As technology continues to improve and the stock market continues to evolve, the outdated practices, like calling a broker on the phone to buy a share of a company’s stock, or even being forced to buy a full share of stock in the first placee, are coming to an end.
More and more investment apps are providing investors with fractional shares, dividend re-investment plans (DRIPs), robo-advisor services, and other wonderful features to make investing in your favorite companies easier than ever.
So let’s talk about fractional shares, why you want them, and the best investment apps that offer them.
What are fractional shares
As you most likely already know, when you buy a share of a stock you’re buying partial ownership of a company.
But what if you want to invest in BIG companies like Amazon, or even Berkshire Hathaway, whose shares are worth a small fortune?
Let’s be honest here, most normal people don’t have $261,906 to buy 1 share of any company, regardless of how bad they want it.
This is where fractional shares come in handy.
Fractional shares allow brokerages to pool investor’s funds together in order to allow them to purchase partial shares of a stock, which makes it much more convenient to invest in the higher priced stocks.
Fractional shares are also great to have if you want to use a Dividend Re-Investment Plan because they allow your dividend payments to purchase small portions of stock, rather than dividend payments sitting idle in your account.
Not all brokerages offer fractional shares, so which ones do, and which ones are the best?
That’s what we’re here to find out… Let’s go!
Top 3 Investment Apps Offering Fractional Shares
We are starting with #1, simply because we don’t want to force you to scroll down to the bottom if you’re in a hurry and just want to go with the best choice.
Robinhood is the app that got me started with investing, and it’s one of the main reasons the entire fintech industry was forced to start offering commission free trading.
Now that people don’t have to deal with Robinhood’s fractional share waitlist, the app feels a LOT better.
Overall, Robinhood is a pretty solid investing app, so I can see why it’s becoming really popular.
As long as you’re just using a regular cash account and you deposit funds through a linked bank account, there really aren’t any fees imposed on you, other than the regulatory fees that everyone pays no matter what.
Other than that, the only fees you really should be concerned about are, the Robinhood Gold membership fee (optional), the Automated Clearing House (ACH) reversal fee of $9 and the Automated Customer Account Transfer Service (ACATS) fee of $75.
Robinhood offers a premium paid service known as Robinhood Gold for $5 per month that gives you access to margin trading, bigger instant deposits, and level 2 market data. None of this is really required, so I wouldn’t worry about it, but some people may want the access to the market data.
An ACH transfer is simply just a bank-to-bank transfer. It’s really not as fancy as it sounds.
To avoid the ACH reversal fee, always make sure you have enough money in your bank account so the transaction doesn’t get denied.
The ACATs fee is pretty standard in the investment world. All it is, is a fee to transfer your stocks to another brokerage. To avoid the fee just don’t switch brokerages, OR sometimes if you DO switch brokerages, the new broker may be willing to cover the transfer fee. I’ve seen Webull offering a deal like that, but I’d assume other brokerages do as well.
My next favorite investment app that offers fractional shares is the Stash app.
It’s a great app that offers some pretty decent features like fractional shares, a Dividend Re-Investment Plan, round-ups, custodial accounts (for your kids), and a few more useful features.
I would choose it as #1 but Stash doesn’t have a free plan, which makes it a little less appealing for people who are new to investing and aren’t sure if they want to commit fully yet.
Honestly, the $1 monthly fee for Stash isn’t a big deal, but keep in mind that there are still some other potential fees, like ACATS fees and regulatory fees, which are all pretty standard.
Here’s a screenshot of their fee schedule from the Stash website:
#3 M1 Finance
A big part of how M1 Finance’s portfolio management system works is the inclusion of fractional shares.
Since your account is split into “pies”, the robo-advisor needs to be able to invest in fractional shares when it automatically re-balances your portfolio.
Overall M1 Finance is a pretty great investing app, and fractional shares makes it all come together.
M1 Finance fees
M1 Finance has many of the same kinds of “hidden fees” as all the other investing apps, but most of them won’t ever become an issue.
The main one to notice is the account inactivity fee. If you have an inactive account with less than $20 in it, they will basically just close your account after 90 days of inactivity, so make sure you stay active if you don’t have above $20 in your account.
M1 Finance also offers a premium service known as M1 Plus. M1 Plus costs $125 per year, with an introductory price of $99.99 per year for the first year.
Here’s a screenshot that shows what M1 Plus offers:
Which investment app with fractional shares do you prefer?
Are you a fan of the investing apps listed here?
Do you know of another app that you like more?
Let us know! We want to give people the best information we can, so make sure you share your opinion with us!
If you don’t like any of the apps here, check out our homepage for a list of other investing apps!
Thank you for reading, have a great day, and happy investing!