Fractional shares represent a portion of a full share of stock. They allow investors to buy less than one whole share, making it easier to invest in expensive companies with smaller amounts of money.
How It Works
Instead of buying one full share at, for example, $500, an investor could buy 0.1 of a share for $50. Fractional shares are typically offered by online brokerages that pool and divide full shares to meet investor demand.
Benefits
- Accessibility: Makes high-priced stocks affordable to more investors.
- Diversification: Allows small amounts of money to be spread across more companies.
- Flexibility: Investors can choose exact dollar amounts rather than whole shares.
Final Thoughts
Fractional shares make investing more inclusive and flexible. They are ideal for beginners or anyone wanting to invest smaller amounts across a wide range of companies.