Have you ever wanted to purchase a share of a stock in a big company, only to realize a share costs thousands of dollars and you can’t even afford one? *cough* Amazon *cough*
Or what about when you receive dividend payments into your portfolio, what if that dividend could just buy small portions of a share to make things convenient for investors?
Well, fractional shares can help with all of that.
What are fractional shares?
When you buy a share of a stock, you’re buying a small portion of a company.
A fractional share is just a split up share of a stock, just like the name suggests. You can buy a fraction of a share of a stock.
If a share of a stock is worth $20, and you invest $10 into it, you’ll have roughly .5 shares. It’s very straightforward.
Splitting up stock shares allows people to afford a variety of different stocks, and also allows investors to save time while calculating their investments.
Rebalancing your portfolio properly can be annoying without help from a robo-advisor, and without fractional shares it just gets worse.
Fractional shares and Dividend Re-Investment Plans
For some reason, fractional shares weren’t common until recently, but now the competitiveness of the Fintech industry has made fractional share functionality standard across most investing apps.
Fractional shares work great when paired with a Dividend Re-Investment Plan because often dividend payments aren’t large enough to be able to afford a full share of stock.
To avoid having to wait months for your dividends to add up until you can afford to buy another share, fractional shares and DRIPs will allow you to immediately, and automatically, re-invest your dividends, making the process much more convenient and passive.
As you can see here in our Stash portfolio, our $.47 dividend was used to automatically purchase .01040 shares of KO as soon as the dividend was issued.
This allows us to build up shares automatically over time, instead of having to manage the money or let it sit there depreciating.
Fractional shares FAQ
Are fractional shares worth it?
Fractional shares are just as worth it, or not worth it, as buying full shares of a stock. Whether or not it’s “worth it” depends on other factors, like picking the right investments.
Who offers fractional shares?
Not all brokerages have begun offering fractional shares, but luckily, they are becoming more and more common in the fintech industry.
Here’s a list of some investing apps that offer fractional shares, in no particular order:
These aren’t all the apps or investing platforms out there that offer fractional shares, but these are the ones we have tried so far and reviewed.
Best investing app with fractional shares
Can partial shares become whole shares?
Yes! When your fractional shares grow and become a whole number, the share of stock will act as either a fractional share OR a regular share when you try to sell it, which makes it really convenient.
When will fractional shares be available on Robinhood
Which fractional shares should I buy?
That’s not really how it works.
Fractional shares just make it more convenient to buy stocks, but you still need to figure out which stocks to buy on your own.
We aren’t financial advisors so we can’t tell you what to invest in, but you could always try learning more about the stock market!
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