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Feb 23, 2018

What Are Fractional Shares?

By Stash Team

Fractional shares can help you build a bona fide portfolio (on a budget you can afford).

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What’s a fractional share?

Fractional shares are just what they sound like — fractions, or pieces of a whole share of stock, bond, or fund.

How do fractional shares work?

The price of a single share of stock can be expensive. Many stocks on the S&P 500* can trade for over $100 a share. A single share of Google’s parent company Alphabet, will cost over $1,100**.

Fractional investing allows you to purchase portions, or small pieces, of a share. This can be cost-effective for investors who want to get into the market but who don’t have a lot of money when they begin.

Think of it this way: You’re still investing in the company, but you don’t need to wait until you’ve got enough money to purchase an entire share. It’s one option for getting started sooner.

Say you want to purchase stock in a popular tech company that’s valued at $100 a share. But you only have $20. Fractional shares would allow you to purchase a fifth of a share of that company.

What’s the benefit of fractional shares?

For those who are looking to invest in the market but worry they don’t have enough to begin, fractional shares are a good way to get started. Even though you’re starting out small, you can still potentially earn a return on your money. This is especially true if you’re starting out early. Little amounts can earn interest, and that interest can compound over time.

Even small amounts can earn a return, and that return can compound over time.

For those who are looking to invest in the market but worry they don’t have enough to begin, fractional shares are a good way to get started.

Fractional shares allow you to invest in exciting, innovative, and interesting companies without having to pay full share price. Think of them in terms of a pizza. If the whole pie is a share, then a fractional share is a slice. Except this pizza may earn interest, dividends, and grow over time. And you get a taste of the company’s success.

Fractional shares are potentially a great way to start building your investment portfolio, on a budget that you can afford. And you can add small amounts of money regularly over time to grow your portfolio.

Remember, you’re still a bona fide shareholder. You just hold fractions of shares. It’s always important to remember that investing involves risk.

How can I purchase fractional shares?

You can purchase fractional shares of exchange-traded funds (ETFs) and some single stocks on Stash. With Stash, you don’t even need $20. You can get started with any dollar amount***.

You can also invest small amounts regularly with Auto-Stash. By turning on Set Schedule, you can set and forget your investment strategy.

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Written by

Stash Team

*S&P 500, March 13, 2020
**Share price, March 13, 2020
***For Securities priced over $1,000, purchase of fractional shares starts at $0.05.

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