Ever wonder what's the smallest number of shares of stock you can buy? Would you believe fractions of shares? If you're buying stock directly from a company, such as through a dividend reinvestment plan (Drip), your money often buys fractions of shares at a time. For example, a $50 contribution would buy you 0.67 shares of a $75 stock. When buying stock through a broker, you can buy as little as one share at a time. Just pay attention to commissions -- if you're buying one $40 share of stock and paying a $25 commission, you're not doing yourself a favor. [You can learn more about choosing a brokerage and can compare commission fees in our Broker Center.]
Another option is using a new breed of online investing service that sports extra-low trading fees -- often just a few dollars. Examples are www.BuyandHold.com and www.ShareBuilder.com. (ShareBuilder.com is a sponsor of Fooldom.) These are attractive options that Foolish investors should consider. They permit you to get started investing with as little as $20, and they have some advantages over traditional dividend reinvestment or direct investment plans. With Drips, it frequently takes weeks and some paperwork before you can buy or sell stock. Last time we checked, BuyandHold and ShareBuilder place orders at least once a day or week. That's a big difference.
These services operate very much like regular brokerages, but with a few notable differences. For starters, they don't buy and sell shares of a stock throughout the day. Instead, they accumulate orders and place large consolidated orders according to a schedule. This means that buyers and sellers can't expect to trade at any exact price that they may want to specify. This shouldn't be a big deal, though. As long as you're planning to hang on to your shares for years, paying a smidgen more than you expected shouldn't be the end of the world. And, in many cases, you'll pay a smidgen less.
To learn more about these companies' services, fees, risks, and advantages, poke around their websites, and ask them any questions you have. As with everything important, read all the fine print.
