What Are Fractional Shares? [Investing in Stock Slices]

By Todd Kunsman

Money Basics

Published on

Updated on

When you begin investing your money, you will quickly realize that some funds and stocks cost quite a bit of money.

I’m talking a few hundred to even a few thousand in order to invest — which can make getting started quite difficult. 

And not only that, some brokerage accounts where you open to start investing may have minimum thresholds to even start. 

It’s frustrating, especially as you are looking to make the right money moves and want to better your future. But don’t give up hope just yet, there is a way to invest with little money and still invest in great funds or stocks. 

And this new investing phenomenon that emerged is investing in fractional shares, which has made stock investing more affordable and allows anyone to become an investor.

So what exactly are fractional shares and how do they work?

What Are Fractional Shares?

Fractional shares are small pieces of whole shares of a stock or ETF. These shares can cost as little as $1 depending on the brokerage, but most shares at minimum can be bought with a few dollars. Now you can invest without committing a lot of money and diversify your stock investments further, which can help manage your risk better.  

Previously, you had to buy an entire share of a company in order to own some of their stock. This could be quite expensive since some companies’ individual shares are not cheap. 

For example, Amazon is currently selling over $3,000 per share as of writing this. With fractional shares, you can now own 1% of that Amazon share and not spend or risk thousands of dollars. 

You can’t purchase fractional shares directly on the stock market, but there are many brokers that give you the option to invest in fractional shares. Most are commission free and there may be limits to which stocks or ETFs are available as fractional shares. 

Do Fractional Shares Pay Dividends?

Fractional shares can and do pay dividends just like regular shares of stocks or ETFs, but only if the stock you buy actually pays dividends. Not all stocks or ETFs offer dividends so if your strategy is to receive recurring payouts, make sure you research the companies you want to invest in first. 

Remember: Dividends are a portion of a company’s earnings that are paid back to their investors. Typically dividends will be paid quarterly, but could also be monthly. You can cash out the dividends or have them automatically re-invested in the company shares.

Dividend reinvestments are a great way to grow your nest egg on autopilot and a good choice out of the many investing strategies out there.

Just be aware that there’s always risk in the market. The share price of the stock could drop so much that it offsets the dividend gains. Or the company’s board could vote to reduce or even eliminate the dividend.

How Do Fractional Shares Work?

As mentioned above, investing used to involve purchasing entire units. Fractional shares work by dividing those shares into smaller parts, which means you can now pick exactly how much you wish to put into company stock. 

Large companies (especially tech companies) like to let their share prices increase over time, without splitting stocks. This makes it hard for investors who don’t want to commit a lot of money or prefer diversifying. 

Some of the most expensive shares on record have reached $336,000 per share, from Berkshire Hathaway! That’s a lot of money to commit to one company. 

Fractional shares also allow you to do dollar-cost averaging; contributing a specific amount every month to your investments. Since you don’t need to save up in order to buy an individual stock, you can contribute as much as you want. 

You can also work with percentages, rather than dollar amounts. It’s a lot easier to invest 20% of your income if you can buy smaller shares, rather than having to save up every time you want to invest in the stock market. 

What are the Benefits of Investing in Fractional Shares?

While I personally love investing in Vanguard index funds, many of them have a $3,000 minimum to invest. The other option is ETFs, which can be bought much cheaper.

But even then, you may still only have $10, $25, etc. to invest. That’s where fractional share investing becomes a great strategy. 

Great to diversify

Fractional shares make it a lot easier to diversify your assets. Instead of having to contribute a large amount of money into one single company, you can now put your money into various companies and ETFs. 

Before, if you only had $1,000 to invest, you could only buy shares in a limited amount of companies. Now, you can diversify every single cent and put your money exactly where you want it.

In the long run, this makes it easier to automate your investing and lower your overall investment risk.

Good for beginner investors

If you’re just getting started with investing, it’s likely you don’t want to invest a large amount of money at first. With fractional shares, you can commit to a low amount of money and therefore lower your risk.

This makes it less overwhelming and easier to get started as a beginner investor.

All investing has some inherited risk, but losing a few bucks over a bad investment is not nearly as devastating as a few grand. This is also a great way to really learn how to invest wisely, control your emotions, and learn the in’s and out’s of the markets. 

More flexibility

You may have your own investing strategy that you like to follow every time you’re ready to invest. It may involve specific percentages, or even an algorithm that you use to monitor several stocks. 

With fractional shares, you don’t need to wait till a stock reaches a specific price in order to purchase it.

Instead, you can follow your investment strategy a lot more accurately by buying a portion of a share at any time you want.

They add up 

Over time, your fractional shares will add up and you’ll end up owning several shares in a company (maybe even hundreds!). Fractional shares are just as good as normal shares, and will still help you grow your wealth, save for retirement and reach financial independence.

What Are the Downsides of Fractional Shares?

While there are plenty of benefits with fractional shares, there are some downsides too. Afterall, there are no perfect investments — unfortunately! 

Limited selection of stocks and ETFs

I alluded to this a bit earlier, but there are limits to what stocks and funds offer fractional shares. While there is a great selection, you are more limited compared to buying regular shares or funds. 

Not as liquid

The ability to share your investments in the stock market traditionally will fill the sell order instantly — for the most part. However, with fractional shares some may not trade as frequently as regular stock market investments. 

This is a combination of brokers Brokers having to wait to get enough fractional orders to buy whole shares. Additionally, not all fraction shares are of high demand and it can take longer for a buyer or sell order to execute.

Smaller dividend payout outs

As mentioned earlier, fractional shares can also offer dividends if the companies you invest in offer that.

However, because they are “slices” it also means your dividend payouts will be smaller in comparison to whole share investing. 

Best Fractional Share Investing Brokerages

Although fractional shares are more common today, not every financial firm or brokerage offers these to investors. However, there have been many robo-advisor and micro investing apps that made this process easier. 

One of the originals in this space is Robinhood, which most people are probably familiar with.

Although they are a decent platform, they’ve run into some past issues and there are plenty of solid Robinhood alternatives to consider as well. 

M1 Finance

M1 Finance is a broker for those who buy shares regularly and do dollar-cost averaging, which means contributing a certain amount of money every month into the stock market. 

The robo-advisor offers a tool called “The Pie,” which helps you visualize your portfolio and see exactly what percentage of your money is going to which company. 

In addition to that, M1 Finance offers commission-free investing along with portfolio allocation tracking. Learn more and sign-up for M1 Finance here.


Stash is another popular fractional share app that educates new investors on stock market investing.

With this app, you can pick which ETFs and stocks to invest in, and you’ll even receive specific recommendations according to a personalized survey. 

They charge $1 per month for an account with less than $5,000 and an annual fee of 0.25% after that. They also offer automatic investments along with dollar-cost averaging. Learn more and sign-up for Stash here.


Public is a new broker that also offers commission-free trading through its app. With Public, you can invest in fractional shares, as well as receive relatively good interest rates on any cash under $10,000. 

The platform is best for those who want to invest in the long term, rather than those who want to day trade and pick stocks. Learn more and sign-up for Public here.


Acorns is a brokerage app that invests your money through “round ups”. The concept is simple: if you buy a coffee at $2.60, Acorns will round up your purchase to $3 and invest the difference into the stock market. 

You link your checking account and card, and the app does the rest. This type of investing is called micro-investing, and will help you invest small amounts of money through fractional shares. 

It’s a great app for those who are just getting started with investing and don’t want to commit too much upfront. Learn more and sign-up for Acorns here.


Stockpile is a fractional share app that allows you to give stocks to others. It’s great for new investors and offers more than 1,000 stocks and ETFs with fractional shares. 

Every trade costs 99 cents, and there is no account minimum, fees or hidden charges.

The app is built to help investors learn about the stock market and even offers a teen account to help younger generations learn about performance trading. 

Is It Worth Buying Fractional Shares?

Fractional shares can be a great way for anyone to get started investing without a lot of money upfront. It also helps you minimize risk of your money, because you can invest with a couple dollars and learn along the way. 

However, fractional share investing is a personal choice based on your current finances, what you can afford, and your current investing knowledge.

What do you think of fractional shares? Have you invested in them in the past or are you current investing in stock slices? Let me in the comments below!