Fractional Shares

Traditionally, investors had to buy whole shares. If a company’s share price was very high, small investors might not be able to afford even one share. Fractional share investing, offered by many brokers and investing apps, lets investors buy shares by amount rather than by number.

For example, if a share costs 500, an investor with 50 can buy one tenth of a share. If the share rises 10%, their holding rises from 50 to 55.

Fractional shares make it easier to build diversified portfolios with small amounts, invest a fixed sum regularly and reinvest dividends fully.

There are some limitations. Fractional shares are often held through the broker’s records rather than directly, may not be transferable to another broker and may not carry full voting rights. Fractional shares created through dividend reinvestment plans and stock splits have existed for a long time, but app-based investing has made them much more widely available.