As competition amongst stock brokers has heated up, online gamers have rushed to offer new features to their customers, including being able to buy fractions of a share. This feature permits investors to buy a stock or ETF with practically any amount of cash rather than needing to have sufficient money to buy a full share. It’s perfect for high-priced bellwether stocks such as Amazon and Apple.
The capability to purchase fractional shares is substantial, specifically for financiers simply beginning out. You can invest with a lot more modest amount of money, and with some stocks ranging above a thousand dollars per share, you can buy what you can pay for. With this feature, it’s much simpler to use dollar-cost averaging, particularly now that significant online brokers have slashed their charges to zero.
However while some brokers have just started permitting financiers to purchase fractional shares, others have enabled them to do so indirectly as part of dividend reinvestment plans for many years. That’s the case even if the brokers didn’t offer to trade fractional shares. This split still exists today, with some brokers providing fractional shares via dividend reinvestment but not otherwise.
With dividend reinvestment prepares you to have the ability to purchase just the stock that made the payout, and no other. Obviously, now with no trading commissions at all the major online brokerages you can reinvest the money yourself with no extra expense, other than a bit of your time.
Below Bankrate highlights online stock brokers that allow fractional shares to be traded and explains key information of each broker’s program and offers.
The finest brokers for fractional share investing:
- Charles Schwab
- Fidelity Investments
- Interactive Brokers
- Robinhood
- TD Ameritrade
- E-Trade
- Merrill Edge
- Vanguard
Charles Schwab
Charles Schwab has long been an investor-focused clothing, and in 2020 it used another benefit to financiers, allowing them to purchase a fractional share of any stock in the Requirement & & Poor’s 500 Index. Called Stock Slices, Schwab’s program allows you to buy a slice of these stocks for just $5 and you can purchase up to 10 slices at a time. And like trades for regular shares, you’ll be able to put your trades without a trading commission. You’ll continue to have the ability to reinvest any dividends from your stocks into fractional shares of the same stock.
Fractional purchases: Yes
Fractional dividend reinvestment: Yes
Securities in the program:~ 500, consisting of all stocks in the S&P 500
Fidelity Investments
Fidelity regularly is a leading competitor among brokerages, and not remarkably includes a method to purchase fractional shares, which it calls Stocks by the Slice. You can start with simply $1 and purchase shares of more than 7,000 stocks and ETFs noted on the exchange. You’ll still be able to acquire stocks with absolutely no trading commission, and you’ll likewise be able to reinvest your dividends in more shares, even fractional shares, whether they’re stocks or ETFs.
Fractional purchases:Yes
Fractional dividend reinvestment:Yes
Securities in the program:More than 7,000 stocks and ETFs
Interactive Brokers
Long referred to as a high-powered option for professional and active traders, Interactive Brokers also offers fractional shares, which is a boon to investors without those deep pockets. You can purchase fractional shares on the broker’s Pro platform (cost: $1 or at the broker’s tiered rate) or on its Lite platform, where trading is totally free. Nevertheless, just stocks with a typical daily volume of $10 million or a market cap greater than $400 million are qualified for the program. Also eligible: ETFs along with foreign stocks trading as American depositary receipts (ADRs).
Fractional purchases:Yes
Fractional dividend reinvestment:No
Securities in the program:More than 9,000 stocks, ETFs and ADRs
Robinhood
Robinhood has long been understood for its commission-free trading (which extends to alternatives, too) but it also enables you to buy the smallest fraction of a share. Yes, you can buy as little as one-millionth of a share of your favorite stocks, and you can purchase a big range of stocks as well. Stocks trading over $1 per share and with a market capitalization greater than $25 million are eligible for the program and ETFs are offered for fractional shares, too. You can also reinvest dividends into fractional shares, however should enable the fractional feature initially.
Fractional purchases:Yes
Fractional dividend reinvestment:Yes
Securities in the program:ETFs and stocks above the volume and size limits
TD Ameritrade
TD Ameritrade does not offer fractional share purchases, however that won’t matter for much longer, since the broker has now been formally gotten by Charles Schwab. Nevertheless, the broker will still be opening new accounts up until it’s formally rolled into Schwab late next year or the year following. TD permits you to reinvest any dividends you get into brand-new shares of that business’s stock. So you’re still able to reinvest your entire dividend and grow your payout.
Fractional purchases:No
Fractional dividend reinvestment:Yes
Securities in the program:More than 5,000 stocks in addition to ETFs and mutual funds
E-Trade
E-Trade is another broker that’s been gotten (by Morgan Stanley), however the broker figures to continue under its own banner. The broker does not offer fractional purchases of stock, but it does enable financiers to reinvest their dividends into fractional shares. E-Trade will reinvest dividends only in a stock or ETF that is trading above $5 per share.
Fractional purchases:No
Fractional dividend reinvestment:Yes
Securities in the program:Countless stocks and ETFs
Merrill Edge
Merrill Edge is another broker that permits dividend reinvestment in fractional shares however does not allow customers to buy fractional shares straight. Merrill lets financiers reinvest dividends from stocks and ETFs along with mutual funds. You can rapidly establish whether you want each security in your portfolio to reinvest with an online choice, and if you change your mind, you can flip your choice later on just as easily.
Fractional purchases:No
Fractional dividend reinvestment:Yes
Securities in the program:Thousands of stocks, ETFs and shared funds
Vanguard
Lead is popular for its mutual funds, and while you can buy fractional shares when you’re putting an order of this type of security, that’s the only type of fractional purchase that you’ll be able to do. Vanguard does not use fractional share investing in stocks or ETFs, though the broker does permit you to reinvest dividends in stocks, ETFs and shared funds. Nevertheless, the broker will not reinvest in certain low-volume stocks, some U.S. stocks and all foreign stocks.
Fractional purchases:Only in mutual funds
Fractional dividend reinvestment:Yes
Securities in the program:Stocks, ETFs and shared funds
