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 bank 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?


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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?


female investor using smart phone app medium

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 kids and 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.

How to Buy Fractional Shares


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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)FeesBest ForPromotions
Acornsacorns logo4.8$1/month - $5/monthAutomated investing in the background into diversified investments$10 sign up bonus when making first deposit at account opening
SoFi Invest: iOS, Android and Desktopsofi logo4.6Commission-free tradesFee-free active trading and automated investingFree stock worth between $5 - $1,000
Public.compublic logo4.7Commission-free tradesSocial theme-based investing interests$10 free stocks for signing up
Webullwebull logo4.7Commission-free tradesSelf-directed investors and intermediate tradersTwo free stocks with $5 deposit, valued between $11 - $2,300
M1 Financem1 finance logo4.3$0 trading or automated investing; $125/year on M1 Plus subscription for custodial accountFee-free active trading and automated investing$30 sign up bonus with $1,000 deposit
Stashstash logo rebrand4.6$1/month - $9/monthEveryday people looking to start managing their finances$5 stock bonus for making a deposit of $5 or more
Greenlight + Investgreenlight logo4.7$7.98/monthTeaching investing fundamentals with guidance from parents; allows individual and index fund investingOne month free
Robinhoodrobinhood logo4.4Commission-free tradesBasic stock, crypto and ETF investingFree stock with sign up

1. Acorns: Micro-Investing App to Learn About Investing


acorns

  • Available via Apple iOS and Google Android.
  • Price: Acorns Lite: $1/mo, Acorns Personal: $3/mo, Acorns Family: $5/mo
  • Sign up here

Acorns is a micro investing app for minors and young adults who wish to start with a small amount of money in their investments. You can choose to invest your spare change through a linked debit card and make regular deposits to contribute to your investment portfolio.

With more time, these recurring contributions and rounded up deposits from your purchases could grow into a large portfolio over time. Hence the company’s name, Acorns: start small like an acorn but grow strong into a mighty oak tree.

The service charges a monthly fee for users. Though, it doesn’t charge trading commissions when your money gets invested on your behalf. Instead, it charges an account fee depending on the subscription plan you select for your account.

Currently, the service has multiple offerings that come with different features, including Acorns Lite for $1/mo, Acorns Personal for $3/mo, and Acorns Family for $5/mo. (College students with an .edu email address don’t pay until age 24.)

These subscriptions provide various product features which fit well for goals of young adults like investing young and managing your money prudently.

The service easily acts as one of the best money apps for kids with its all-in-one platform (Acorns Family).

Their plans come as follows:

  1. Acorns Lite ($1/mo): Comes with the Acorns Invest plan, which invests spare change through the popular “Round-Ups” feature, earns bonus investments and provides access to financial literacy articles
  2. Acorns Personal ($3/mo): All the features on Acorns Lite (Investing), plus it also includes Acorns Later for tax-advantaged investment options like individual retirement accounts (IRAs) and Acorns Spend. This service acts as your bank account, offering free withdrawals at over 55,000 ATMs nationwide with your debit card, no account fees and the ability to earn up to 10% bonus investments
  3. Acorns Family ($5/mo): Everything in Acorns Personal (Acorns Invest, Later and Spend), plus Acorns Early. This allows you to take advantage of the best way to invest $1,000 for your child’s future and can teach you how to invest as a minor through opening a custodial account.

Learn more in our Acorns review.

Related: Best Acorns Alternatives: Micro-Investing Apps to Use

2. SoFi Invest: Invest in Stock Bits


sofi invest free stocks

  • 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.

 

3. Public.com: Best Free Investment App for Beginners (Stock Slices)


public.com sign up

  • 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.

 

4. Webull: Best Stock Trading App for Beginners


webull sign up

  • 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.

 

5. M1 Finance: Portfolio Pie Stock Slice


m1 finance

  • 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.

 

6. Stash: First-Time Investors


stash sign up

  • Available via desktop, Apple iOS and Android App on Google Play
  • Price: Starts at $1/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 $1/mo for their Stash Beginner Plan, $3/mo for their Stash Growth plan and $9/mo for their Stash+ Plan.

 

7. Greenlight (Fractional Shares App for Minors)


greenlight sign up

  • Available: Sign up here
  • Price: Free 1-month trial, $7.98/mo after for Greenlight Card + Invest package

Greenlight + Invest 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 Card + Invest 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.

Related: goHenry vs. Greenlight: Who Has the Best Debit Card for Teens?

8. Robinhood


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.

 

9. Betterment: ETF Share Investing


betterment sign up

  • Available via desktop, Apple iOS and Google Android.
  • Price: 0.25% AUM Fee

You can use the Betterment robo-advisor platform to buy fractional shares of ETF index funds like the S&P 500 in taxable accounts as well as individual retirement plans.

The service does not allow you to invest in individual stocks but will automatically place deposits into fractional bits of index fund ETFs aligned with your portfolio objectives.

The service charges an all-encompassing 0.25% assets under management fee but can justify this expense in taxable brokerage accounts through its tax-loss harvesting feature.

This is one of their products which justifies the 0.25% AUM fee for holdings in a taxable account. It works by selling losses to lock in short-term capital losses and lowers your taxable income while taking your proceeds and placing them into a similar investment.

This lowers your taxable income or other capital gains and can easily cover the 0.25% annual AUM fee.

Further, based on your intended financial goal, the company provides investment advice through tailoring your portfolios to work toward accomplishing these goals.

Betterment led the way for robo-advisor services, growing from a small business to what now represents a significant book of business.

Using them has become a popular choice for people looking to invest toward specific goals without need of any investing experience for a reasonable fee.

10. Charles Schwab: Stock Slices


charles schwab sign up

  • 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 Rule Breakers subscription service. For $99 for the first year, the company vets high-quality stocks likely to outperform their industry and deliver alpha above market returns.

They’ve got a great track record, outperforming the S&P 500 by 5x over the last 20 years.

rule breakers vs sp500 chart

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?


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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


man reviewing investments on smartphone

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.

About the Site Author and Blog

In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time.  My job routinely required extended work hours, complex assignments, and tight deadlines.  Seeking to maintain my momentum, I wanted to chase something ambitious.

I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity.  I launched the site with encouragement from my wife as a means to lay out our financial independence journey and connect with and help others who share the same goal.

Disclaimer

I have not been compensated by any of the companies listed in this post at the time of this writing.  Any recommendations made by me are my own.  Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.

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