--- title: "What are fractional shares, and how do they work?" description: "Fractional shares are parts of a whole share of a company's stock. Instead of buying an entire share, you can purchase just a portion of it, allowing you to invest smaller amounts in high-priced stocks." url: "https://www.mrmoneytv.com/articles/what-are-fractional-shares/" category: "Investing & Market" author: "Finlit" published: 2024-05-23 updated: 2024-05-24 source: "Mr Money TV" --- # What are fractional shares, and how do they work? Fractional shares are parts of a whole share of a company's stock. Instead of buying an entire share, you can purchase just a portion of it, allowing you to invest smaller amounts in high-priced stocks. ## Key takeaways - Fractional shares are parts of a whole share, so if a full share costs $100 you can invest $20 and own a fraction of it. - Fractional shares carry the same benefits as whole shares, including the right to a proportion of any dividends per share the company pays. - A stock split leaves your total value unchanged: after Apple's August 2020 four-for-one split, a $400 share became four $100 shares, and half a share worth $200 became one $50 share, still $200 in total. - The upside is a lower entry barrier, diversification for as little as $1 to $5 per share, and easier monthly investing and dollar-cost averaging. - The catch: not every stock or ETF is available, fractional shares may not carry voting rights, they can be slower to sell, and low prices can tempt impulsive buys. - moomoo offers fractional trading of certain US stocks and ETFs from as little as $5 or a minimum order size of 0.0001 share, with 0% commission. Want to invest in big name stocks but can’t afford to take out a huge chunk of your savings to do so? Then you might be interested in fractional shares. Fractional shares allow you to purchase pricey stocks and ETFs for less. They offer the same benefits as whole shares, including the right to receive a proportion of any dividends per share that may be paid by the company. This might be a great option if you’re a beginner investor looking to dip your toes into investing or if you’re a trader looking to diversify your portfolio without investing all your savings in a single company. In this article, you’ll learn about fractional shares, how they work, and how you can get started on fractional trading. Let’s dive in! ## What are fractional shares? Fractional shares are parts of a whole share of a company's stock. Instead of buying an entire share, you can purchase just a portion of it, allowing you to invest smaller amounts in high-priced stocks. Think of a whole share as a pizza. Instead of buying the whole pizza, you can buy just one or two slices. Similarly, with fractional shares, if a full share costs $100, you can invest $20 and own a fraction of that share. This way, you can start investing with smaller amounts and still own a piece of high-value stock. ![pizza cut into slices to illustrate fractional shares](../../assets/articles/what-are-fractional-shares/img-1.jpg) ### Real-Life Example: Apple Stock Split Let's use a real-life example with Apple. In [August 2020](https://www.nasdaq.com/articles/stock-split-watch:-is-apple-next), Apple announced a four-for-one stock split. Before the split, if you owned 1 share of Apple worth $400, after the split, you would own 4 shares, each worth $100. Despite the split, the total value of your Apple stock remains unchanged ($400), but you now hold more shares, each priced lower. For fractional shares, if you owned half an Apple share worth $200 prior to the split, you would now own one share worth $50 each. The overall value of your holdings remains $200. This makes investing more accessible, allowing you to own a portion of high-priced stocks without spending a large sum of money upfront. ## The Pros of Fractional shares ### Lower Entry Barrier Fractional share trading lets you invest in small sums of money, which makes it a great option for beginner investors looking to start their investment journey without forking out a large investment upfront. This will help you get into the market sooner and start benefiting from [compounding returns](https://www.investopedia.com/terms/c/compoundreturn.asp). ### Do More with Less With fractional shares, you can diversify your portfolio and spread your investments across a broader range of assets. Diversifying your portfolio is a fundamental principle in building a robust portfolio to mitigate your risk of losses if one of your shares starts to dip. Fractional investing allows you to invest in multiple shares, often for as little as $1 to $5 each. Essentially, even with a small investment, you will have a wider range of stocks than you might otherwise have. ### Monthly Investing  Fractional trading is ideal for monthly investing because you can start investing without the need to commit larger sums of money upfront. This makes it easier to stick to a consistent investment strategy over time. ### Dollar-cost Averaging Fractional shares allow you to take advantage of [dollar-cost averaging](https://www.investopedia.com/terms/d/dollarcostaveraging.asp). Dollar-cost averaging lets you invest a set amount of money at regular intervals, regardless of the stock's price at the time. You invest the same amount regularly, which helps you buy more shares when they're cheap and fewer when they're expensive. Fractional shares make this easier because you can always invest your full amount, even if you can't afford a whole share. This helps you save money over time and makes your investing smoother in the long run. ## The Cons of Fractional Shares ### Limited Availability  Not all stocks or ETFs are available for fractional trading, so it’s best that you do your research depending on which investment platform you’re trading on.  ### No Voting Rights  Fractional shares might not come with the same stock ownership privileges as whole shares, such as voting rights in shareholder meetings. This means you may not have a say in company decisions, unlike whole share owners. ### Liquidity  Selling fractional shares may take longer compared to whole shares, as fractional shares don’t trade as frequently. This could potentially impact your ability to exit positions quickly, especially during times of market volatility. ### Psychological Impact While fractional shares make investing more accessible, it's essential to be mindful of overimpulsive decisions. Just because a stock is affordable doesn't necessarily mean it's a good investment. The relatively small investment amounts may lead to hasty decisions, which could accumulate over time and affect your overall investment performance. ## Where Can I Buy Fractional Shares?  There are plenty of brokers that offer fractional share trading. [moomoo](https://tinyurl.com/mmtvmm1) has recently rolled out its fractional trading feature. With [moomoo](https://tinyurl.com/mmtvmm1), you can buy or sell fractions of stock and ETFs starting from as little as $5 or a minimum order size of 0.0001 share. However, it's worth noting that fractional trading on moomoo is currently available only for certain US stocks and ETFs. [moomoo](https://tinyurl.com/mmtvmm1) offers fractional share trading with **0% commission fees**. This means you can trade fractional shares without incurring additional costs such as settlement fees, SEC fees, or trading activity fees. So, you can enjoy the freedom to invest in fractional shares of your favourite stocks and ETFs without worrying about extra charges. ## How to Buy Fractional Shares  If you are new to investing and want to start with fractional shares, look for a broker that provides fractional share trading. [moomoo](https://tinyurl.com/mmtvmm1), for example, is an excellent investment platform for beginners that makes trading fast, simple, and accessible. Here’s how you can get started: ### 1\. Research and Choose Your Stocks Take some time to research the stocks or ETFs you’re interested in. Look for companies with strong performance histories or those in industries you believe in. Consider reading up on their financial health, market position, and future prospects. You can use the “**Industrial Chains**” feature on the moomoo app to get a comprehensive understanding of popular industries and related stocks. To access it, click on the **Market tab**, then navigate to **US > Industrial Chain.** ### 2\. Open an Investment Account  Not all brokerage platforms support fractional shares, so choose one that does. If you haven’t already, you can open your investment account [here](https://www.moomoo.com/my/promotion/welcome?global_content=%7B%22promote_content%22%3A%223466%22%2C%22promote_id%22%3A14287%2C%22promote_manager%22%3A150%2C%22promote_type%22%3A37%2C%22sub_promote_id%22%3A1%2C%22sub_promote_manager%22%3A5%7D).  ### 3\. Deposit Funds After your account is set up, deposit funds into your investment account. Fund deposits typically take a few business days to process, but moomoo's [FPX Express Deposit](https://www.moomoo.com/community/feed/no-more-waiting-use-the-fpx-express-deposit-to-make-112416550813702) feature allows you to transfer funds in as little as 5 minutes.  ### 4\. Start Buying Fractional Shares Navigate to the **Markets tab** on the moomoo app and ensure you’re on the **US Market** section. Then, tap on **Fractional Shares** to see the list of available stocks. Decide how much money you want to invest, whether it’s $5 or a higher amount, and place your order. ![screenshot of fractional share feature on moomoo app](../../assets/articles/what-are-fractional-shares/img-2.png) ### 5\. Monitor Your Investments Following your fractional share purchase, monitor your assets, evaluate your returns, stay up to date on market developments, and make any necessary portfolio adjustments. ## Conclusion  Buying fractional shares makes trading more accessible to new investors and traders alike, as it allows them to enter the market with a lower entry barrier to become familiar with investing and to diversify their portfolios without requiring substantial capital.  *Subscribe to our* [*financial newsletter*](https://www.mrmoneytv.com/) *for the latest news, insights, and advice on personal finance, investing, and more. With every email, you’ll gather the confidence and knowledge to make informed decisions to achieve your financial goals.* ## Frequently asked questions ### What are fractional shares? Fractional shares are parts of a whole share of a company's stock, so instead of buying an entire share you buy just a portion. If a full share costs $100, you can invest $20 and own a fraction of it. They offer the same benefits as whole shares, including the right to receive a proportion of any dividends per share the company pays. That makes high-priced stocks accessible with smaller amounts. ### Do fractional shares pay dividends? Yes. Fractional shares offer the same benefits as whole shares, including the right to receive a proportion of any dividends per share that the company pays. So if the company distributes a dividend, you get a slice of it in line with the fraction you own. This lets beginner investors earn dividends on high-priced stocks without buying a full share upfront. ### What are the disadvantages of fractional shares? There are four main ones. Not all stocks or ETFs are available for fractional trading, so it depends on your platform. Fractional shares may not carry voting rights in shareholder meetings. They can be less liquid and take longer to sell because they trade less frequently, which matters during market volatility. And because they are cheap, they can tempt impulsive buys, since an affordable stock isn't automatically a good one. ### How does a stock split affect fractional shares? The total value of your holding stays the same; you just hold more shares at a lower price each. When Apple announced a four-for-one split in August 2020, one share worth $400 became four shares worth $100 each. For fractional holders, half a share worth $200 before the split became one full share worth $50 each, still worth $200 in total. ### How do I start buying fractional shares? Pick a broker that supports fractional trading, since not all do. Research the stocks or ETFs you want, open and fund an investment account, then place your order for the amount you choose, whether $5 or more. On moomoo you can buy or sell fractions from as little as $5 or a minimum order size of 0.0001 share, currently for certain US stocks and ETFs, with 0% commission.