Buying fractional shares can be a smart way to invest for someone who doesn’t have the capital to buy whole shares at once though wants to start investing now. Further, you get the option of selling only what you need and not necessarily a whole share.
You will need to open an account with a brokerage that offers fractional share purchases and select how many dollars you want to invest, giving you a corresponding number of fractional shares for your portfolio.
From there, you pay for them with money you’ve deposited through a checking account, debit card or other funding mechanism.
In this article we’ll discuss what fractional shares and how they work, how to buy them through brokers, and other considerations fractional shares have for investors’ portfolios.
What are Fractional Shares?
Fractional shares are a part of a share – not the whole. A fractional share is a portion of stock in an individual company that has been divided up into many shares, typically to make investing more affordable and accessible for those who do not have large sums of money available upfront or are just beginning their careers.
The theory behind fractional shares is nothing more than allowing people to invest in a company with an expensive share price with smaller amounts of money.
For example, if fractional shares were available for Tesla, they could be bought at the fraction of the cost of a full-price share—even a few dollars worth. This would allow people with smaller budgets and those who are just starting out to buy into this lucrative company.
Before fractional shares investing, you could only do this through purchasing shares in a mutual fund, exchange-traded fund (ETF) with the hope that the underlying stocks held by the fund would perform and increase your equity in several companies simultaneously.
Some markets, like the New York Stock Exchange (NYSE) or the NASDAQ require investors to buy whole shares in a publicly-traded company.
Meaning, people who wish to buy shares in Alphabet or Berkshire Hathaway could only do so if they had a lot of cash on hand or they chose to purchase them as part of a larger basket of securities in a mutual fund or ETF.
To make shares in companies like these accessible to everyone, some apps like Robinhood, M1 Finance and others have chosen to offer fractional shares to their users.
This can be a great investment option to new investors looking to buy in some of the most innovative and successful companies on the market without breaking the bank.
How Do Fractional Shares Work?
Investors can purchase fractional shares in companies like Alphabet, Berkshire Hathaway and other high-priced stocks without having to buy a whole number of shares (in other words, full shares of stock).
This lowers barriers to entry for investors who may not be comfortable investing a large amount of money into one company’s stock or don’t have enough cash on hand at the time.
This allows small investors to transfer a consistent amount of money into their account and know it’ll get invested at transfer, not only when they’ve accumulated enough money to purchase a whole share.
Likewise, for younger investors who might not have a lot of money to spare, they can link a debit card for teens (or young adults) which then employs a round-up system.
This rounds up your purchase to the nearest dollar, investing the difference automatically in fractional shares. Micro investing apps like this use fractional shares to build account holders’ balances slowly but consistently.
Based on the dollar-cost averaging investment strategy, this allows for real-time purchasing and not delayed investments over lumpy periods of time.
Fractional shares allow you to diversify your portfolio with ease, which can help spread the risk of your investments and potentially increase your overall return.
If you had to stash your money until you could afford one high-priced stock, it might mean your portfolio carries a lot of undesired exposure to a smaller basket of stocks while you wait to accumulate enough money to buy a whole share of a company you really want.
Investors also have more control over fractional shares than they do with only being able to buy and sell whole shares. You might not wish to liquidate a whole share of Tesla and instead only need a fourth of the share’s value for some purchase.
Fractional shares allow you to choose exactly how much money you need to pull from the market if you have a financial need.
For example, if Tesla stock is worth $750 and you currently hold $3,500 worth of the stock, you’d own 4.67 shares of the stock.
You might only need $300, lowering your ownership to 4.27 shares of stock. You don’t need to sell a whole share to get cash when you only need a fraction of a share’s worth.
Essentially, fractional shares investing allows you to invest in the market on any budget.
Related: Best Debit Cards for Kids
How to Buy Fractional Shares
Many investing brokerages allow you to place stock and ETF trades for fractional shares, reducing the dollar amount you need to commit upfront when buying stocks by the slice.
These stock brokers have enabled a new generation of investors to buy into the stock market without credence to share prices thanks to fractional trading capabilities.
When balancing student loans, living expenses and other competing money priorities, having the ability to invest through an institution that equips you with the tools that make any stock accessible is valuable.
The best options on the market that we’ve found are found below.
Brokerages Offering Fractional Share Purchases
| App | Rating (out of 5) | Fees | Best For | Promotions | |
|---|---|---|---|---|---|
| Acorns |  | 4.8 | $3/month - $12/month | Automated investing in the background into diversified investments | $20 bonus when you set up recurring investments and make your first successful recurring investment |
| SoFi Invest: iOS, Android and Desktop |  | 4.6 | Commission-free trades | Fee-free active trading and automated investing | Free stock worth between $5 - $1,000 |
| Public.com |  | 4.7 | Commission-free trades | Social theme-based investing interests | $3-$300 free stocks for signing up |
| Webull |  | 4.7 | Commission-free trades | Self-directed investors and intermediate traders | Six to Twelve free stocks with $5 deposit, valued between $18 - $36,000 |
| M1 Finance |  | 4.3 | Commission-free trades and automated investing; $10/month or $95/year on M1 Plus subscription for custodial account | Fee-free active trading and automated investing | 3 months of M1 Plus free |
| Stash |  | 4.6 | $3/month - $9/month | Everyday people looking to start managing their finances | $5 stock bonus for making a deposit of $5 or more |
| Greenlight + Invest |  | 4.7 | $9.98/month | Teaching investing fundamentals with guidance from parents; allows individual and index fund investing | One month free |
| Robinhood |  | 4.4 | Commission-free trades | Basic stock, crypto and ETF investing | Free stock with sign up |
1. Acorns: Micro-Investing App to Learn About Investing
- Available via Apple iOS and Google Android.
- Price: Acorns Personal: $3/mo. Acorns Personal Plus: $6/mo. Acorns Premium: $12/mo.
- Sign up here
Acorns is an investing app geared toward minors, young adults, and millennials by offering “Round-Ups”: The app rounds up purchases made on linked debit and credit cards to the nearest dollar, then invests the difference on your behalf.
For example, if you purchase a coffee for $2.60 on a linked credit card, Acorns automatically rounds this charge up to $3.00 and puts the 40-cent difference aside. Once those Round-Ups reach at least $5, they can be transferred to your Acorns account to be invested.
The Acorns investment offering itself is a simple, automated platform that uses pre-built portfolios of ETFs to keep investors exposed to stocks and bonds. While it doesn’t have much to offer intermediate investors who want variety in their portfolios, Acorns’ basic approach makes it one of the best investment apps for beginners.
Here’s more about what you can expect from Acorns’ varying subscription options:
- Acorns Personal ($3 per month): Includes an Acorns Invest investment account, as well as Acorns Later for tax-advantaged investment options such as Roth IRAs. Also includes Acorns Checking, a bank account that has no account fees, lets you withdraw fee-free from more than 55,000 ATMs nationwide, and Smart Deposit, which allows you to automatically invest a bit of each paycheck into your Acorns accounts.
- Acorns Personal Plus ($6 per month): Everything in Acorns Personal (Acorns Invest, Later, and Checking), plus Premium Education, which are live onboarding sessions covering account setup, Round-Ups, setting up recurring investments, and more; Emergency Fund; and a 25% bonus on Acorns Earn rewards (up to $200 per month).
- Acorns Premium ($12 per month): Everything in Personal Plus, plus Acorns Early, which allows you to open a custodial investment account for your child so you can begin investing for them while they’re a minor; custom portfolios that allow you to hold individual stocks; live Q&As with financial experts; a 50% match on Acorns Earn rewards (up to $200 per month); $10,000 in life insurance; even the ability to set up a will for free.
Personal Plus and Premium subscribers also get access to a powerful way to accelerate their savings: Later Match. While most people are aware that employers will sometimes match funds you contribute to your 401(k), “matches” are virtually unheard of in retirement accounts like IRAs, where there’s no employer to kick in extra cash. However, Acorns itself will match 1% or 3% on new contributions to IRAs for Personal Plus and Premium subscribers, respectively.
Learn more in our Acorns review.
- Acorns allows you to sign up for investment, retirement, and checking accounts for you and your family, learn how to earn more money, and grow your investing knowledge.
- Famous for investing spare change automatically through Round-Ups, this all-in-one financial app helps younger generations start investing earlier.
- Invest in expert-built portfolios made up of diversified ETFs.
- New Premium tier includes perks such as live Q&As with financial experts, a 50% match on Acorns Earn rewards (up to $200/mo.), $10,000 in life insurance, and the ability to pick individual stocks for their portfolios.
- Earn even more with Later Match: Acorns will match up to 1% (Personal Plus) or 3% (Premium) of all new IRA contributions.
- Special offer: Get $20 to start*.
- Robo-advisor with affordable fees (on larger portfolios)
- Fixed fee model
- Round-ups
- FDIC/SIPC insurance
- IRA match (Personal Plus and Premium)
- High fixed fees for small balances
- Limited investment selections
- Must subscribe to Premium for any self-directed investing options
Related: Best Acorns Alternatives: Micro-Investing Apps to Use
2. SoFi Invest: Invest in Stock Bits
- Available via desktop, Apple iOS and Android App on Google Play.
- Price: Free trades
- Sign up here: (iOS), Android, Desktop
SoFi Invest is an app that allows you to invest in stocks with whatever dollar amount you prefer because the app offers its investing products with fractional shares.
The well-known brand in the personal finance space recently expanded its presence to the investing world by offering free trades on stocks, ETFs, cryptos and more.
The service provides you the ability to trade actively or stand back and let its automated investing tools takeover.
Of interest to beginning investors, using a brokerage account through SoFi allows you to participate in fractional share investing, called “stock bits” by SoFi.
This means you don’t need to save up a lot of money before buying some of your favorite tech companies like Alphabet (Google), Amazon or Facebook.
The app is a great choice for investing your spare change or adding more to the market at once by tapping into savings accounts to make larger deposits on a regular basis.
Therefore, this app might make a good place to hold your investment accounts because you’ll have options of how to invest money.
The company wants to serve all customers who have an interest in improving their financial situation alongside participating in their other personal finance products like refinanced student loans, money management, credit cards and more.
Start by making a $5 deposit today.
- SoFi Invest allows you to trade or invest in stocks, ETFs, and options with no commissions and no account minimums. You can also invest in cryptocurrency and participate in some initial public offerings (IPOs).
- Invest for as little as $1 with fractional shares.
- Free robo-advisory services, including goal planning and auto-rebalancing.
- Special offer 1: Fund a new account with at least $10 within 30 days of opening an account, and receive $5, $10, $25, $100, or $1,000 worth of stock. (Prize level awarded at random.)
- Special offer 2: You can receive up to $100 in Bitcoin when you make you first cryptocurrency trade with SoFi.*
- Good selection of available investments
- No options contract fees
- DIY and automated investing options
- Fractional shares
- Doesn't support mutual funds
- Limited trading tools
- Higher-than-average cryptocurrency trading fees
- No tax-loss harvesting
- No socially responsible robo-advisor functionality
3. Public.com: Best Free Investment App for Beginners (Stock Slices)
- Price: Free trades
- Sign up here
Public.com is a commission-free investing app that targets Millennials and Gen-Zers who have attuned their senses to social media.
While the company previously followed the lead of companies like Robinhood with monetizing Payment for Order Flow (PFOF), or receiving kickbacks from clearinghouses for routing trades to them, they’ve recently abandoned this practice.
Instead, they now rely on other revenue streams as well as a “tipping” system.
This places this beginner investment app firmly on the side of retail investors and not pledging allegiance to Wall Street clearinghouses.
Why is Public.com a Good Investment App for Beginners?
What Public.com is really about is making investing like an investing social network, where members can own stock slices, or fractional shares of stocks and ETFs, follow popular creators, and share ideas within a community of investors.
What Public.com aims to do above all else is make the stock market an inclusive and educational place, with social features that make it easy to collaborate as you build your confidence as an investor—for free.
For younger investors who want to align their investing with their social preferences, as well as keep good company to socialize and learn from others, Public.com might be the app for you.
For those interested in starting to trade on Public.com, the online brokerage platform for beginners offers a free $10 signup bonus if you make an initial deposit. Further, you can share your special link with others and gift them stock slices as well.
If this sounds like an interesting investment app, open an account and make an initial deposit to see if the app meets your social and investing needs.
Read more in our Public.com investing app review.
- Public.com offers zero-commission trading on thousands of stocks and ETFs, available as fractional shares. The app also allows you to invest in cryptocurrency, and it's one of the rare brokerages that allows its users to buy alternative assets.
- Earn a 5.3% yield with Public.com's Treasury Account, which allows you to earn state- and local-tax-exempt income from T-bills.
- Use a social feed where members can share why they believe in certain companies (or don't) and can post comments on others' trades.
- Invest in curated lists of stocks and ETFs for people to aggregate investments by interest area or values.
- Subscribe to Public Premium for features such as advanced company-level data, Morningstar insights, and exclusive audio content from Public.com's expert analysts.
- Special offer: Transfer investments from another broker to Public.com and earn between $150 and $10,000.*
- Fractional shares
- Allows you to trade alternative assets
- No payment for order flow (PFOF)
- Creative social investing features
- Doesn't support mutual funds
- Limited investment research and other tools
4. Webull: Best Stock Trading App for Beginners
- Available via desktop, Apple iOS and Google Android.
- Price: Free trades
- Sign up here
Webull came into the stock trading world in 2018 when it started challenging Robinhood for market share. This stock trading app offers free stock trading (no trading fees) as well as free trades on ETFs, options and cryptocurrencies.
The company also recently added the ability to trade fractional shares, making this a great app for micro investing.
Like most investment apps available, the company provides access to trade on your smartphone, tablet or desktop.
Further, it charges no commissions for the trades because Webull makes money on other actions you take, like Payment for Order Flow (PFOF), margin loans, interest on cash and service fees for their Nasdaq TotalView Level 2 Advances quotes subscription.
Webull also provides you access to several powerful tools you can use for in-depth trading analysis.
If these account features sound attractive, the best part might also come with knowing setting up a Webull account is free and comes with no account minimums you must meet or maintain. Finally, to de-risk your sign up, Webull also runs frequent promotions that give free stocks.
Read more in our Webull review.
- Webull is a low-cost trading and investing app that allows you to invest in stocks, ETFs, options, and crypto, and participate in initial public offerings (IPOs). Webull has also expanded its U.S. offerings to include futures and commodities trading.
- Commission-free trades on stocks, ETFs, and options.
- Trading features include charting tools, technical indicators, customizable screeners, real-time stock alerts, and group orders.
- Let Webull manage your money for you with Webull Smart Advisor, which combines Webull's in-house investment expertise and artificial intelligence to build, manage, and rebalance an ETF portfolio for you.
- New users also get one free month of Nasdaq TotalView's Level 2 Quotes service. (That subscription costs $2.99/mo. thereafter.)
- Sign up for Webull Cash Management to earn a 5.0% APY without fees or minimums.
- Special offer: Open an account and deposit at least $500 to receive 20 free fractional shares, collectively worth between $60-$90,000.*
- Good selection of available investments
- Fractional shares
- Powerful technical analysis tools
- Offers robo-advisory services
- Accessible to beginning and intermediate users
- Voice commands
- Offers highly competitive APY through Webull Cash Management
- Does not support mutual funds
5. M1 Finance: Portfolio Pie Stock Slice
- Available via desktop, Apple iOS and Google Android.
- Price: Free trades
- Sign up here
The M1 Finance app offers investors two options for investing on their platform.
The first option entails a traditional investing method: build your own tailored portfolio with your personal picks of stocks and ETFs you think will meet your investment objectives.
If that option sounds unappetizing or otherwise uncomfortable from an investment selection perspective, you can opt for their pre-made “Expert Portfolio Pies” containing different stocks and ETFs for your money.
With either option, you can set predetermined percentage amounts for your M1 Finance investment account (they offer several types of investment accounts, including a custodial Roth IRA) and then buy stocks and funds to match those percentages.
Users of M1 Finance can also buy fractional shares of stock, or stock slices, on their own without an extra charge or trading commissions.
As you earn dividends, you can choose to participate in automated dividend reinvestment in accordance with your portfolio preferences, making automated investing through M1 Finance one of the best passive income investment ideas.
Read more about the app in our M1 Finance review.
- M1 Finance's Smart Money Management gives you choice and control of how you want to invest automatically, borrow, and spend your money—with available high-yield checking and low borrowing rates.
- Basic account includes an FDIC-insured checking account and an M1 Visa debit card that delivers 1% cash back.
- Upgrade to M1 Plus and unlock perks including higher cash-back rewards on the M1 Owner's Rewards Credit Card, 5.00% APY from high-yield savings, ATM reimbursements, and 0% international fees.
- Invest in stocks, ETFs, and cryptocurrencies.
- Special Offer 1: Open a brokerage account and receive up to $500.*
- Special Offer 2: Open an account and get 3 months free of M1 Plus**.
- Robo-advisor with self-directed investing capability
- Attractive cash-back and APY opportunities with M1 Plus subscription
- Doesn't support mutual funds
- Doesn't allow trading throughout the trading day (1 trading window for Basic, 2 for M1 Plus)
- High cost for M1 Plus service tier
6. Betterment: ETF Share Investing
- Available via desktop, Apple iOS and Google Android.
- Price: $4/mo. or 0.25%/yr. AUM fee*
- Sign up here
Betterment is a robo-advisor platform that allows you to invest in pre-built portfolios—with different themes and goals—in taxable accounts as well as individual retirement plans.
Betterment’s primary offering is ETF-only portfolios that provide varying types of exposure depending on your risks and interest. For instance, Core is a roughly 60% stock/40% bond portfolio that keeps you invested in most domestic and international securities. Social Impact buys stocks and bonds of companies with “a demonstrated focus on supporting social equity and minority empowerment.”
There are no self-directed options, however. The portfolios buy fractional shares of ETF index funds tracking benchmarks like the S&P 500 to keep you invested in stocks and bonds. But the service does not allow you to invest in individual stocks or bonds. The app has added crypto portfolios holding digital currencies such as Bitcoin and Ethereum, but again, you can’t buy them individually—only through pre-built portfolios.
One interesting perk that stands out: Betterment’s tax-loss harvesting feature.
If you invest in a taxable account, and you sell an investment for a gain, you’ll owe taxes on those gains. (What you owe differs depending on whether you’ve held that investment for more than a year.) However, if you sell an investment for a loss, you can use that to offset your capital gains, and thus the taxes you’d pay on them, or if your loss is more than your gains (or you don’t have any gains at all), you can even reduce taxes owed on your personal income, subject to a $3,000 annual cap.
It can be a complicated strategy, though, but Betterment’s Tax Loss Harvesting+ automates the process for you. It will regularly check your portfolio for tax-loss harvesting opportunities, then take the proceeds from selling those investments and reinvesting them where it makes sense for you.
Just note that Betterment is different from many traditional brokers in that it’s a subscription-based product. Betterment charges $4 per month to start; however, if you set up recurring monthly deposits totaling $250, or reach a balance of at least $20,000 across all Betterment accounts, the fee changes to 0.25% of all assets under management. Betterment Premium provides unlimited financial guidance from a Certified Financial Planner™. Premium costs 0.65% annually, and upgrading requires having at least $100,000 in assets with Betterment.
- The Betterment app gives you the tools, inspiration, and support you need to become a better investor.
- Start with as little as $10 and use the top-rated mobile app to set up automatic investing into diversified ETF portfolios.
- You can also invest in diversified preset cryptocurrency portfolios.
- Customize your risk tolerance and investment goals with guidance available at any time.
- By upgrading to Premium, you can unlock unlimited financial guidance from a Certified Financial Planner™.
- Hands-off investment management
- Diversified portfolio that automatically rebalances
- Low-cost investment selection
- Limited investment selections
- Limited crypto diversification in cryptocurrency portfolios
7. Stash: First-Time Investors
- Available via desktop, Apple iOS and Android App on Google Play
- Price: Starts at $3/mo
- Sign up here
Stash is an all-in-one investing platform that caters to beginners. That means it can be a kids investing app, work as an investing app for minors or be a way for teenagers to invest money. It grows with the user into adulthood.
The company offers stock slices as part of their Stash Invest app, which can be accessed by signing up for the service on the website.
Investors have access to over 50 different ETFs that they can purchase fractional shares in and invest their money across multiple baskets through just one platform.
Stash charges a low monthly fee of $3/mo for their Stash Beginner Plan, $3/mo for their Stash Growth plan and $9/mo for their Stash+ Plan.
- Stash is a personal finance app that simplifies investing, making it easy and affordable for everyday Americans to build wealth and achieve their financial goals.
- Invest in stocks and exchange-traded funds (ETFs) for as little as 1¢ thanks to fractional shares.
- Earn Stock-Back® rewards on every eligible debit card purchase.
- Sign up for Stash+ and get access to custodial accounts, better Stock-Back® rewards, and access to $10,000 in life insurance.
- Special offer: Earn a $100 bonus when you sign up with Stash and make a $250 deposit.
- Robo-advisor with self-directed investing capability
- Fractional shares
- Custodial accounts available
- Offers values-based investment options
- Get paid up to two days early when you direct deposit pay into your Stash account
- FDIC/SIPC insurance
- Charges monthly fee
- Smart Portfolios don't offer tax-loss harvesting
8. Greenlight (Fractional Shares App for Minors)
- Available: Sign up here
- Price: Free 1-month trial, $9.98/mo after for Greenlight Max
Greenlight Max is an investment account for kids that comes paired with a debit card and bank account.
It’s easy to use and can double as a savings account and banking apps for teens. The app will teach the basics of investing, how to invest money in stocks and ETFs, etc.
It works best if parents and/or grandparents are involved in the process because it requires linked accounts from the custodians’ banks or brokerages. Plus, parents and guardians will need to approve trades made in the investment account.
The all-in-one plan teaches them important financial skills like money management and investing fundamentals — with real money, real stocks and real-life lessons.
You can use the investing feature to:
- Buy fractional shares of companies your kids admire (kid-friendly stocks)
- Start investing with as little as $1 in your account (with fractional shares)
- No trading commissions beyond the monthly subscription fee
- Parents approve every trade directly in the app on individual stocks and ETFs with a market capitalization of $1 billion+
Consider opening a Greenlight Max account to start investing in a custodial brokerage account for your kids today. The first month is free to trial the product and see if it meets your needs for giving one of the best investments for kids.
Read more in our Greenlight Card review.
- Greenlight offers flexible parental controls for each child and real-time notifications of each transaction.
- Greenlight is the only debit card letting you choose the exact stores where kids can spend on the card.
- Parents can use this app to teach them how to invest with a brokerage account through Greenlight Max and Greenlight Infinity plans
- Best-in-class parental controls (can prohibit specific stores)
- Can add brokerage account to invest in stocks
- Intuitive Parent and Kid apps
- Competitive cash back and interest rates
- High price points
- No cash reload options
- No parent / child lending
Related: GoHenry vs. Greenlight: Who Has the Best Debit Card for Teens?
9. Robinhood
- Available via desktop, Apple iOS and Google Android.
- Price: Free trades
- Sign up here
Robinhood is an investing app geared toward millennials who want to invest from the convenience of their smartphones.
The company forced the industry to adopt commission-free trading, allowing Robinhood to make money largely from monetizing its order flow. Previously, the industry’s lowest commissions belonged to Interactive Brokers, who only charged $2/trade.
The company offers fractional shares as part of their Robinhood Instant account, which can be accessed by signing up for the service on the website.
While there is no fee to open an account with Robinhood, they charge $0.0025/share when a stock position is opened and then rebates that amount when the position is closed.
Users have access to stocks that trade on the NYSE, NASDAQ and AMEX exchanges as well as ETFs listed in the US Market from a variety of issuers at fractional shares prices.
The app allows users to purchase stock slices in up to four different companies simultaneously with no commission fees.
- Robinhood is an investing app that became famous for offering commission-free trades on stocks, ETFs, options, and cryptocurrency.
- The platform has added a new innovation in the retirement space: an individual retirement account (IRA) with a 1% match. Robinhood will match 1% of any IRA transfers or 401(k) rollovers, as well as any annual contributions*, made to your Robinhood Retirement account—and it will upgrade that match to 3% if you subscribe to Robinhood Gold.
- Robinhood Gold also includes Level II market data provided by Nasdaq, higher interest rates on uninvested brokerage cash, lower margin trading rates, and bigger Instant Deposits.
- Special offer: Sign up for Robinhood, link a bank account, and fund your account with at least $10, and receive a randomly selected cash amount between $5 and $200 to put toward fractional shares.
- Good selection of available investments in brokerage accounts
- 1% match on rollovers, IRA transfers, and contributions to IRAs and Roth IRAs (3% with Robinhood Gold)
- Automated portfolio builder in IRAs and Roth IRAs
- Intuitive interface
- Extensive educational library
- Lackluster investment selection in IRAs and Roth IRAs
- No mutual funds in brokerage or IRAs
- No robo-advisor functionality
10. Charles Schwab: Stock Slices
- Available via desktop, Apple iOS and Google Android.
- Price: Free trades
Charles Schwab offers similar products as all the other brokerages listed here including Schwab Stock Slices.
Instead of paying full the full stock price on one share of stock, Schwab Stock Slices allow you to buy fractional portions of stocks commission free.
The fractional share investing product allows users to participate in Schwab Stock Slices for as low as $5, with the ability to buy up to 10 Schwab Stock Slices at a time.
Where Charles Schwab differs from other investing brokerages on this list is ability to do only for S&P 500 companies. This compares to investing brokerages like those above as well as Fidelity and Interactive Brokers, except they don’t have such restrictions on their fractional share investing features.
While good choices exist in the S&P 500 index, extending the Schwab Stock Slices capability to medium and small business opportunities outside of the index can be useful for anyone seeking opportunities beyond the widely-tracked index.
What Does Fractional Share Trading Mean for Your Portfolio?
Investors can buy fractional shares when they want to purchase stocks they otherwise can’t afford as a whole share. This opens up a world of possibilities for your portfolio.
Fractional investing lowers the barrier to investing into almost any stock (depending on broker), allowing you to experience the full breadth of portfolio options previously reserved to individuals with more capital.
You no longer need $5,000 to buy a single share of some companies (while uncommon, major tech companies have been known to sport high per share prices), you just need to add as little as $5 to your portfolio to buy the stock you want. You can buy any increment you desire.
Further, you may want to buy fractional shares to build a truly diversified portfolio, not one arbitrarily sized based on a need to purchase whole shares only.
Now, you can diversify based on the actual dollar amount you want to hold in each stock, allocating your money exactly as you want.
How to Make Money with Fractional Shares
Fractional shares investing works just like regular investing with whole shares. The same strategies you would use for your whole share investing opportunities you would use for fractional share investing.
That means finding good stocks to buy through conducting your own stock research, or subscribing to things like:
Depending on your investing objective and style of investing, my top pick is Motley Fool’s Stock Advisor subscription service. For a discounted initial subscription for the first year, the company vets both “Steady Eddies” and potential high-flying stocks with sound fundamentals—an ideal combination of holdings if you want to generate strong performance without risking extremely high volatility.
Stock Advisor stock picks have performed exceptionally well over the service’s 22-year existence. The service has made 190 stock recommendations that have historically delivered 100%+ returns.
Overall, the Motley Fool Stock Advisor stock subscription service has returned 740% through July 24, 2024, since its inception in February 2002. This number is calculated by averaging the return of all stock recommendations it has made over the past 22 years. Comparatively, the S&P 500 Index has returned 163% over that same time frame.
I’ve personally subscribed and invested money in M1 Finance Roth IRA to test the service.
I expect to continue subscribing to get their latest stock picks and add to my portfolio as time goes on. This is long-term money and looking for continued upside potential.
Consider pairing these recommendations with the best stock analysis apps to understand more behind their picks and also learn more about how to research stocks and analyze them for potential future performance.
You can then use powerful stock tracking and portfolio monitoring apps to see how they trade over time.
What are the Potential Drawbacks to Fractional Shares?
Fractional shares level the playing field for people looking to diversify their portfolio and maximize their potential returns.
This doesn’t mean it all comes up roses for fractional shares investing, however.
First, not all commission-based or free stock trading apps will offer fractional shares.
This means you remain locked in to your broker or have a limited number of stock trading apps you can consider for your investing needs.
Fortunately, some of the best investing apps for beginners and experts meet a lot of your needs if you have small budgets.
Likely, sophisticated investors have more access to capital and fractional share investing presents less of a benefit because they have easier access to capital than a new or smaller investor might.
Second, just because your broker offers fractional shares doesn’t mean they can trade in fractional shares on an exchange.
This means you may need to wait for another investor at your same broker to place a trade that meets the missing balance of your fractional share to complete a whole share.
While not as much of a problem on very liquid stocks with high trading volumes and on apps with millions of users, this is something to keep in mind for lower volume stocks.
Third, some brokers may charge fees for trading fractional shares. None of the apps recommended by this site do this, but other brokers exist and may.
How to Calculate Fractional Shares
Calculating fractional shares is an easy exercise. It anchors on two items: the current value of one share of stock and the amount of money you have available to invest.
You divide the value you want to invest by the current price of a single share of stock. This gives you the fractional share size.
For example, if you had $100 to invest in Alphabet stock ($2,500/share), you’d own $100 / $2,500 or 0.04 fractional shares of the whole stock.
M1 Finance splits every stock share into 1/100,000 of a share so your investment amounts can better match your target portfolio allocation.
What Happens if You Own Fractional Shares and There’s a Stock Split?
Stock splits occur when a company decides its stock’s price is too high and it should be lowered to allow more investors into the stock or accomplish some other objective.
This effectively decreases the stock price while increasing the number of shares available, leaving the market value of the stock unchanged.
Because the value remains, your fractional shares won’t work any differently or be worth less following the stock split. For example, if you already owned 7.5 shares of Facebook worth $2,000 and the company decided to do a 2 for 1 stock split, you’d have 15 shares still worth $2,000.
