Investing in the stock market has traditionally been associated with buying whole shares of companies. But what if the price of a single share is too high? That’s where fractional shares come in. They allow you to invest in a portion of a share, making stock market investing more affordable and accessible.
Table of Contents
In this guide, you’ll learn what fractional shares are, how to invest in them, their benefits, risks, and the best platforms to get started.
What Are Fractional Shares?
A fractional share is a portion of a whole share of a stock or exchange-traded fund (ETF). Instead of buying one full share of an expensive stock like Amazon or Tesla, you can invest a smaller amount (say $10 or $50) and own a fraction of that share.
For example:
- If a stock costs $1,000 per share and you invest $100, you’ll own 0.1 of that share.
This makes investing in high-value companies possible even with a limited budget.
Why Invest in Fractional Shares?
Fractional shares are a game-changer for beginner and small-budget investors. Here’s why they are popular:
✅ Affordable Entry Point – You can start investing with as little as $1.
✅ Portfolio Diversification – Spread your money across multiple companies without needing large capital.
✅ Access to High-Value Stocks – Own shares of premium companies like Google, Apple, or Amazon.
✅ Reinvestment of Dividends – Many brokers automatically reinvest dividends by buying fractional shares.
How to Invest in Fractional Shares: Step-by-Step
1. Choose a Brokerage That Offers Fractional Shares
Not all stockbrokers provide this option. Popular platforms like Robinhood, Fidelity, Charles Schwab, Interactive Brokers, and SoFi allow fractional investing.
2. Open and Fund Your Account
- Sign up with your chosen broker.
- Verify your identity (as required by regulations).
- Deposit funds into your account.
3. Pick the Stocks or ETFs You Want to Buy
Do your research and choose companies or ETFs that match your investment goals. Consider fundamentals, long-term growth, and risk.
4. Decide How Much to Invest
Unlike traditional investing, you don’t need the full share price. You can simply enter the dollar amount you want to invest (e.g., $50 in Apple).
5. Place Your Order
Select “buy fractional shares” or enter the investment amount. Your broker will allocate the corresponding fraction of the share to your portfolio.
6. Monitor Your Investments
Keep track of stock performance, company news, and adjust your portfolio when necessary.
Example of Fractional Share Investment
Imagine you want to invest in Alphabet (Google) stock, which costs $2,500 per share. If you only have $250 to invest, fractional investing allows you to own 0.1 shares. Over time, your holdings grow in value proportionally to the stock price movement.
Risks of Investing in Fractional Shares
While fractional shares are beneficial, there are some risks to consider:
- Liquidity Issues – Not all brokers allow you to sell fractional shares instantly.
- Limited Broker Availability – Only certain brokers support them.
- No Voting Rights – Some companies don’t grant voting rights to fractional shareowners.
- Market Volatility – Fractional shares still carry the same risks as full shares.
Best Platforms to Buy Fractional Shares
Here are some of the most popular platforms offering fractional shares:
- Robinhood – Beginner-friendly, commission-free investing.
- Fidelity – Offers fractional shares for over 7,000 stocks and ETFs.
- Charles Schwab – Allows investing in slices of S&P 500 companies.
- SoFi Invest – Easy-to-use for small investors.
- Interactive Brokers – Ideal for international investors.
Final Thoughts
Fractional shares make investing in the stock market more inclusive and accessible. You don’t need thousands of dollars to own a piece of your favorite companies anymore. By starting small, diversifying wisely, and staying consistent, fractional investing can help you build wealth over time.