Best Fractional Share Brokerages – An 'in' for New Investors
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Fractional share investing can sound like a shell game. Why buy a fractional share of Tesla for $20 or so when you can buy one share for around $200? What’s the point of owning 10% of one share of stock (which is what $20 is of $200)?
Investing $20 in stock slices isn’t much of an investment. If the price of one full share of Tesla jumps $100 in one day, that’s a $100 profit instead of $10 on a $20 investment in a fractional share on the same day, based on a 50% share price rise.
But either way, it’s a 50% increase, which is good for your personal finances no matter how you slice it.
Many brokerages sell fractional shares of stocks, which, despite the low value, can be a way for new investors to get started and overcome the perception that they need thousands of dollars to invest in the stock market.
Fractional shares of stocks can be bought for as little as $1. Fractional share trading can be a way to create a more diversified portfolio, help you choose your investment size by dollars instead of shares, and can be a good way to teach your children how to invest. Fractional shares can also help you get started as an investor and lead to more stock trading as you learn how to run an investment account.
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Overview of the best fractional share brokerages
Brokerage | Best For |
Fidelity | Reaching investment goals |
Robinhood | Beginners |
Charles Schwab | Research tools |
M1 Finance | Portfolio building |
SoFi Invest | Long-term investors |
Webull | Active traders |
Stash | Automatic reinvestment of earnings |
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The best fractional share brokerages
Fidelity
I’m a Fidelity customer, so I’m a little biased, but I’ve found Fidelity to be a great brokerage to save for retirement, invest in stocks and ETFs, or exchange-traded funds, and help set investment goals.
Fidelity offers fractional shares, too, from more than 7,000 U.S. stocks and exchange-traded funds, or ETFs, which are a basket of securities that tracks an underlying index.
Fidelity doesn’t charge commissions or fees for regular stock trades. There is no minimum deposit requirement for their brokerage account.
Fidelity calls its program “Stocks by the Slice,” a way to own a slice of your favorite companies and ETFs based on how much you want to invest.
Fractional investing makes dollar-cost averaging easy as an investment strategy to divide the total amount invested across periodic purchases and reduce volatility. Value investors use this method to buy stocks or shares of stocks on regular schedules, regardless of a stock’s price.
- Costs: $0 commissions
Robinhood
The online brokerage Robinhood allows customers to buy stocks and ETFs in pieces of shares or whole share increments. The company says fractional shares can be as small as 1/1000000 of a share, and fractional share trading is real-time and commission-free. Other account fees may apply, such as regulatory trading fees.
Certain stocks that cost hundreds or thousands of dollars for a single share can be bought as a fractional share for as little as $1. It can be easy to dip your toe in a company without committing to an entire share.
Fractional share orders can be placed in dollar amounts or share amounts. All purchases are rounded to the nearest penny. According to Robinhood, most stocks worth more than $1 per share with a market capitalization over $25 million are eligible for fractional share orders.
Our reviews of Robinhood have found it to be a great brokerage for beginners, with an interface that’s easy to use and little or no fees. Robinhood gives new users one share of free stock when opening an account and linking it to a bank account.
- Costs: $0 commissions
- Where to find: Robinhood
Charles Schwab
Charles Schwab will sell you a fraction of a share of stock in companies in the S&P 500 through its Schwab Stock Slices program for as little as $5. You can buy one slice for $5 or multiple slices at a time in different stocks. Up to 30 slices can be bought at a time.
Commission-free trading must be done online. Otherwise, you may face low-cost fees for assistance from a broker. Customers can buy fractional shares for themselves or can gift them to minors through a custodial account.
You can search for individual stocks by name or ticker symbol through Stock Slices or browse by sectors such as financial, health care, and energy.
Schwab is a full-service brokerage that offers a robo-advisor service to use your investing preferences to develop investment recommendations for beginners or long-time investors. Schwab also has excellent educational resources and tools to learn about individual stocks, ETFs, mutual funds, options, and many other investment products.
- Costs: $0 commissions
- Where to find: Charles Schwab
M1 Finance
M1 Finance has a robust portfolio allocation tool lets users build and manage their investment portfolio with stocks and ETFs around a customized investment plan. Or they can choose pre-baked (their description), or pre-selected Expert Pies designed for many goals or investment styles.
M1 Finance makes it easy to add fractional shares of stocks to create a more diversified portfolio without paying commissions or fees or buying several shares. Users can choose their portfolio allocation by percentage and how much to invest, and M1 calculates the rest.
Once you decide what stocks to buy, you can fund your account automatically, and the money will split up automatically among your investments. If odd dollar amounts or fractional shares are needed, then M1 does that calculation for your portfolio, called a Pie, which can hold up to 100 stocks.
M1 Finance requires at least $100 to open an investment account, which is higher than other fractional share investing brokerages. But once you’ve put $100 in, you can buy a fractional share for as little as $1.
- Costs: $0 commissions
- Where to find: M1 Finance
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SoFi Invest
SoFi Invest gives users access to over 4,000 stocks and ETFs for fractional share trading, starting with a $5 minimum to own a portion of the stock. It doesn’t charge commissions or trading fees for regular stock investing activity.
Like other online brokers, SoFi points out fractional shares are easy to sell on its mobile app or website. Just click on the “sell” button and choose the amount of trade you want to execute. Any amount can be sold, but SoFi requires the smallest denomination to be up to five decimal places.
Our reviewers have found SoFi Invest to be the best for long-term investors. It offers active trading and robo-advisor services and is ideal for investors who want access to all financial products. SoFi also offers loans, credit cards, and savings accounts.
- Costs: $0 commissions
- Where to find: SoFi Invest
Webull
Webull sells fractional shares of stocks and ETFs for as little as $5, with a minimum of 0.00001 shares per order. The company doesn’t say how many stocks it has fractional shares available for but says the list of available symbols is subject to change.
It doesn’t charge commissions or management fees to buy fractional shares. It also doesn’t have minimum deposit requirements or charge inactivity fees.
One of the unique features of Webull is its Paper Trading virtual trading simulator. Instead of using your real money, Paper Trading lets you try out trading scenarios without any risk to your funds. It’s a good way for beginners to get their feet wet learn how to use the app, and see how their investments might play out.
For more experienced investors, Webull has a suite of analytics tools in one of the easiest-to-understand trading platforms. The dashboard on its desktop platform can be customized to fit your investment style. Webull’s technology and interface make it best for active traders who love technology.
- Costs: $0 commissions
- Where to find: Webull
Stash
Stash offers more than 3,800 individual stocks and ETFs that can be bought as fractional shares.
Stash has a flat-free structure of $3 to $9 per month. For accounts with investments lower than $5,000, the fee may make the account too expensive to be worthwhile. Stash doesn’t charge trading fees but ETFs may have a fee after purchase.
Its beginner account is $3 per month. The minimum investment for fractional shares is $5, and fractional shares of most investments start at $0.01. Any stock or fund trading at more than $1,000 per share can be bought as a fractional share for just $0.05.
Stash isn’t a robo-advisor, so it won’t direct you to stocks to purchase. It will make some suggestions based on your goals so you can choose what to add to your investment portfolio. Your risk tolerance level is also factored in. And no, in case you’re wondering, you can’t buy fractional cryptocurrency shares.
Earnings are automatically reinvested through Stash’s dividend reinvestment program or DRIP. This is an easy way to improve dollar-cost averaging without doing any work.
- Costs: $0 commissions
- Where to find: Stash
Summary of best fractional share brokerages
Brokerage | Account minimum | Commission | ETFs minimum | Fractional share investment |
Fidelity | $0 | $0 | Yes | $1 |
Robinhood | $0 | $0 | Yes | $1 |
Charles Schwab | $0 | $0 | Yes | $5 |
M1 Finance | $0 | $0 | Yes | $1 |
SoFi Invest | $0 | $0 | Yes | $5 |
Webull | $0 | $0 | Yes | $5 |
Stash | $0 | $0 | Yes | $5 |
FAQs
What benefits do I get as a fractional shareholder?
Most stock exchanges, including the New York Stock Exchange, require buyers to buy a whole share of stock. Brokerages can buy one share and then divide it up among their investors. According to Robinhood, which sells fractional shares, it will aggregate and report votes on fractional shares. Some brokerages, however, may not provide voting rights to fractional share owners. Dividends are paid to eligible shareholders who own fractions of a stock. Dividend payments will be split based on the fraction of the stock owned, rounded to the nearest penny.
What if there’s a stock split?
If a stock splits, fractional share investors can multiply their current fractions by the number shares of the stock split to see what their future share holdings will be. According to an example from Charles Schwab, if you owned .15 of a share and the company announced a split of three additional shares, you could expect to hold .45 (0.15 X 3) of a share when the stock split is complete.
Can you day trade fractional shares?
SoFi Invest points out on its website that fractional share trading is regulated by the same standards as day trading stocks. Investors executing more than four day trades in a five-business-day window should maintain a $25,000 minimum balance or they can be marked as a pattern day trader. Otherwise, the account could get restricted according to day-trading margin requirement rules.
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Why you should use fractional share brokerages
Fractional share stock brokers are worth using when you don’t have enough money to buy a full share of a particular stock. Fractional share investing can also be worthwhile if you want to build a diversified portfolio but don’t have enough cash to buy full shares of some stocks.
For example, if a stock you want to buy trades at $1,000 per share but only $100 to invest, fractional share investing allows you to buy one-tenth of a share or .1 shares. Or you could invest the $100 in 10 companies that trade at $1,000 each and have a more diversified portfolio of fractional shares.
The investing apps we reviewed all sell fractional shares at $0 commission. Trading online is free, but you may have to pay a fee to get assistance from a broker.
The bottom line
Fractional shares can be a good way to get started as an investor, either as an adult or for children through custodial accounts. Buying stocks or ETFs in dollar amounts instead of by the price of a full share can be easier and make such investments more affordable.
Remember, a 10% gain in stock price is still a 10% gain, whether for a full share of an individual stock or a fractional share. You won’t see your portfolio grow as much in dollars with fractional shares, but you’ll have a chance to invest in some of the biggest companies as you learn about investing.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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