Fractional Shares Explained
Can't afford a full share of Amazon or Google? Fractional shares let you buy $10, $50, or any amount of almost any stock.
What Are Fractional Shares?
Fractional shares are portions of a full share. Instead of buying 1 share of Apple at $180, you can buy 0.1 shares ($18) or 0.5 shares ($90). Your broker handles the math—you just pick a dollar amount.
Why Fractional Shares Matter
Access to Expensive Stocks
Some stocks cost hundreds or thousands per share. Without fractional shares, you'd need $3,500+ for one share of Amazon or Google. With fractional shares, you can invest $50 and own a piece.
Precise Dollar Investing
Want to invest exactly $500/month? With whole shares, you'd always have leftover cash. With fractional shares, you can invest every dollar.
Better Diversification
With $1,000, you could only buy whole shares of maybe 5-10 stocks. With fractional shares, you could own 50 stocks at $20 each.
Which Brokers Offer Fractional Shares?
| Broker | Minimum | Stocks Available |
|---|---|---|
| Fidelity | $1 | 7,000+ |
| Robinhood | $1 | Most stocks |
| Schwab | $5 | S&P 500 only |
| Interactive Brokers | No minimum | Most US stocks |
| Public | $1 | Most stocks |
| Webull | $5 | Limited selection |
| Vanguard | No fractional | N/A |
How Fractional Shares Work
When you buy a fractional share, your broker either:
- Pools orders: Combines your order with others, buys whole shares, distributes fractional ownership
- Holds inventory: Maintains whole shares and sells you portions from their inventory
You own a real portion of the stock with the same rights: dividends (pro-rated), voting rights (sometimes), and gains/losses based on your ownership percentage.
Fractional Share Benefits
No Wasted Cash
Invest your full deposit. If you add $100/month, all $100 gets invested—no leftover cash sitting idle.
Easy Dollar-Cost Averaging
Invest the same dollar amount regularly regardless of share price. Classic dollar-cost averaging strategy.
Portfolio Rebalancing
Adjust allocations precisely. Move exactly 2% from stocks to bonds without worrying about share prices.
Fractional Share Limitations
Not All Stocks Available
Most brokers only offer fractional shares for large-cap, liquid stocks. Small caps and international stocks may not be available.
Can't Transfer Fractional Shares
When transferring to another broker (ACAT), fractional shares are typically liquidated. You can only transfer whole shares.
Voting Rights
Some brokers don't extend voting rights to fractional shareholders. Check your broker's policy.
Tax Lot Complexity
Many small fractional purchases = many tax lots. This can complicate tax reporting when you sell.
When to Use Fractional Shares
- Starting with small amounts — Invest $50/month effectively
- Building diversified portfolios — Own many stocks with limited capital
- Buying expensive stocks — Access Amazon, Google, etc.
- Dollar-cost averaging — Invest fixed amounts regularly
When Whole Shares Make More Sense
- Voting is important to you — Some brokers restrict fractional voting
- You might transfer brokers — Fractional shares get liquidated
- Tax simplicity — Fewer tax lots = easier reporting
The Bottom Line
Fractional shares democratized investing. Anyone can own Amazon, Berkshire Hathaway, or any expensive stock with just a few dollars. For most investors, especially those starting out, fractional shares are a great feature.
The main consideration: if you might switch brokers, know that fractional positions will be sold during transfer. Plan accordingly.
Compare Fractional Share Offerings
Fidelity offers 7,000+ stocks for fractional investing.
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