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Many beginning investors struggle to come up with money to buy stocks. Most brokers let you open accounts with small deposits, but expensive shares mean you won't be able to buy much. Many companies have shares that cost hundreds or thousands of dollars -- if you only have $50 or $100 every month to invest, what can you do?
Fractional shares solve this problem. You can buy into stocks that would otherwise be out of your budget. You'll need to find the right broker to do this, so we're going to share the five best places to buy fractional shares.
The Ascent's best brokers for buying fractional shares
- Modern, low-cost investing: Robinhood
- Membership offerings: SoFi Active Investing
- Fractional share selection: Fidelity
- Beginner investors: Charles Schwab
- Mobile app experience: Cash App Investing
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Fractional shares can be purchased commission free with as little as $1, for companies with a market capitalization of at least $25 million. Robinhood's commission-free and modern brokerage experience further its lead in this area.
Read Full ReviewFees:
$0 for stocks, ETFs, options, and cryptocurrencies
Account Minimum:
$0
Rating image, 4.0 out of 5 stars.
4.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
SoFi Stock Bits can be purchased with as little as $1. Investors can also make purchases commission free, earning them access to begin investing in select popular stocks and ETFs.
Read Full ReviewFees:
$0 for stocks, 1.25% for cryptocurrencies
Account Minimum:
$1
Open Account
On SoFi Active Investing's Secure Website.
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Buy fractional shares for as little as $1, for over 7,000 companies. Fidelity's robust suite of solutions and commission-free investment options explains why it's a leading broker pick as well.
Fees:
$0 stock trades
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Schwab Stock Slices allow investors to buy fractional shares of S&P 500 companies starting with as little as $5. What's more, Schwab has a strong reputation for having an easy-to-use trading platform, extensive customer service, and access to global markets with no account minimums.
Fees:
$0 stock and ETF trades
Account Minimum:
$0
Rating image, 4.0 out of 5 stars.
4.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Buy fractional shares with as little as $1. A one-stop, simplified shop for your banking, payment, and investing needs, including stocks and cryptocurrencies.
Fees:
$0 for stocks, fees vary for cryptocurrencies
Account Minimum:
$0
What is a fractional share?
A fractional share is a position in a stock equal to less than a whole share. The fraction is between 0 and 1. You'll often see half-shares after stock splits. Companies sometimes offer 1.5 or 2.5 new shares for every existing share, resulting in fractional shares.
But fractional shares can be smaller, too. Many companies calculate them down to thousandths or even ten-thousandths of a share.
Historically, companies issued whole shares. Exchanges also required trading in whole shares. In fact, throughout much of the history of the stock market, investors were encouraged to trade stocks in 100-share lots.
It was only with the advent of online brokers that buying and selling fewer than 100 shares at a time became common. Now transactions often involve single shares.
The idea of fractional shares isn't new. Even though exchanges didn't allow fractional shares to trade, many companies used them in shareholder reinvestment plans. Dividend reinvestment programs allowed shareholders to purchase additional stock with dividends. Because the dividend often wasn't enough to buy a full share, companies would keep fractional shares in their internal records.
Why buy fractional shares?
The dividend situation above is a good example of when it's useful to buy fractional shares, but it's far from the only one.
It used to be that most stocks traded for $100 per share or less. When prices went above that mark, companies tended to split their stock. That resulted in more shares at a lower price, making them more affordable.
Today, stock splits have almost disappeared. And shares in popular companies might cost hundreds or thousands of dollars. Most financial institutions still let you open a brokerage account with $50 or $100 a month. But at this rate it could take months to come up with the cash for a single high-priced share.
Unless you go with a company that will let you buy fractional shares.
Who should buy fractional shares?
Fractional shares work well for any investor. Putting all your money into stock means you don't have extra cash sitting in your brokerage account. That's easier to do with fractional shares.
Just about the only downside is that tracking fractional shares is complicated, especially compared to dealing in round numbers like 100-share lots.
Fractional shares are especially important for investors who don't have the money to buy individual stocks. Not only do they give you access to the higher-priced stocks that you'd otherwise be unable to afford, but they also let you spread modest amounts of savings across a larger number of stocks. That gives you access to a diversified portfolio with less risk than a portfolio of one or two stocks.
TIP
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| Broker/Advisor | Best For | Commissions | Next Steps | |
|---|---|---|---|---|
Robinhood
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Modern, low-cost investing |
Commission:
$0 for stocks, ETFs, options, and cryptocurrencies |
|
SoFi Active Investing
Rating image, 4.0 out of 5 stars.
|
Rating image, 4.0 out of 5 stars.
|
Best For:
Membership offerings |
Commission:
$0 for stocks, 1.25% for cryptocurrencies |
|
Fidelity
Rating image, 5.0 out of 5 stars.
|
Rating image, 5.0 out of 5 stars.
|
Best For:
Fractional share selection |
Commission:
$0 stock trades |
|
Charles Schwab
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Beginner investors |
Commission:
$0 stock and ETF trades |
|
Cash App Investing
Rating image, 4.0 out of 5 stars.
|
Rating image, 4.0 out of 5 stars.
|
Best For:
Mobile app experience |
Commission:
$0 for stocks, fees vary for cryptocurrencies |
About the Author
Dan is a lawyer and financial planner living in Williamstown, Massachusetts. With experience in tax and estate planning, trust administration, and wealth management, Dan led The Motley Fool's investment planning bureau when he started writing in 2006 and covers a host of topics ranging from retirement and tax planning to personal finance.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.
