Moderna Has Tripled This Year But You Can Get Its Stock for $1

Moderna (NASDAQ: MRNA) has gone from relative obscurity to become a household name in just over a year. Its whirlwind success is due, of course, to the development of its blockbuster COVID-19 vaccine — the first product it's ever brought to market. Though investors have been jittery this week about the new, potentially vaccine-resistant omicron variant, Moderna is already testing four omicron-specific vaccine candidates.

A single Moderna share would cost you just shy of $350 as of Nov. 30. Though shares of the biotech company are down from the peak they reached earlier, they're still up around 200% year to date. If you don't have much money to invest. But believe it or not, there's a way to invest in the stock on the cheap. Here's how to invest in Moderna for as little as $1.

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How can Moderna shares only cost $1?

In the past, you would have needed deep pockets to invest in a stock like Moderna. Fortunately, those days are gone thanks to something called fractional shares.

Fractional shares allow you to set the price and decide how much you want to invest. As the name implies, you'll get a corresponding fraction of a share. If Moderna is trading at $350 and you only want to invest $1, you'd get 1/350th of a share.

You get the same risks and rewards that you'd get with buying whole shares. If the stock gains value, you make money. If it tanks, your investment loses value. If the company issues a dividend, you'll also get the proportional fraction of the payment.

The big advantage is that fractional shares let you avoid putting lots of money at risk, making them a good choice for beginning investors. Fractional shares can also be a useful tool if you practice dollar-cost averaging, which is where you invest a certain amount on a set schedule. For example, rather than saving up enough money to buy a full share of Moderna, you could decide to invest $25 or $50 a month.

Can I buy fractional shares of any stock?

Not all brokerages allow for fractional investing. For investment platforms that do allow you to buy partial shares, the rules vary, as do investment minimums.

For example, Charles Schwab lets you buy fractional shares of any stock on the S&P 500, with a $5 minimum investment. Fidelity offers access to fractional shares for 7,000 U.S. stocks and exchange-traded funds (ETFs). Robinhood lets you buy fractional shares of most stocks that trade for at least $1 with a market cap above $25 million.

One important thing to note: While it's easy to transfer whole shares between brokerages, you'll typically have to sell your fractional shares and repurchase them if you switch firms. That can result in capital gains taxes. So you may want to avoid buying partial shares if you plan to switch brokerages soon.

Should I buy fractional shares of Moderna?

Whether you're buying whole shares or fractional shares, you need to do your homework before you invest. With Moderna or any other stock, you should be confident the company can make money moving forward and also understand the risks.

If you're just starting to invest, you'll typically want to start out with index funds before you invest in individual stocks. An index fund that tracks the S&P 500 or the overall stock market gives you instant diversification and helps you avoid the risk of any one company failing. Once you've invested across the stock market, adding fractional shares to the mix can be a good way to try your hand at investing in individual stocks.

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Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Robin Hartill, CFP® has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and Moderna Inc. The Motley Fool has a disclosure policy.

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