Following up on Investing in Index Funds, this week we’ll discuss fractional shares, which is essentially holding a slice of a whole share of equity. Fractional shares allow you to invest in stocks based on a dollar amount.
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With fractional shares, you can buy a piece of any publicly traded business, including some of the biggest companies in the United States, which trade for thousands of dollars a share.
Fractional shares allow you to invest in stocks based on a dollar amount, so you may end up with a fraction of a share, a whole share, or more than one share.
You receive the same benefits as any investor with a full share. You make the same percentage gains and get the same benefits of stock ownership. You also take on the same risk of loss.
You can sell fractional shares just as you can sell any other shares of stock you own.
Most brokerages that offer fractional shares also offer commission-free trading, which means you will not pay transaction fees associated with the purchase or sale of your partial shares.
In the past, investors generally would end up with fractional shares only after a stock split, since brokers allowed the purchase of full shares only.