What Is Fractional Share Investing?

How Can You Benefit From Fractional Shares?

Fractional shares allow you to buy fractions of stocks in companies that have a high price per share.

More importantly, you can immediately start using all cash available for investing because you no longer have to wait and save up the minimum funds needed to open an account.

As a result, you get access to shares you may not have otherwise been able to afford.

Most companies issue stock in whole units known as shares, which are then traded on the open market. Because the stocks are issued and traded as whole shares, most brokers restrict investors to buying and selling stock in whole share quantities.

Surprisingly, you could still end up with fractional shares due to stock splits and dividend reinvestment plans, even if you only trade stocks in whole shares.

Getting started is easy.

First, you set the dollar amount or amount of shares you wish to purchase. Next, the platform will calculate the amount of shares or dollar amount needed to meet that number of shares, regardless of whether it is a fraction.

Fractional Shares Add Flexibility

Investors can leverage the benefits of trading fractional shares by getting access to stocks that they normally would not be able to afford if they were forced to purchase whole shares.

If you’re on a budget and want to limit the amount spent on a trade, fractional shares can help you buy high priced stocks such as Priceline (PCLN) with shares traded between $1,148.06 and $1,927.13 per share in the past year.

Fractional shares can be advantageous when you don’t want to spend a lot of money on a trade, but wish to purchase a stock that has a higher price per share.

Put All Of Your Cash To Work

Since you control the amount you spend, fractional shares allow you to put all of your available cash into the market immediately- no need to wait until you raise enough cash to meet the account minimum or enough funds to buy one share.

If you don't invest with fractional shares, you'll end up with random amounts of left over cash just sitting in your account going to "waste".

Calculations Are Done For You Based On Your Budget

This is a huge plus for those of you that don’t like to do math- you don’t have to calculate how many fractional shares of a stock or exchange-traded fund (ETF) you want to buy or sell.

All you have to do is input the dollar amount for each trade or the share amount, and the calculations will be made to meet your goal!

Most fractional shares are eligible for dividends just like full shares.

Since you are able to make regular investments that meet your budget, it will be easier to invest on a regular basis for the amount you choose.

Where Can You Invest Fractional Shares

Now that you know more about fractional shares, take a moment to review some of the companies listed below to get started with investing in fractional shares.

Fractional shares are growing in popularity, and with new apps and companies that provide an investment plan for any budget, you will be confidently investing in your portfolio in no time.

1. M1 Finance

3. Public

Public is one of the newest commission-free brokers that allows app-based investing. But what sets them apart is that they also allow fractional-share investing.

You can invest in fractional shares on the platform, and still enjoy commission-free trading. They don't allow day-trading, and fractional share investing does take slightly longer to settle.

As a bonus, Public also offers a huge interest rate on cash up to your first $10,000 in the account.

Read our full Public Investing App review here.

Open an account at Public here >>

4. Robinhood

Robinhood has been the biggest player in commission-free investing for years, revolutionizing the industry with app-based investing several years ago.

However, Robinhood just announced that they will support fractional share investing, and allow Dividend Reinvestment (DRiP). This is huge because we already name Robinhood one of our picks of the best places to invest for free. Adding in this feature makes them a more robust investing platform.

Read our full Robinhood review here.

Open an account at Robinhood here >>

5. Schwab

Schwab is one of the largest brokerages in the United States, and they have recently launched fractional share investing. They recently launched fractional share investing with what they call Schwab Stock Slices.

To invest in fractional shares at Schwab, you do need to invest at least $5. Also, they limit fractional shares to companies listed in the S&P 500 - which is a good selection, but not every stock.

Read our full Schwab review here.

Open an account at Schwab here >>

Final Thoughts

Before you begin investing with fractional shares, learn the basics and read up on best practices in building your portfolio.

We have put together a list of the best investing blogs and investing podcasts to follow, as well as ways to learn about investing when you are just starting out.

Now that you’ve learned the benefits of fractional shares, how will you put more of your money to work? Have you ever bought or sold fractional shares? If so, we’d love to hear about your experience in the comments section below.