Best Platforms for Investing in Fractional Shares: Low-Cost Entry to the Market
Introduction
Investing in stocks has long been a popular way to build wealth, but high share prices often act as a barrier for many investors. Fortunately, fractional shares allow investors to buy portions of expensive stocks, making it easier to enter the market with a small budget.
This article explores the best platforms for investing in fractional shares, their benefits, risks, and how they enable cost-effective investment strategies.
What are Fractional Shares?
Fractional shares are portions of a whole stock, allowing investors to buy a fraction instead of purchasing an entire share. For example, if a stock costs $1,000 per share, but an investor only has $50 to invest, they can buy 5% of one share through a fractional investing platform.
Benefits of Fractional Shares Investing
- Low-Cost Market Entry: Investors can buy high-value stocks with minimal capital.
- Diversification: Enables investment in multiple stocks without needing a large portfolio.
- Dollar-Cost Averaging: Investors can contribute small amounts regularly, reducing the impact of market volatility.
- Flexibility: Allows investors to allocate funds efficiently without needing to buy full shares.
Best Platforms for Investing in Fractional Shares
1. Robinhood
Robinhood is a commission-free brokerage that provides easy access to fractional shares for stocks and ETFs.
Key Features
- No minimum investment required
- User-friendly mobile app
- Commission-free trades
Pros
✔ Zero commission fees ✔ Real-time trading for fractional shares ✔ Ideal for beginner investors
Cons
✘ Limited research tools ✘ No retirement accounts
2. Fidelity
Fidelity offers its Stocks by the Slice feature, enabling investors to buy fractional shares with as little as $1.
Key Features
- No account minimums
- Supports stocks and ETFs
- Research tools and financial planning resources
Pros
✔ No commissions ✔ Strong educational resources ✔ Supports retirement accounts (IRA, 401(k))
Cons
✘ Trades are executed only during market hours ✘ Limited cryptocurrency options
3. Charles Schwab
Schwab’s Stock Slices program lets investors buy fractional shares of S&P 500 companies for as little as $5.
Key Features
- Allows investment in up to 10 companies at once
- No commission fees for stocks and ETFs
- Strong customer support and advisory services
Pros
✔ Offers a wide selection of stocks ✔ No trading fees ✔ Trusted financial institution
Cons
✘ Fractional shares limited to S&P 500 stocks ✘ No cryptocurrency trading
4. M1 Finance
M1 Finance provides an automated investing approach, allowing investors to create “pies” with fractional shares.
Key Features
- Customizable portfolio structure
- Auto-rebalancing features
- No commission fees
Pros
✔ Hands-off investing with automation ✔ Supports individual and retirement accounts ✔ No trading fees
Cons
✘ Limited real-time trading ✘ No mutual funds or bonds
5. Cash App Investing
Cash App Investing is a simple way for users to invest in fractional shares directly from their mobile device.
Key Features
- Minimum investment as low as $1
- No commission fees
- Mobile-first investing experience
Pros
✔ Easy to use for beginners ✔ Instant deposits and withdrawals ✔ Direct integration with Cash App payments
Cons
✘ Limited stock selection ✘ No advanced research tools
Comparing the Best Fractional Investing Platforms
| Platform | Minimum Investment | Commission Fees | Features |
|---|---|---|---|
| Robinhood | $1 | No | Easy-to-use, real-time trades |
| Fidelity | $1 | No | Strong research tools, IRA support |
| Charles Schwab | $5 | No | Invest in S&P 500 stocks, customer support |
| M1 Finance | $100 | No | Automated investing, portfolio customization |
| Cash App Investing | $1 | No | Mobile investing, instant deposits |
Factors to Consider When Choosing a Fractional Investing Platform
- Fees and Costs – Look for platforms with zero or low commissions.
- Stock Availability – Ensure the platform offers the stocks and ETFs you’re interested in.
- Investment Tools – Consider research tools, portfolio management, and automation features.
- Account Types – Check if the platform supports retirement accounts like IRAs.
- Ease of Use – Choose a user-friendly interface that matches your experience level.
Is Fractional Investing Right for You?
✅ Great for Beginners – Low-cost entry makes investing accessible. ✅ Ideal for Diversification – Spread investments across multiple stocks. ✅ Perfect for Long-Term Growth – Suitable for dollar-cost averaging strategies. ❌ Not Ideal for Active Traders – Limited control over order execution. ❌ Not Suitable for All Stocks – Some platforms restrict available stocks.
Final Verdict: The Best Fractional Share Platform for You
- For Beginners: Robinhood or Cash App Investing (easy-to-use, low barriers)
- For Hands-Off Investors: M1 Finance (automated portfolio management)
- For Retirement Planning: Fidelity or Charles Schwab (IRA support, research tools)
- For Stock Variety: Fidelity (broad market access)
Investing in fractional shares is a powerful way to enter the market with limited funds while building a diversified portfolio. By choosing the right platform, investors can take advantage of low-cost opportunities and grow their wealth over time.
FAQs
1. Are fractional shares a good investment?
Yes, they allow investors to diversify their portfolios with smaller amounts, making investing more accessible.
2. Can I sell fractional shares anytime?
Most platforms allow selling fractional shares, but execution times may vary.
3. Do fractional shares pay dividends?
Yes, if the underlying stock pays dividends, fractional shareholders receive proportional payments.
4. Can I buy fractional shares of any stock?
Availability depends on the platform; some restrict fractional shares to specific stocks and ETFs.
5. Are there tax implications for fractional shares?
Yes, fractional share gains and dividends are subject to capital gains tax and income tax, respectively.
By leveraging fractional investing platforms, investors can gain exposure to high-value stocks without needing large sums of money. Whether you’re a beginner or an experienced investor, there’s a platform suited for your financial goals.
