Depending where in the United States you live, a gallon of gas will now run you between around $3 and around $4.50 per gallon. While this is a high price compared with the recent past, it’s still a small pittance compared to the price of a full share of Tesla ( TSLA -4.35% ) stock.
But, despite the fact that Tesla is trading for around $1,100 per share as of the end of November, it’s still possible to buy an ownership interest in the electric car maker for less than it would cost you to buy a single gallon of gas at the pump.
Buying into Tesla will cost you much less than you think
Buying an ownership interest in Tesla doesn’t have to cost you $1,100 or more. The price can come in at less than the cost of a tank of gas because you don’t have to purchase a full share of the electric car maker in order to gain exposure to it.
Instead, it’s possible to buy a partial share, otherwise known as a fractional share. A number of mainstream brokers now offer the option to buy fractional shares, allowing investors the chance to specify how much money they want to invest in a company rather than how many shares they want to buy.
While traditionally, you needed to be able to afford at least one full share as the price of admission if you believed in a particular stock and wanted to profit from share price increases, you can now buy as large (or small) of a fraction of a share as your pocketbook allows. So if you have just enough to buy a gallon of gas — about $4, you could buy 0.003 of a share of Tesla.
Now, not every broker offering fractional shares allows you to invest with so little. Some have a $5 minimum or set other restrictions. But others enable you to invest as long as your transaction would get you as little as 0.001 of a share. So, if you wanted to buy Tesla for less than a gallon of gas, you’d need to research brokerage firms carefully to find one that would allow it.
Of course, the big question on your mind might be, is it worth buying so little of a stock? The answer is yes. While your gallon of gas doesn’t have the chance to grow your wealth, buying a partial share of Tesla stock does. If the stock goes up, you’d make the same percentage gains as any other investor. A 100% bump in the share price would turn your $4 into $8. Although this still doesn’t seem like a princely sum, you’d have doubled your money for your efforts.
Buying fractional shares has no real downside as long as your brokerage firm charges no commission fees — which most don’t — and as long as you still take investing seriously even if you aren’t putting a ton of money on the line.
And you can add to your stake over time, buying a partial share here and there as you get spare cash. Each time you do, you have the potential for your money to grow. You’re better off with that happening than just squandering the cash on purchases that won’t pay off in the end.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.