded in 2013, Robinhood allowed investors to purchase stocks, ETFs, options, and even cryptocurrencies through its app. But the Menlo Park, California-based company's latest mission is to join others who are trying to make investing affordable to everyone. Fractional trading would allow an investor to invest in a stock like Amazon for as little as $1.

"We believe that if you want to invest, it shouldn't matter how much money you have. With fractional shares, we're opening up a whole universe of stocks and funds, including Amazon, Apple, Disney, Berkshire Hathaway, and thousands of others," Robinhood product manager Abhishek Fatehpuria told TechCrunch.

Democratizing Investing

The technology that effectively lowers the barriers of entry to purchase a well-performing stock is a robo-advisor. Robo-advisors are also financial advisors that make use of algorithms to manage the portfolio as well as provide investment advice to clients, but unlike their human counterparts, they don't pick and choose only the wealthy ones to earn a hefty commission.

"Robo-advisors are built on technology that makes it efficient to help anyone, regardless of account balance. This technology allows robo-advisors to charge significantly less to help you invest," Blooom CEO Matt Burgener explained.

Blockchain has also been instrumental in affording the masses investment opportunities and better liquidity through the tokenization of assets, which would otherwise be available to only professional or institutional investors.

"We think that this [security tokens] would, at the end of the day, benefit not only the retail investors who can actually grow sustainable wealth over time but would truly democratize the capital markets that are just now very divided between these two worlds [professional and institutional investors]," said Robin Matzke, co-founder of Berlin-based Fundament Securities.