Fractional Shares: What They Are And How To Buy

New buyers could also be shocked to see how costly a single share of a inventory or exchange-traded fund (ETF) could be. A single Class A share of Warren Buffett’s Berkshire Hathaway (BRK-A) sells for greater than $767,000 as of Might 2025, and the Class B shares (BRK-B) are greater than $500 every.

However there’s excellent news for buyers who might not be capable of afford whole shares of sure firms or ETFs. Fractional shares mean you can make investments a set greenback quantity, moderately than having to buy complete shares.

Right here’s what buyers ought to learn about fractional shares, together with find out how to purchase them.

What are fractional shares?

Fractional shares allow buyers to buy lower than a complete share of a inventory or ETF, which permits the total desired greenback quantity to be invested, moderately than solely the quantity that buys whole shares.

For instance, say an investor needs to take a position $1,000 in ABC inventory that trades for $136 per share. If an investor had to purchase solely complete shares, they might be capable of purchase seven shares for $952 (excluding charges), and $48 would go uninvested. However fractional shares permit your entire $1,000 to be invested, leading to 7.35 shares for the investor.

You may additionally see fractional shares in the event you reinvest dividends you obtain again right into a inventory or fund. The dividends will not be sufficient to buy a complete share, so that you obtain fractional shares as an alternative. 

Who may need to purchase them?

Fractional shares could also be interesting to many alternative sorts of buyers. Listed below are a couple of:

Methods to purchase fractional shares

Fractional shares can be found by many of the greatest on-line brokers lately, with prime corporations comparable to Charles Schwab and Constancy Investments providing the characteristic, although Schwab solely gives fractional shares of S&P 500 shares.

Listed below are a number of the greatest brokers for fractional shares. 

Whenever you’re prepared to position a commerce order for both a inventory or ETF, you’ll enter the greenback quantity that you just’re trying to make investments, moderately than the variety of shares you need to purchase. As soon as the order is crammed, you’ll see the fractional shares in your account. For those who’ve arrange your account to reinvest dividends, you’ll see your complete shares develop as dividends are paid and new shares are bought.

Backside line

Fractional shares permit buyers to buy lower than a full share of a inventory or mutual fund in order that their full greenback quantity will get invested. Most main brokers mean you can purchase fractional shares of shares and ETFs, usually with minimal investments of simply $5. 

New buyers who’re beginning with small sums might discover fractional shares notably helpful as a result of you may construct a diversified portfolio with out having to have a big sum of money to take a position.

Editorial Disclaimer: All buyers are suggested to conduct their very own impartial analysis into funding methods earlier than investing resolution. As well as, buyers are suggested that previous funding product efficiency isn’t any assure of future value appreciation.