What Are Fractional Shares?
A fractional share is a piece of one share. If a share costs $400 and you invest $100, you own a quarter of a share.
How fractional shares work
Your broker buys whole shares and splits them among customers. You get your exact slice of any gain, loss or dividend. If the stock rises 10%, your $100 slice becomes $110.
Why they are useful
They let you start with small amounts and invest an exact dollar figure every month. That makes dollar-cost averaging and diversification easy, even with little money.
The downsides
Not every broker offers them, and not for every stock. Moving fractional shares to another broker can be hard; often they must be sold first. Voting rights may be limited.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Brokerage accountThe account you use to buy stocks.
Dollar-cost averagingInvesting the same amount on a regular schedule.
StockA small piece of a company you can own.
Stock splitMore shares at a lower price, same total value.
DiversificationNot putting all your money in one place.
ETFOne fund that holds many stocks at once.