Fractional Shares Explained

Instead of buying whole numbers of shares, you can buy fractions of a share. Fractional shares allow you to invest in a company regardless of how much you want to invest.

Example of fractional shares

Alice has $1,000 to invest and wants to buy shares of company X. The stock is listed at $10,000 dollars, but she can’t afford to invest that much. She invests her $1,000 and gets 0.1 shares. Her returns are proportional to the original stock.

The rest of the fractional shares are owned by the brokerage.

Fractional shares allow you to buy a stock whose share price might be out of your range. If you have a smaller budget, a company’s stock with a price of around $2,000 might not be available to you. But with fractional shares, you can now take part in the company’s stock returns.

Most brokerages out there will offer fractional shares, including popular ones like Robinhood.