Why You Should Start Investing in Fractional Shares

Brief Description

Investing in fractional shares allows you to buy a portion of a stock instead of purchasing a full share. This makes it easier to invest in expensive stocks like Amazon, Google, or Tesla without needing a large amount of capital.

In this guide, we’ll cover:
What fractional shares are and how they work
The benefits of fractional investing
The best platforms for buying fractional shares
How to build a diversified portfolio with small investments

If you want to grow your wealth without a huge upfront investment, fractional shares are an excellent way to get started. Let’s dive in!

What Are Fractional Shares?

A fractional share is a portion of a stock rather than a whole share. Instead of buying an entire share, you can own a fraction of a stock based on the amount you invest.

For example:

If Tesla (TSLA) costs $1,000 per share, and you invest $100, you own 0.1 shares.
If Apple (AAPL) costs $150 per share, and you invest $50, you own 0.33 shares.

This lowers the barrier to entry, making high-quality stocks accessible to everyone, even if you have a small budget.

How Do Fractional Shares Work?

You invest a fixed amount – Instead of buying whole shares, you can invest $10, $50, or any amount you choose.
You own a portion of the stock – Your ownership percentage is based on your investment amount.
You earn dividends proportionally – If the stock pays dividends, you receive a fractional dividend based on your ownership.
You can reinvest automatically – Many platforms allow automatic reinvestment of fractional dividends.

Example:
If Microsoft (MSFT) pays a $3 annual dividend per share, and you own 0.5 shares, you receive $1.50 in dividends.

Fractional investing is perfect for beginners who want to build wealth without large investments.

Why Invest in Fractional Shares?

Here are some key benefits of fractional share investing:

Affordability – You don’t need thousands of dollars to invest in high-priced stocks.
Diversification – Spread your money across multiple stocks and ETFs, even with a small budget.
Easy Entry for Beginners – No need to save up for a whole share—start with as little as $1.
Automatic Dividend Reinvestment – Earn passive income and grow your portfolio over time.
Dollar-Cost Averaging (DCA) – Invest small amounts consistently, reducing the impact of market volatility.

Pro Tip: Fractional shares remove barriers to investing, making it easier for anyone to build wealth over time.

Best Platforms for Buying Fractional Shares

Many investment platforms offer fractional share trading, making it easier than ever to get started. Here are some of the best:

1. Robinhood

Minimum Investment: $1
Fees: No commission
Best For: Beginner investors who want a simple, user-friendly app.

Robinhood allows you to buy fractional shares with as little as $1, making it ideal for new investors.

2. Fidelity

Minimum Investment: $1
Fees: No commission
Best For: Long-term investors looking for free dividend reinvestment.

Fidelity offers fractional shares for stocks and ETFs, along with zero-fee index funds.

3. Charles Schwab

Minimum Investment: $5
Fees: No commission
Best For: Investors who want automated investing options.

Schwab’s Stock Slices program lets you buy fractional shares in 500+ stocks from the S&P 500 index.

4. M1 Finance

Minimum Investment: $100
Fees: No commission
Best For: Automated investing with pre-built portfolios.

M1 Finance allows you to invest in customized “Pies”, making it easy to diversify with fractional shares.

5. Cash App Investing

Minimum Investment: $1
Fees: No commission
Best For: Casual investors who want to invest directly from their mobile app.

Cash App makes it super simple to buy fractional shares with just a few taps.

How to Build a Diversified Portfolio with Fractional Shares

One of the biggest advantages of fractional investing is portfolio diversification. Instead of putting all your money into one stock, you can spread your investment across multiple assets.

Here’s how to build a strong portfolio with fractional shares:

1. Invest in Blue-Chip Stocks

Example Stocks: Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Google (GOOGL)
Why? These are stable, high-quality companies with long-term growth potential.

2. Add ETFs for Instant Diversification

Example ETFs: SPDR S&P 500 (SPY), Vanguard Total Stock Market (VTI), Invesco QQQ (QQQ)
Why? ETFs provide exposure to hundreds of stocks, reducing risk.

3. Invest in Dividend Stocks for Passive Income

Example Stocks: Realty Income (O), Johnson & Johnson (JNJ), Procter & Gamble (PG)
Why? Dividend stocks pay consistent income, which you can reinvest.

4. Allocate a Small Portion to Growth Stocks

Example Stocks: Tesla (TSLA), Nvidia (NVDA), Shopify (SHOP)
Why? Growth stocks offer high upside potential, but come with higher risk.

5. Use Dollar-Cost Averaging (DCA)

DCA Strategy: Invest a fixed amount every month, regardless of market prices.

For example:
Invest $50/month in Apple, Microsoft, and Amazon.
Over time, you accumulate shares at different price points, reducing risk.

Key Takeaway: Even if you only have $10-$100 per month, fractional shares let you build a well-balanced portfolio over time.

Common Myths About Fractional Shares

“Fractional shares are not real ownership.”
Reality: You own a real percentage of a stock, just like a full shareholder.

“You don’t get dividends.”
Reality: You receive dividends proportional to your share ownership.

“Fractional shares are risky.”
Reality: Fractional shares reduce risk by allowing better diversification.

Who Should Invest in Fractional Shares?

Fractional shares are perfect for:
Beginners who want to invest without large capital.
Small investors looking to build long-term wealth.
Dividend investors who want reinvestment benefits.
Anyone who wants to own expensive stocks like Amazon or Tesla.

Final Thought: Whether you have $10, $100, or $1,000, fractional shares make investing more accessible than ever.

Conclusion: Start Small, Grow Big!

Fractional shares eliminate barriers to investing, making it easy for anyone to start building wealth.

Key Takeaways:
Invest in your favorite stocks with just a few dollars.
Diversify easily with ETFs and blue-chip companies.
Use dollar-cost averaging to smooth out market fluctuations.
Reinvest dividends to accelerate portfolio growth.