{"id":2396,"date":"2021-09-13T11:12:48","date_gmt":"2021-09-13T11:12:48","guid":{"rendered":"https:\/\/demo.wealthface.ca\/blog\/?p=2396"},"modified":"2022-05-18T08:35:24","modified_gmt":"2022-05-18T08:35:24","slug":"fractional-shares","status":"publish","type":"post","link":"https:\/\/wealthface.com\/blog\/fractional-shares\/","title":{"rendered":"Fractional Shares: What They Are and Where to Buy Them"},"content":{"rendered":"\n

Fractional shares<\/a> make it possible to buy portion shares of a company stock. When you buy an Amazon fractional share, for example, you are buying a portion of that stock. That means you can buy the priciest stocks and exchange-traded funds (ETFs)<\/a> for as little as one dollar. This way you can decide how much money you want to invest in a company rather than how many stocks you want to buy, making it easier to diversify your portfolio.<\/span><\/p>\n\n\n\n

What are fractional shares?<\/b><\/h2>\n\n\n\n

Fractional shares are portions or slices of a whole share of stock or ETF. For example, if you want to invest in Amazon<\/a> that has a share price of more than $3000 but you only have $500, you can purchase one sixth of that share, that is done when you use a broker that offers fractional shares solution. Knowing that brokers have different minimum portions of shares, you can still buy a fraction of a stock as low as $1 with Wealthface<\/a>. <\/span><\/p>\n\n\n\n

In the past, investors could only buy fractions of a share in limited ways:<\/span><\/p>\n\n\n\n

Stock splits: <\/b><\/h2>\n\n\n\n

When a company splits its stock, the stock price falls while the number of shares increases.<\/span><\/p>\n\n\n\n

In a 3:2 stock split, for example, you receive three shares for every two shares you own. So, if you previously owned 15 shares, you now own 22.5 shares. A fractional share is that extra half stock.<\/span><\/p>\n\n\n\n

Dividend reinvestment plan (DRIP):<\/b><\/h2>\n\n\n\n

Dividends<\/a> paid by a company or fund are automatically used to buy new stock. When this occurs, investors may be left with fractional stock. Assume you own 200 shares of a company with an annual dividend payout of $0.30 per share. In that year, you’d be entitled to $60 in dividends. If the stock is worth $40, dividends would automatically purchase one and a half shares. You would end up with 201.5 shares of stock.<\/span><\/p>\n\n\n\n

Mergers and acquisitions:<\/b><\/h2>\n\n\n\n

 When a company merges or is purchased, its stock may be exchanged for new shares. They typically use a ratio to combine stocks from different companies, which means that five shares of Company Y may become three shares of Company X, resulting in fractional shares.<\/span><\/p>\n\n\n\n

Why should you buy fractional shares?<\/b><\/h2>\n\n\n\n

A one-share position in Tesla<\/a> Inc. (NASDAQ: TSLA) stock costs $680, while Amazon.com Inc. (NASDAQ: AMZN) costs an even higher $3,400 – the list goes on. Generally, an investor with a small amount of capital may believe that those stocks aren’t for them, or that they must look elsewhere or settle. <\/span><\/p>\n\n\n\n

If a stock is worth $3,000 per share, you’d need at least $3,000 to include it in your portfolio. If you want to purchase more than one share, you must pay $6,000 for two shares, $9,000 for three shares, and so on. If you don’t have that much money saved up, you’ll have to make another investment. However, with fractional shares, this is not the case. Fractional trading lets you buy the amount of stock you can afford as low as $1.<\/span><\/p>\n\n\n\n

That’s where fractional shares come into play. If you want to invest in a high-priced stock but don’t want to put all of your money into a single company, a fractional share solution is an inexpensive way to get started. Here are some advantages of using a fractional share solution:<\/span><\/p>\n\n\n\n