Fractional Shares

Fractional Shares

Fractional shares are portions of a whole Share of a Stock or mutual fund. They allow investors to buy or sell a fraction of a share rather than a full share, making it easier to invest in high-priced stocks with smaller amounts of Money.

Examples

  • If a single share of a company costs $1,000, an investor could buy 0.5 shares for $500.
  • A mutual fund with a share price of $200 can be purchased in fractions, such as 0.25 shares for $50.

Cases

Fractional shares are commonly used in the following cases:

  • Dollar-Cost Averaging: Investors can regularly invest fixed amounts, acquiring fractional shares over time.
  • Access to High-Value Stocks: Retail investors can diversify their portfolios by Investing in expensive stocks like Amazon or Google without needing significant Capital.
  • Dividend Reinvestment Plans (DRIPs): Investors can reinvest dividends to purchase fractional shares, enhancing their investment without additional cash outlay.