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 best fractional shares brokerage accounts.
Ratings Methodology
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.
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.
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.
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.
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.
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.
Fees:
$0 for stocks, ETFs, options, and cryptocurrencies
Account Minimum:
$0
Special Offer
Get a free stock with a new account
Open Account for Robinhood
On Robinhood's Secure Website.
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
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.
Fees:
$0 for stocks, 1.25% for cryptocurrencies
Account Minimum:
$0
Open Account for SoFi Active Investing
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 commission for online US stock and ETF 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
TIP
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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.
Pros and cons of buying and owning fractional shares
Fractional shares are partial shares or a portion of a company's stock. They can be bought and sold just like whole shares. There are many benefits to owning fractional shares. One is that investors with little capital can invest in high-priced stocks. However, not all brokers offer fractional shares, and bookkeeping with fractional shares can be complicated. Here are the pros and cons of fractional shares.
Pros
- Investors can invest with little money.
- Investors can invest in high-priced stocks.
- Investors can build a diversified portfolio with less money.
- Investors can rebalance their portfolio much easier.
- Investors can have their money working for them immediately and not sitting in cash.
Cons
- Fractional shares are not available with every broker.
- If your broker charges a commission, buying fractional shares can be costly.
- Buying fractional shares can complicate record keeping and bookkeeping.
- There may be liquidity issues with fractional shares.
- Investors may not be able to transfer fractional shares.
- Depending on the broker, investors may not have shareholders rights.
- If investors own a very small fraction of a share, they may not get the dividend.
Why don’t some brokerages offer fractional shares?
Many brokers are starting to offer fractional shares to attract younger investors, but some brokers do not offer fractional shares yet. This may be due to brokers not ready to handle the recordkeeping and bookkeeping that comes with fractional shares, challenges with clearing firms, and the financial commitment of the broker required to hold remaining fractional shares.
Are fractional shares a good investment?
Fractional share investing makes investing more accessible for investors with little capital. The share price of certain companies can be quite high. Fractional shares allow investors to participate in a company's growth without having to pay for a full share. Investors who dollar-cost average (invest a certain amount over a regular interval) can diversify their investments without large amounts of capital. In addition, they can have their money working for them immediately by buying fractional shares as opposed to waiting to accumulate enough cash to purchase one share.
What types of securities can be purchased as fractional shares?
Brokerage firms that offer fractional shares may limit the types of securities an investor can buy and sell using fractional shares. Some may only allow fractional share investing in stocks, while others may offer stocks and exchange-traded funds (ETFs). Some brokerage firms may also limit the type of stocks and ETFs available for fractional shares.
How to get started in purchasing fractional shares
- The first step is to find a brokerage firm that offers fractional shares.
- Deposit funds into the account. It may take several days for the funds to settle in the account.
- Select the stock or ETF that you want to purchase. Ensure the broker allows fractional shares for the stocks you have chosen. Unsure of which stocks to buy? Check our Stock Advisor picks.
- Choose the amount you want to invest in each stock or ETF. This may be a set dollar amount you deposit every month or based on the portfolio allocation you have selected.
| Broker/Advisor | Best For | Commissions | Next Steps | |
|---|---|---|---|---|
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 |
|
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Membership offerings |
Commission:
$0 for stocks, 1.25% for cryptocurrencies |
|
Rating image, 5.0 out of 5 stars.
|
Rating image, 5.0 out of 5 stars.
|
Best For:
Fractional share selection |
Commission:
$0 commission for online US stock and ETF trades |
|
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 |
|
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 |
FAQs
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Fractional shares are partial shares or a portion of a company's stock. They can be bought and sold just like whole shares. Fractional investing has made investing more affordable. For example, some stocks can cost upwards of $1,000 a share. An investor with only $500 cannot afford to purchase one whole share. With fractional shares, however, the investor can own a piece of that full share. Fractional shareholders receive the same benefits as other shareholders, such as voting rights (depending on the broker) and dividends. They receive the same percentage gains or losses as those who own whole shares.
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Fractional share investing makes investing more accessible for new investors and investors with little capital. Fractional shares allow investors to participate in a company's growth without having to pay for a full share. In addition, those who dollar cost average (invest a certain amount over a regular interval), can continue to invest in high-priced stocks and diversify their investments without large amounts of capital.
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No, but fractional shares are growing in popularity, and many brokerage firms offer them to investors. You can only invest in fractional shares from brokerage firms that allow it. Fractional shares are handled differently based on the broker. You should check to see which stocks your broker allows fractional shares for and for what stock exchanges.
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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