How to Invest in Mastercard for Less Than the Cost of a Tank of Gas

Gas prices are on the rise. You’ve likely noticed this because every time you take out your credit card to pay at the pump, you are spending more money to fill up your vehicle’s tank.

According to the U.S. Energy Information Administration, the average price of gas in the U.S. is running about $3.32 per gallon. If you live in California, you may well be paying well over $4 per gallon. An average car holds about 15 gallons of gas, so if you’re filling up your tank, you’re routinely paying $50 to $60-plus a pop, depending on how much gas you’re putting in, based on the U.S. average.

That $50 you’re putting on your Mastercard (NYSE: MA) every fill-up to pay for gas could instead be invested in the credit card company, which has been one of the most consistent stocks over the past decade. It might not get you to work, but an investment in Mastercard could help you on your investment journey to retirement or some other long-term goal.

Image source: Getty Images.

While an investment in Mastercard stock may seem too expensive for some based on its roughly $335 per-share stock price, it’s not if you invest using fractional shares.

The scoop on fractional-share investing

If you haven’t heard of fractional-share investing, you’re likely not alone. The concept has only started to emerge in the past couple of years as an option offered by stock trading platforms. With fractional-share investing, investors don’t have to own whole shares of a stock to invest in a company; they can own portions, or fractions, of a share.

This has brought a lot of great stocks into play for investors who may have previously considered them too expensive to consider. For example, one of the best, most consistent growth stocks over the past 10 years is Mastercard. The credit card company and payment processer has posted an average annualized return of 26.6% over the past 10 years as of Oct. 25, which is about double the return of the S&P 500.

Such consistent and strong growth has boosted its stock price from about $31 per share 10 years ago to over $335 per share right now. For those who don’t have a lot of money to invest, a stock that expensive might be priced out of their range. But with fractional-share investing, that is no longer the case. Here’s how it works.

Invest by dollar amount

With fractional-share investing, or through “stock slices,” as some brokers call them, you can invest by dollar amount instead of by share. So, if you had $50 to invest — that cost of filling up your tank — you could invest it in Mastercard and buy that fraction of the stock. That would buy you about 14% of one share, but you could add $50 to it every month, and soon, in about seven months, you’d own a share, and more, over time, as you continued to invest.

Another great thing about fractional-share investing is that the returns you gain on the investment are equivalent to the gains that a full share would earn. So, if Mastercard gains 26% this year — its historical average — your little piece of the pie gains 26% as well. The reality is, Mastercard is only up 1% year to date in 2021, but that’s nothing to be too concerned about as spending continues to increase, coming out of the recession. Plus, the company has been in acquisition mode as it recently bought companies to bolster cryptocurrency security and open banking.

The bottom line is, Mastercard is part of a duopoly in the credit-processing space along with Visa, and many consider it to be one of the best long-term investments on the market. Through fractional-share investing, you can buy a piece of it for the cost of filling up your gas tank.

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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard and Visa. The Motley Fool has a disclosure policy.

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