Scarcely a 10 years into manufacturing, Elon Musk’s Tesla (NASDAQ:TSLA) is currently mainly the granddaddy of electric car or truck shares, the standard to which newcomers aspire. In contrast, Trevor Milton’s Nikola (NASDAQ:NKLA) is the new child on the block — an electrical truck IPO that additional than doubled its inventory price tag in just its first 7 days of investing past thirty day period.

Even following growing so sharply considering the fact that its IPO, Nikola stock nevertheless only charges about $56.50 a share, as opposed to just about $1,400 a share for Tesla. For the rate of just one particular share of the greatest-recognised electric powered motor vehicle stock on the block, you could obtain 25 shares of the fast-increasing upstart.

So which should really you opt for? Tesla or Nikola? Do you even have to pick out at all?

Excellent news for small investors

I will never bury the lede here: You don’t have to opt for, at least not any more.

Probably you’d want to personal shares of financially rewarding Tesla, which has attained practically $265 million mixed above its last 3 noted quarters — but at $1,400 a pop, you can’t afford to pay for to get far more than a share or two at its present-day rate. Possibly you figure that, in get to have a respectable amount of shares, you have to gamble on less costly Nikola rather — which has but to market even one particular electric truck, much much less generate any earnings on its sales, and which just isn’t envisioned to generate any gains in advance of 2025 at the earliest (according to analysts polled by S&P Worldwide Market place Intelligence).

The good news is that now main lower price brokers these kinds of as Charles Schwab and Fidelity have joined with Robinhood in presenting fractional shares, so it can be just as simple to invest in $56.50 truly worth of a single $1,400-Tesla share (or around .04 of just one share of Tesla) as it is to invest the same cash to purchase 1 total share of Nikola.

Fractions make math simpler

Fractional shares are precisely what they seem like — fractions, or parts of full shares of a inventory, carved out by a broker and sold off piecemeal. If you have as tiny as $5 to spend, Charles Schwab will allow you to use it to invest in a piece of a share of inventory (about a .004 share of Tesla, for illustration). Fidelity is even more flexible, permitting stock buys in increments as tiny as .001 share (which in Tesla’s situation would price you just a buck-forty).

And of class, really should you be of a brain to, you could devote your cash to obtain 1. share of Nikola stock — or 1.001, or 1.004, actually, any portion you like.

Why get fractional shares?

Of program, the concern stays why you would want to get fractional shares. Very first and most naturally, the answer is that fractional stock investing permits you to make investments in shares that offer for experience price costs major adequate that you could not ordinarily be capable to obtain even one of them — Tesla is one particular case in point, at $1,400 a pop. Warren Buffett’s famed Berkshire Hathaway (NYSE:BRK.A) would be an even a lot more excessive case in point, providing for a share cost of … $268,780. Every.

There are, having said that, other explanations to consider fractional inventory investing. Maybe the most important rationale for novice investors, I imagine, is that fractional stock investing drives house the reality that all shares are in actuality “fractions.” Nikola, for example, divides its $14.5 billion market capitalization between 360.9 million shares remarkable. Meanwhile, Tesla divides its significantly larger sized $258 billion current market cap between quite a few much less shares — 185.5 million shares to be precise. Thus, every single “total” share of Tesla in point represents a 1/185.5 millionth share of the company.

“Fifty percent a share of Tesla,” appropriately, is just a more compact fraction of the complete corporation: 1/371 millionth to be specific. For that matter, 1/25th of a share of Tesla (.04 share, or $56.50-worth) can be just as correctly explained as 1/4.6375 billionth of Tesla in its entirety.

When you glance at it this way, there seriously just isn’t a lot qualitative change amongst acquiring a complete portion, or a fraction of a fraction of Tesla. What matters is the excellent of the small business you are getting, no issue how small a portion of that business enterprise you invest in.