Which Trading Platforms Allow Fractional Shares?
Are you interested in dipping your toes into the stock market, but don’t have the budget to buy full shares of high-priced companies? Fractional shares might just be the solution you’re looking for. They allow you to own a piece of expensive stocks like Amazon, Tesla, or Google, even if you can’t afford to buy an entire share. As fractional shares become more popular, several trading platforms have embraced this feature, offering a more accessible way for investors to diversify their portfolios. But which trading platforms allow fractional shares, and why should you care? Let’s dive into it.
What Are Fractional Shares?
Before we get into which platforms offer fractional shares, let’s quickly explain what they are. Fractional shares are portions of a full share of stock. For example, if you want to invest in a stock priced at $1,000, but you only have $100 to invest, fractional shares let you buy 10% of that stock. This allows you to participate in high-value companies without needing a large sum of money upfront.
Fractional shares have gained a lot of traction in recent years, especially with the rise of retail investing. They’re ideal for investors who want to diversify without needing to invest thousands of dollars into each stock. Plus, they’re a great way for beginners to start investing with smaller amounts of capital.
Popular Platforms That Offer Fractional Shares
Not every trading platform offers fractional shares, but many of the leading brokers have jumped on board. If you’re wondering which platforms allow fractional shares, here’s a rundown of some of the most popular ones.
Robinhood
Robinhood was one of the pioneers in offering fractional shares to retail investors. The platform allows you to buy as little as $1 of a stock, meaning you don’t need to commit to purchasing an entire share. This makes Robinhood a favorite among beginner investors and those with limited funds.
What’s great about Robinhood is that it doesn’t charge any commission fees, which is a significant advantage for smaller investors. Whether you’re into stocks, ETFs, or crypto, Robinhood lets you invest in fractional shares across multiple asset classes. However, Robinhood’s simplicity comes with a trade-off—its research tools and educational resources are limited compared to some other platforms.
Charles Schwab
Charles Schwab is one of the most respected names in the finance industry, and it also offers fractional shares through its Stock Slices program. Schwab allows you to invest as little as $5 in a stock from a pre-selected group of top S&P 500 companies. This opens up the opportunity to build a diversified portfolio with very little capital.
Schwab’s platform provides more robust research and educational tools, making it an excellent choice for investors who want to learn while they invest. It’s also well-suited for those who want to expand beyond fractional shares into more advanced trading and investment products.
Fidelity
Fidelity offers fractional shares through its "Stocks by the Slice" program, allowing you to invest in partial shares of over 7,000 US stocks and ETFs. The minimum investment is just $1, so you can start building a diversified portfolio without needing large sums of capital.
One of the best aspects of Fidelity’s fractional share offering is the ability to reinvest dividends. This feature automatically purchases fractional shares with any dividends you receive, helping your investment grow over time without you having to do anything.
SoFi Invest
SoFi is another up-and-coming platform that offers fractional shares in both stocks and ETFs. Like Robinhood, SoFi allows you to invest with as little as $1, and they don’t charge any commissions or management fees.
SoFi is also appealing because of its user-friendly mobile app, making it easy for beginners to navigate the world of investing. On top of fractional shares, SoFi also provides a variety of other investment tools, like automated investing and retirement accounts.
M1 Finance
M1 Finance is a little different from other platforms. It combines the best of both worlds by allowing you to create customized portfolios (called "pies") with fractional shares. This means you can allocate your funds across different sectors, stocks, and ETFs in a way that aligns with your financial goals.
M1 Finance also automates the process of rebalancing your portfolio, making it easier to stay on track with your investment strategy. The platform allows you to buy fractional shares of thousands of individual stocks and ETFs, and you can start investing with as little as $100.
The Advantages of Fractional Shares
So, why should you care about fractional shares in the first place? Here are a few key reasons:
Accessibility
Fractional shares break down the barriers of entry for investing in high-priced stocks. With fractional shares, anyone can get a piece of companies like Tesla, Amazon, or Berkshire Hathaway, which would otherwise be out of reach for most small investors. This democratizes access to high-growth potential stocks.
Diversification
By investing in fractional shares, you can diversify your portfolio without needing to buy full shares of every stock you want to invest in. This means you can spread your investments across a wider range of assets, reducing your exposure to risk and increasing your chances for long-term growth.
Flexibility
Fractional shares allow you to invest in a way that fits your budget. You don’t have to wait until you have enough money to buy a full share. Whether you have $1 or $1,000, you can invest and start building wealth.
Portfolio Building for Beginners
For new investors, fractional shares are a game-changer. They give you the ability to start small and gradually increase your investments as you learn more about the stock market. Many platforms, like Robinhood and SoFi, also offer educational resources to help you get started.
Prop Trading and the Future of Finance
While fractional shares are a fantastic way to enter the world of retail investing, they’re just one part of the broader financial landscape. One area that has been gaining momentum is prop trading, where traders use a firms capital to trade various assets, such as forex, stocks, options, and commodities.
With the rise of decentralized finance (DeFi) and the increasing use of smart contracts, the future of prop trading is looking promising. The integration of AI and machine learning in trading platforms is another exciting trend. These innovations will make trading even more efficient, providing traders with automated tools that can optimize their strategies.
The future of finance also includes an ever-increasing shift toward decentralized platforms. DeFi offers greater transparency, security, and accessibility, but it also comes with challenges like regulatory uncertainty and the risk of technical failures. As blockchain technology matures, decentralized platforms could revolutionize the way we trade, eliminating middlemen and lowering transaction costs.
The Road Ahead: Fractional Shares and the Trading Revolution
The trend toward fractional shares isn’t just a passing fad; it’s part of a broader shift in the financial industry toward greater accessibility and democratization of wealth-building tools. Platforms that offer fractional shares are helping level the playing field for everyday investors, giving them the chance to grow their wealth through smarter, more diversified investments.
Whether you’re a beginner just starting out or an experienced investor looking to make your portfolio more accessible and flexible, fractional shares open up a world of possibilities. With the continued rise of decentralized finance, AI-driven trading strategies, and prop trading, the future of finance is evolving, and fractional shares will undoubtedly be a key part of that transformation.
Are you ready to take your investment game to the next level? Fractional shares are just the beginning.
