Best Brokers for Fractional Share Investing March 2024

How to open a brokerage account for buying fractional shares

Once you’ve determined which brokerage you would like to work with, go back to its website and look for a button labeled “Open an Account.”

Once there, you may be surprised by how much information you’re asked to supply. That’s because brokers need this information to comply with federal laws and regulations.

Here’s a sample of what you may be asked to provide:

• Your name
• Social Security number (SSN) or taxpayer identification number (TIN)
• Address
• Telephone number
• Email address
• Date of birth
• Driver’s license, passport information, or some other form of government-issued ID
• Employment status and occupation
• Insight into your investment objective and risk tolerance

How to buy fractional shares

As soon as you find a brokerage firm that offers fractional shares on its trading platform and have checked out its fee structure, it’s time to fund your account and start buying. Here are the four general steps required:

1. Deposit funds into the account. It may take several days for the funds to settle in the account.
2. Select the stock or ETF that you want to purchase. If the broker does not provide a list of available fractional share stocks (many do), ensure the broker allows fractional shares for the stocks you have chosen.
3. Choose the amount you want to invest in each stock or ETF. This may be a set dollar amount you deposit every month or based on the portfolio allocation you have selected.
4. Follow the prompts to make a purchase. The money to cover your purchase will be deducted from the funds you have deposited into the account.

Can you buy fractional shares of any stock?

You can buy fractional shares of any stock offered as fractional shares by your brokerage.

Some companies don’t offer fractional shares, and different brokerage firms tend to offer a slightly different menu of stock options. And that’s an important factor to keep in mind as you’re shopping around for the right brokerage.

Planning ahead is a good way to ensure you sign on with the right broker. Let’s say you have your heart set on buying fractional shares of Tesla and CVS stock. Make sure any broker you’re considering offers both.

How much do fractional shares cost?

Typically, you can start investing by buying a fractional share for as little as $1 to $5. That’s a far cry from having to put together nearly $3,000 for a single share of Autozone.

Can you make money with fractional shares?

Yes, you can make money with fractional shares — you can also lose money with fractional shares. Just like with whole shares of stock, whether or not you make money with fractional shares depends on several factors, such as the market or the company itself.

Is buying fractional shares worth it?

Absolutely. There are several reasons why buying fractional shares is worth it.

Fractional shares allow you to begin investing with very little money. They’re a great way to get your feet wet without betting the farm. Additionally, once you have a brokerage account, you may have access to educational resources (depending on your brokerage). These can help you learn to be a better investor in the future even if you’re starting small right now.

Pros

• Investors can invest in the stock market with little money.
• Investors can invest in high-priced stocks.
• Investors can build a diversified portfolio of stocks and ETFs with less money.
• Investors can rebalance their portfolio much easier.
• Investors can have their money working for them immediately and not sitting in cash.

Cons

• Fractional shares are not available with every broker.
• Buying fractional shares can complicate record keeping and bookkeeping.
• There may be liquidity issues with fractional shares.
• Investors may not be able to transfer fractional shares.
• Depending on the broker, investors may not have shareholders rights.
• If investors own a very small fraction of a share, they may not get the dividend.

What are fractional shares?

A fractional share is a position in a stock equal to less than a whole share. The fraction is between 0 and 1.

Fractional shares are important because they allow newer investors or people who typically invest small amounts of money to invest in stocks.

You’ll often see half-shares after stock splits. Companies sometimes offer 1.5 or 2.5 new shares for every existing share, resulting in fractional shares. But fractional shares can be smaller, too. Many companies calculate them down to thousandths or even ten-thousandths of a share.