Should You Use the Robinhood App to Buy Tesla Shares?

Here's how you can use Robinhood to buy shares for less.

Robinhood changed the investing landscape by being one of the first to offer commission-free trading. After its 2015 launch, other brokers began to follow suit by also offering $0 trading fees. Robinhood has close to 16 million investors, according to website Business of Apps. Despite some hits to its brand due to trading restrictions, Robinhood is still the go-to for many investors, including beginning investors looking to get started with a small amount of money. And one way they can do this is with fractional shares.

How fractional shares work

Fractional shares are partial shares or a portion of a company's stock. They can be bought and sold just like whole shares, but you can get started with a few dollars instead of having to pay the full price of a share. Fractional share investing makes investing more accessible for investors with little capital.

The share price of some companies, such as Tesla, can be quite high. As of this writing, Tesla’s stock price was averaging around $920 a share. But fractional shares allow you to invest in Tesla in amounts as low as a few dollars. And Robinhood requires a minimum of just $1, making it a great fit for many new investors.

Another advantage of fractional shares is that investors who dollar-cost average (invest a certain amount over a regular interval) can diversify their investments without large amounts of capital. Prior to fractional shares, you would have had to save close to $1,000 before you could invest in a stock like Tesla. Now you can have your money working for you immediately by buying fractional shares.

Robinhood debit card

In addition to offering fractional shares, Robinhood has introduced the Robinhood Cash Card. It offers a round-up rewards program, which allows you to round up your purchase amounts to the nearest dollar on debit card transactions.

If you spend $4.80 on a latte for example, Robinhood will round the payment up to $5. The extra $0.20 can be used to buy a stock, like Tesla, or crypto you choose. When your round-ups are transferred to your brokerage account for investment each week, you’ll receive a bonus that equals 10% to 100% of the total value of your round-ups from that week. Bonuses are capped at $10 per week.

The Robinhood Cash Card could be a great way to eke out a little extra money for investments just by making your regular purchases. And if you're interested in fractional share investing, those small round-ups could even go toward your fractional share budget. Getting started with Robinhood is relatively easy, and if you're looking for more information on investing in general, check out our beginner's guide to brokerages to learn more about the basics.