Like Peter Lynch says, invest in what you know. It would be cool if your round-up could buy a fractional share of whatever business you shopped at. If that company isn’t publicly traded, you could set a stock for it to default to.
So if I go to Chipotle, my round-up goes to a fractional share of Chipotle. If I go to my favorite local hole in the wall, my round-up would go to a fractional share of $SPY or whatever I set my default to.
I know Cash App and the Robinhood Cash Card both have round-ups to buy stock, but they only buy one stock. Anyone know a card that’s more inline with what I want?
I used to have an account where you could own partial shares. I think it was called Sharebuilder. The problem was the fees. There was a transaction fee (and I think it was only $5) for buying and selling, so you had to make at least that, plus enough to offset capital gains taxes, just to break even. So you either needed to buy a lot each time (in which case you probably didn’t need Sharebuilder) or buy and hold on long enough for the stock to go up enough to make it worth it. In fairness they were clear that $50/month or whatever I was doing wasn’t likely to be enough to be successful.
I actually ended up doing better with the money market account that they kept uninvested money in. It was an interesting lesson.
I suspect this idea would suffer a similar restriction. How would the company that administers this make money?
Not sure how they pull it off, but you can make fee-free trades of fractional shares on Robinhood. I believe other platforms support this as well.
Pretty much every brokerage offers fee-free trades, and they usually make money by giving you a slightly worse price (as in, slightly higher purchase price and slightly lower sale price), but that doesn’t really affect most regular investors.