A fractional share represents a portion of company stock or a share of an exchange-traded fund that is less than one whole share. Investing in fractional shares affords some investors advantages that center on being able to buy portions of expensive stocks at a price that is below their entire market price. This also allows them to create a diversified portfolio without needing to spend their dispensable or investible cash on purchasing the full value of their selected stocks.
Investing in Fractional Shares: Where to Buy Fractional Shares
Purchasing and investing in fractional shares is tantamount to investing in the stock market and selecting expensive stocks with little money. Hence, because it still falls under stock investing, the first step when it comes to investing via this route is to understand the risks involved in stock investing and researching the prospected stocks. However, when it comes to the actual process of investing in fractional shares, the question is not how but where.
The concept of offering a fraction of a share has been around since the 1980s and the 1900s but it only gained massive popularity beginning in 2019 when Charles Schwab and Fidelity, two of the biggest brokers in the United States, rolled out fractional shares trading for stocks and various exchange-traded funds. Other brokers have since followed suit. This means that investing in fractional shares often involves going through brokerage firms
Popular Brokers that Offer Fractional Shares in U.S. and Global Markets
There is a considerable selection of brokers in the United States that offer investors access to the U.S. stock market and other markets for securities and assets. Most of these brokers also provide access to global markets. The most popular ones also offer fractional shares in their respective platforms. These brokers also have online-enabled platforms that make investing more convenient. Take note of the following:
• Charles Schwab: This broker is one of the largest brokerage firms in the U.S. and is one of the brokers that made fractional shares trading more accessible. Investors can buy fractional shares of stocks and ETFs with no minimum investment required.
• Fidelity Investments: It is also one of the brokers that promoted fractional shares trading. This broker operates as a full-service brokerage firm that provides its investors with financial advisors. Investors can buy fractional shares with as little as USD 1.00.
• Robinhood: This is one of the most popular discount and commission-free brokers in the U.S. Its platform allows investors to buy fractional shares of almost any stock over $1 with a market cap exceeding USD 25 million. It has a USD 0.00 account minimum.
• Interactive Brokers: Another low-cost brokerage firm is Interactive Brokers. It is also one of the largest brokers in the United States. It has a specific platform called IBKR that allows individuals to invest in fractional shares without commission fees.
• M1 Finance: Users of the M1 Finance platform can invest in limited fractional shares through its thematic investing pies that include pre-built and user-built pies. It provides a hands-on robo-advisor approach for those who want better control over their investments.
• SoFi Active Investing: This is the investment arm of online personal finance and banking company SoFi. It also offers commission-free fractional shares trading at a minimum USD 1.00 investment and allows reinvesting dividends for continuous purchases.
• Stash Financial: Stash was not established as a broker in the traditional sense but has since been known to offer micro-investing opportunities with automation features. These include a commission-free fractional sharing investing that starts at USD 0.05.
• Webull Corporation: Another commission-free broker that operates a trading platform and also offers fractional shares of stocks and ETFs with a minimum investment of USD 5.00 It is also known for its advanced charting tools and other resources.
The aforementioned list includes some of the most popular brokerage firms that offer fractional shares of U.S. and global stocks and exchange-traded funds. This is not an exhaustive list. There are a lot of brokers from other countries that offer the same investment options. Nevertheless, when it comes to deciding where to buy fractional shares, it is important to take into consideration what stocks or ETFs you want to invest in, ensure that the broker you choose has a superior selection of fractional shares, compare costs like commission fees and minimum investment amount, and take note of features or value-added services like learning resources and tools.