How to Buy Fractional Shares and Break into the Stock Market

If you’re relatively new to learning how to invest money, it can be difficult to know where to begin or where to focus your efforts. Finding the right investments for your portfolio, developing a budget, knowing when to buy or sell, and learning how to rebalance — it’s easy to see how everything can quickly become overwhelming when you’re learning how to invest.

But whether you’ve already dipped your toes into the world of investing or you are just getting started in the stock market, there is an investment strategy you should know about: the fractional share.

What are fractional shares?

Fractional shares are pieces of a whole share of a company’s stock. If a stock is too expensive for you to buy a whole share, you might be able to buy a fraction of it instead. For example, if a stock costs $1,000 and you only have $100, some investment platforms would allow you to buy 0.1 of a share.

Depending on the investment platform you use, you could invest in fractional shares for as little as $1. And although each brokerage handles things differently, a fractional share could represent a small fraction of a standard share.

This means a company with a high stock price becomes an accessible investment for people who are just starting to explore how to invest. And although fractional investing is more popular with online brokerages and investing apps, even some traditional brokerage firms — like Charles Schwab and Fidelity — now offer fractional shares.

The advantages of buying fractional shares

There are many reasons you may want to consider buying fractional share investing, especially if you are investing for the first time or are working on building a strong portfolio:

Beginners can dip their toes in the investment waters

Fractional shares could be great for beginner investors, especially those without a lot of money and/or investing knowledge. Rather than focusing your efforts in one place by buying full shares, you can dabble in a number of different industries to see what moves you toward your personal finance goals.

They help you more easily diversify

Often, investors pick funds, specific stocks, or industries that interest them, feel safe, or have performed well in the past. They may not venture far from those trusted investments, resulting in a portfolio that isn’t diversified. With fractional shares, you can test a variety of stocks without a significant investment, which allows you to safely and strategically branch out.

You can start earlier, for less

Many traditional brokerage accounts have what’s known as account minimums. This means there is a minimum requirement for the number of shares you need to buy at once or for the dollar amount you’re required to invest. This can be prohibitively high for newer investors.

In contrast, many online brokerages that offer fractional shares — like Stash¹ <p> </p><p>Paid non-client endorsement. The paid partner received cash compensation of up to $150.00 (per cost per action) for providing this endorsement. Compensation creates an incentive for the individual to recommend Stash. Endorsements are not representative of the experience of all clients and are not guarantees of future performance or success. For a representative sample of client testimonials, refer to Apple App Store or Google Play reviews To begin investing on Stash, you must be approved from an account verification perspective and open a brokerage account (“Personal Portfolio”). Promotion offer is subject to <a href="https://lp.stash.com/personal-portfolio-5-first-deposit-offer-promoter/" target="_blank" rel="noopener noreferrer">Terms and Conditions</a>.</p><p> </p><p>This material is not intended as investment advice and is not meant to suggest that any securities are suitable investments for any particular investor. Investment advice is only provided to Stash customers. All investments are subject to risk and may lose value. All product and company names are trademarks ™ or registered ® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.</p> <p>Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.</p> <p>What doesn’t count: Cash withdrawals, money orders, prepaid cards, and P2P payment. See full terms and conditions.<br><br>Fractional shares start at $0.05 for investments that cost $1,000+ per share.</p> or Robinhood² <p>Terms apply. Rate subject to change.</p>  — have low or no minimum investment requirements (in addition to already being some of the best investment apps around).

They’re more affordable

A single share of Berkshire Hathaway Inc. stock is going for more than $562,800, and a share of Booking Holdings Inc., the company behind the famous travel booking service, goes for over $3,158 (as of Sep. 18, 2023).

Unless you have that kind of cash ready to be invested and are willing to risk it all on an individual stock, you’re out of luck as an investor. So if you’re wondering how to buy these stocks, fractional trading could be the answer. With fractional shares, you can buy a 0.1 share of Booking for about $315.

They make dividend reinvestment easier

Over time, you may receive dividends from your investments, which you can reinvest to grow your portfolio even further. Rather than wait weeks or months until you have enough built up to purchase a full share, you can put your money to use immediately by buying fractional shares. After all, when it comes to investing, time is the biggest factor on your side.

How to buy fractional shares

As mentioned, not all brokerages offer fractional shares, especially the traditional ones. There are a number of online brokerages that do offer these smaller investment shares, though. If you’ve already been studying up on how to invest in stocks online, adding fractional shares to your portfolio could be a piece of cake.

To help you get started, here are a few investing platforms that offer fractional share trading:

Stash

Stash provides you and even your kids (depending on the plan you choose) with an easy-to-manage personal investment account, from which you can sell or withdraw your funds at any time. Stash allows you to invest in tax-advantaged retirement accounts, such as traditional IRAs³ <p class="">Stash does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor.<br></p> .

Through Stash, you are able to purchase fractional shares of a company’s stock in any dollar amount. This means you can buy $5 worth of Coca-Cola Co. or $20 of Berkshire Hathaway Inc., if you so desire, allowing you to build the portfolio you want and can afford.

Who Stash is a best fit for: Investors who want an easy portfolio management platform, the ability to buy fractional shares, and features like investment rewards on everyday purchases.

Robinhood

With Robinhood, investors can enjoy commission-free trades on stocks, options, exchange-traded funds (ETFs), and cryptocurrency. There is no minimum account balance requirement to get started, and you can begin trading on the streamlined platform in minutes for free.

Robinhood allows you to buy fractional shares on thousands of different stocks, and these can be purchased for as little as $1 each. Unfortunately, you are unable to invest in mutual funds or bonds through Robinhood. You’ll also be charged a $75 fee if you ever want to transfer your assets out of Robinhood, so keep that in mind.

Who Robinhood is a best fit for: Beginning investors interested in niche options like fractional shares and cryptocurrency, with no minimums or fees.

Public

As a social investing app, Public⁷ <p>Free stock offer valid for U.S. residents 18+. Subject to account approval. See <a href="https://public.com/disclosures" target="_blank" rel="noopener noreferrer">Public.com/disclosures/</a></p> allows you to not only invest commission-free in stocks and ETFs, but you can also follow specific people or companies, join in group chats, and even ask questions in public forums. Fractional shares are available for as little as $5, and there are no commission fees to worry about.

You can also invest in bonds and bills issued by the U.S. Treasury⁸ <p>Treasury Accounts are custodied at The Bank of New York Mellon. Balances below $500k are covered by SIPC insurance. The underlying Treasury bills held in the account are fully backed and guaranteed by the US Government. Investments in Treasury bills are not FDIC insured or bank guaranteed, as this type of protection only applies to savings accounts and other banking products.</p> . 

Who Public is a best fit for: On-the-go investors who appreciate a social experience, like being able to watch what other investors and companies are doing, or chatting with similar users.

M1 Finance

Through M1 Finance,¹⁰ <p>The opinions expressed are solely those of the authors and do not reflect the views of M1. They are for informational purposes only and are not a recommendation of an investment strategy or to buy or sell any security in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Prior to making any investment decision, you are encouraged to consult your personal investment, legal, and tax advisors.</p> ¹¹ <p>See important disclosures <a href="https://www.m1finance.com/legal/disclosures/" target="_blank">here</a>.</p> <p> </p><ul> <li>All investing involves risk, including the risk of losing the money you invest.</li> <li><p>Brokerage products and&nbsp;services are offered by M1 Finance LLC, Member&nbsp;FINRA / SIPC, and a wholly owned subsidiary of M1&nbsp;Holdings, Inc.</p></li> </ul> <p></p> you can invest, spend, and even borrow while curating the perfect investment portfolio for you and your interests. Fee- and commission-free investing is offered with fractional options available starting at 1/100,000th of a share.¹² <p>If you choose to transfer your account to another broker-dealer, only the full shares are guaranteed to transfer. Fractional shares may need to be liquidated and transferred as cash.</p> ¹³ <p> Commission-free trading of stocks and ETFs refers to $0 commissions charged by M1 Finance LLC for self-directed brokerage accounts. Other fees may apply such as regulatory, account closures and ADR fees. For complete list of fees, visit <a href="https://m1.com/legal/disclosures/misc-fees/" target="_blank" rel="noopener noreferrer">M1 Fee Schedule</a>. </p> You can build a portfolio pie through M1 Finance that accounts for all your interests and preferences, with the ability to diversify and rebalance using full or fractional shares.¹⁴ <p>Due to the complex nature of various Hedge Fund strategies, the Hedge Fund Expert Pies mimic, but are not exact replications of, the original.</p>

There is a $100 minimum requirement to get started with M1 Finance, which may dissuade some beginners. There is also a limited trading window each day, which may eliminate day traders and other more experienced investors.¹⁵ <p>Participate in both trade windows when you have $25,000 or more equity to comply with pattern-day trading regulations.</p>

Who M1 Finance is a best fit for: Investors who want a one-stop-shop cash management option.¹⁶ <p> All investing involves risk, including the risk of losing the money you invest. Brokerage products and services are offered by M1 Finance LLC, Member <a href="https://www.finra.org/" target="_blank" rel="noopener noreferrer">FINRA</a> / <a href="https://www.sipc.org/" target="_blank" rel="noopener noreferrer">SIPC</a>, and a wholly owned subsidiary of M1 Holdings, Inc. </p>

Betterment

While Betterment doesn’t allow you direct access to make fractional purchases of individual shares, it does employ fractional investing strategies with its ETF offerings. By allowing fractional purchases of funds, Betterment makes it easy to maintain the target allocations of your portfolio and to reinvest your dividends. You don’t have to wait until you have enough for an entire share of an ETF before you can put that money back to work.

Betterment has no minimum balance requirement. It also provides advanced tax-saving strategies no matter what kind of investor you are. Betterment does charge fees to investors on its platform. Depending on which plan you choose, you can expect to pay between .25% and .40% of your assets under management in the form of an annual fee.

Who Betterment is a best fit for: Investors who want to sync external accounts to get a comprehensive view of all of their assets in one place, with features like fractional shares and automatic rebalancing.

FAQ about fractional trading

Bottom line

Seeking out and buying fractional shares isn’t for everyone, but fractional trading can make investing easier and more affordable for beginners who might not have the cash to build a diversified portfolio. These slivers of shares allow investors to buy stock in companies that might otherwise be out of reach.

Fractional shares also make it easier to diversify an existing portfolio and rebalance investments in a more exact way. And if you have dividends or interest that you plan to reinvest, fractional shares allow you to put that money to work as soon as it’s available, rather than waiting until you have enough earnings to buy full shares.

Not every investment company offers fractional share trading, though it’s becoming easier to find (especially within the more popular platforms). With the ability to buy these slivers of shares for as little as $1, it’s easy to see how their popularity has grown.