How to start investing $100 with Robinhood’ and everything you need to know about the new features
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Robinhood has finally released their brand new feature DRIP, and Fractional Shares. DRIP stands for Dividend Reinvestment Plan, and it allows you to be paid dividends and automatically reinvest them back into the same stocks that paid those dividends.
These features have a few advantages to normal non automated investing so I wanted to show you an overview and basic tutorial of how to invest for beginners, if you wanted to invest $100 in the stock market.
Some things to note about how Robinhood is treating fractional shares. There are two types of transfers available – partial and full. A full transfer will move your stocks from one brokerage to another (at the cost of $75 via ACATS, Automated Customer Account Transfer Service), and your fractional shares will be sold and the money given to you. A partial transfer will move your stocks and leave the fractional shares in Robinhood.
No matter which option you choose for your investment, fractional shares cannot be moved from one brokerage to another until they become full shares.
Fractional shares also receive dividends in proportion equal to the amount of shares you own in that stock. For example, if you own 10% a stock, you will receive 10% of that dividend payout at the end of the trading day rounded to the nearest penny.
There is a common misconception that if you reinvest your dividends through DRIP, you don’t actually have to pay taxes on that money. This is a myth, you still have to pay taxes on that money because it is still considered as money you received.
DRIPs and Fractional Shares are important because these features make it easier to get into a habit of investing, which over a long period of time builds good consistent habits, and that’s how wealth is created – as opposed to day trading like most people think when they think of investing. But these features will help make you an automatic millionaire by using compound interest to your advantage.
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