What is a Fractional Share?
A fractional share is small portion of an equity (less than 1 full share) in a stock or ETF.
Many brokers nowadays allow investors to buy fractional shares through their mobile investing app. In this article, we’ll answer the most common questions about fractional shares and provide some tips to use when trading them.
How Do Fractional Shares Work?
Fractional shares are exactly like they sound – a fractional portion of a whole share. Online brokers like Fidelity allow you to purchase fractional shares during normal market hours.
What are the benefits of Fractional Shares?
Fractional shares provide several major benefits over purchasing whole shares:
- You can buy expensive stocks like Google (NASDAQ: GOOG) and Amazon (NASDAQ: AMZN) with as little as $1
- You can use dollar cost averaging to purchase fractional shares over time as you work towards owning at least 1 whole share
- Fractional share investing builds the habit of investing so you can invest even more money as your income increases
Are Fractional Shares Worth It?
Yes. Fractional shares allow you to build up a position in a stock or ETF even if you don’t have enough money for 1 whole share.
For example, Amazon (NASDAQ: AMZN) stock trades for over $3,400 per share and many investors may find it difficult to raise over $3,000 for a single share. Instead of saving up enough money for 1 or more shares, you could invest $100 every week in Amazon stock and eventually own 1 share of stock after 6 months.
Which Brokers Offer Fractional Shares?
You can trade fractional shares on popular brokers like Fidelity, Robinhood, and eTrade.
- Fidelity: You can invest with as few as 0.001 shares or 0.01