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Robinhood Fractional Shares and DRIP Explained (Invest for $1) - YouTube
Channel: Honest Finance
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so over the last few months if you join
the waiting list on Robinhood you could
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get access to their fractional shares a
little bit faster and that's exactly
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what's been happening they've been
rolling it out to different users I got
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mine about a week ago and I know a lot
of other guys have actually got their as
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months ago so this is a good thing it's
rolling out and hopefully soon it'll be
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available to everyone so in this video
I'll teach you everything you need to
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know about fractional shares on Robinhood and then I'll also teach you about
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their DRIP program which is also
associated with the fractional shares
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and on top of that I'm gonna go inside
my phone I'm gonna show you exactly how
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to do the fractional shares and how to
use the drip program both of those are
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gonna be separate so you guys can learn
two new things from the fractional
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shares on Robinhoods so if you don't
know what a fractional share is they're
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actually really easy to understand and
the way that I like to describe it is
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think of a share as a dollar and what
you're gonna do if you want fractional
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shares is you're just gonna take that
dollar and you're gonna break it down
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into a hundred pennies so now you can
invest in just one penny rather than one
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dollar and it makes it a lot easier to
get in as far as the investing side goes
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because right now if you wanted to
invest in a company like Google you'd
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actually have to pay out over a thousand
dollars just to get one share of them
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and then on top of that if you were
looking at a company like Amazon they're
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actually trading for over two thousand
dollars a share right now so just to get
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started investing with just one share of
either of those companies
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you're gonna need over a thousand
dollars or two thousand and Amazon's
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case just to own one share and that's
why fractional shares come in really
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handy because Robinhood actually lets
you invest for as little as just $1 into
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those companies so you can own a tiny
little piece of a share and now you're
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investing in those companies but you
don't have to have that initial amount
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to invest with so because of fractional
shares it makes it a lot easier to
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invest in a bunch of different companies
that you otherwise might not have
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invested with just because you didn't
have the initial amount of money to
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invest in one share of those companies
and that is why fractional shares are so
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handy and then the other cool thing
about fractional shares is that you
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don't miss out on your dividends just
because you own a portion of the shares
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so that means if you own half a share of
a company that paid out $1 a year and a
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dividend then you'd still get paid 50
cents a year in that dividend because
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you own a
action of it and so you're not missing
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out on those now keep in mind that there
are a couple cons when it comes to
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investing in fractional shares with
Robin Hood but they aren't really that
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big of a deal however I did want to
address them right here for you guys so
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the first problem with fractional shares
is that if you ever get to the point
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where you want to switch to a different
brokerage account you can't actually
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migrate fractional shares from Robin
Hood to a different company they have to
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stay on that same platform so the only
options you have is that you can either
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sell those fractional shares and just
get your cash or you can just leave them
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inside of Robin Hood and then obviously
deal with that account and another
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account from the different company now
the other problem with buying fractional
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shares is that when you buy them you
have to buy them at the current market
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price so that means you're gonna be
placing a market order and you're gonna
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have to buy them for whatever they're
trading for at that exact moment now
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this can be a problem if you're
investing a lot of money because in that
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case you probably want to do limit
orders and different order types that
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way you can get the best value for your
money but honestly if you're just
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investing a little bit of money to get
fractional shares you're really just
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talking pennies and it's probably not
that big of a deal anyway and if you
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guys are liking this video can you
please just give it a big thumbs up that
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way we can share it with more people
because the more likes we get the more
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likely it is to be shared so thank you
very much
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I really do appreciate it now at this
point I'll show you guys exactly how you
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can buy fractional shares using the
Robin Hood app so we're gonna go right
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inside my phone I'll show you guys how
that works and then after that we'll go
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right into the drip program which also
has to do with the fractional shares
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okay so as long as you have fractional
shares activated on Robin Hood it's as
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simple as just finding any company that
you want to invest in and then you can
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now buy fractional shares so in this
case we're just in my watchlist and we
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are gonna invest in Apple which is a APL
and that is the second one down on the
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list so we're just going to click that
and it looks like they're trading for
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277 right now and we want to invest in
them so let's just click buy down here
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on the bottom right now because we have
fractional shares activated you can
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actually plug that in right here if you
wanted to so for instance I could put in
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point 5 and that would get me half a
share but really the easiest way to do
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this is to just buy a dollar amounts and
the way that you do this is you click on
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the
top right where it says shares up here
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and once you're in here this is where
all the different order types are and
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you're gonna be looking under market
order and you're gonna buy in dollars
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and that's exactly what we're gonna do
to be able to buy the fractional shares
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is inside the market order so just click
the first one on the list which is buy
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in dollars and that's exactly where we
want to be so right now if you look
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below the zero you're gonna see 150 368
available to buy Apple and that's how
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much cash I have in my account so let's
pretend that I wanted to invest $100 an
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Apple and that's exactly what we're
gonna do right now now just click review
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and it's going to show us exactly the
fraction amount of shares that we're
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buying and we're gonna swipe up to
submit and that is all we have to do and
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now we can review the completed order
and that is all you have to do to buy
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fractional shares on Robinhood now that
you know how to buy fractional shares
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using the Robin Hood app it's also
important to know what the drip program
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is because this is included with the
fractional share offerings and drip
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stands for dividend reinvestment program
and I'll tell you exactly what that
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means so let's pretend that you invest
in a company that costs $200 a share and
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they pay out ten dollars in dividends
per year what this means is that if
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you're only getting paid ten dollars per
year in dividends then it's gonna take
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twenty years before you can even buy one
more share to reinvest in that company
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if it was staying at $200 a share that
entire time which is probably not likely
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but when you have access to fractional
shares and there's a drip program then
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what this means is that you can actually
take that ten dollars and you can
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reinvest it fractionally into that
company so that you don't have to wait
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twenty or so years before you can save
up enough to get one more share so this
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way you just buy little fractions of it
with your dividends and it automatically
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happens which is really handy because
it's completely hands-off and you don't
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have to do anything so basically as long
as you have the drip program activated
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on Robinhood then if a company pays out
a $2 dividend then that $2 will go right
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back into fractional shares of that
specific company so that you're already
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investing in them and then you can also
get more of their dividends in the
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future we
as you own a tiny little bit more every
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single time they pay out a dividend or
obviously if their stock prices go up
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also I do want to mention if you're new
to Robin Hood and you haven't signed up
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for them yet I have a referral link in
the description below that will give you
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a free share just for signing up now
I'll warn you it's probably not going to
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be worth much probably like five to ten
bucks but sometimes they can be around
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the $200 range and they are free just
for signing up so try that link out if
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you want to sign up for them now in
order to activate the drip program on
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Robin Hood you manually have to do it
inside of their app so I'm going to show
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you guys how to do that right here we're
just gonna go back inside my phone and
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I'll show you guys exactly how to
activate the drip program on Robin Hood
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okay so in order to activate drip and
Robin Hood you have to click the little
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person on the bottom right so just click
that and we're gonna get into the main
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menu now you're gonna click the second
tab down from the top which is investing
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because that includes drip inside of it
so just click that and then we're gonna
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scroll down until we see dividend
reinvestment where it says disabled
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right here and we're gonna click on
enable dividend reinvestment right there
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in green now from here it just gives you
a tiny explanation of what it is so
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we're gonna hit continue and from here
you can learn more about it if you'd
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like to but the main two things they're
listed right here for you you're gonna
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have automated reinvestments which means
that they'll reinvest any cash dividends
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you earn on the next market day and then
they tell you right up front that you
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can pause the feature at any time and
this is going to be handy if you don't
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want those dividends to go back into
those individual companies if you just
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want that money to go back into your
cash account and then you decide what
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you want to do with it then obviously
pause the drip program so it isn't
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automatically reinvesting those
dividends now from here we'll just hit
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continue now we are gonna have to agree
to the drip agreement so go ahead and
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read through it if you'd like to or once
you just get to the bottom it's gonna
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have you accept it and by accepting you
are agreeing to their drip agreement and
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now we are officially enrolled in the
dividend reinvestment program on Robin
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Hood and that has all you have to do to
set up drip now that's pretty much
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everything you need to know about the
fractional shares and the drip program
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on Robin Hood and if you guys just found
this channel I'm Jason with honest bye
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and I make a lot of videos on different
topics that'll give your life and your
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finances more value so if you do have an
interest in that type of content feel
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free to subscribe but for now I am gonna
leave another playlist over here that
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you guys can watch specifically on
different Robin Hood videos so check
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those out if you want to learn more
about them but thank you for watching
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have a great day
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