AI Investing Guide: Fractional Shares

Fractional Shares: Buy a Portion of a Stock

when it comes to investing, fractional shares have become a game-changer, allowing investors to purchase a portion of a stock rather than needing to buy a whole share. This innovation has made investing more accessible, especially for those who want to invest in high-priced stocks but lack the capital to buy full shares.

This article explains the benefits of incorporating fractional share investing in your personal wealth-building journey.

What are Fractional Shares?

Fractional shares allow you to own a portion of a full stock or ETF rather than a whole share. You participate in gains and losses based on the exact percentage you own—for example, if your stock rises or falls by 10%, the value of your fractional holding rises or falls by 10% as well. Additionally, you receive dividends proportional to your ownership, so if you own 0.5 shares and the company pays a $2 dividend per share, you would earn $1 in dividends.

For instance, instead of buying one full share of a company like Amazon (which could cost hundreds of dollars), you can invest as little as $5 or $10 and own a small fraction of that share.

Why Fractional Shares Matter?

Fractional shares democratize investing by lowering the barrier to entry. This is particularly appealing for beginner investors or those looking to diversify their portfolios without significant upfront capital. They allow investors to:

• Portfolio Diversification: Instead of putting all your money into one or two stocks, you can spread your investment across multiple companies.
• Greater Access to High-Priced Stocks: Stocks like Tesla or Amazon become accessible even with limited funds.
• Start Investing Small: New investors can dip their toes into the market without committing large sums of their paychecks, as little as $100 across a handful of stock, or $5 into a single stock.

Starting small? Look for AI investing apps that support small amountsand fractional shares.

Whether you're a seasoned investor or just starting, understanding your risk tolerance is essential for long-term success, as it reflects how much uncertainty or fluctuation in investment value an individual is willing to endure while pursuing financial goals. Understanding risk tolerance isn't just about categorizing yourself as conservative, moderate, or aggressive: it's about aligning your investments with your unique personal wealth journey.

Which Brokerages Can You Buy Fractional Shares

You may reference the table provided above for a detailed list of major brokerages and whether they support fractional share investing. Some key players in the industry offering this feature include.

• Charles Schwab: A leader in the brokerage industry, Schwab allows fractional share investing through its Stock Slices program.
• Fidelity Investments: Fidelity offers fractional shares to set-up reoccurring investments on up to 7,000 different stocks and ETFs, making it an excellent option for diversified investing.
• Vanguard: Known for its low-cost index and ETF funds, Vanguard also supports fractional investing.
• Robinhood: A popular choice among younger investors, Robinhood makes it easy to buy fractional shares with no account minimums.
• SoFi Invest: SoFi provides an intuitive platform for buying fractional shares alongside other financial products.
• Webull: A tech-savvy brokerage that offers commission-free trading, including fractional shares.
• Interactive Brokers: This platform caters to both retail and professional investors with its fractional share offerings.

Notable Brokerages That Don’t Allow Fractional Share Buying

Some major brokerages still do not support fractional share investing, include:

• Merrill Lynch: Despite being a prominent name in the industry, Merrill Wealth Management does not offer this feature.
• E-Trade: Another well-known brokerage that currently lacks support for fractional shares.