Note: We receive a commission for purchases made through the links on this site. Our sponsors, however, do not influence our editorial content in any way.
A fractional share refers to a portion of equity as opposed to buying one whole share.
Equity refers to the amount of money that would be returned to shareholders if all company assets were liquidated and debt paid off. It is important to note that equity is the most common way of assessing a company’s financial status.
Fractional shares may occur, including stock splits, dividend reinvestment plans, capital gains, and mergers and acquisitions.
One can only invest in fractional shares through selected major brokerage firms. This is because they are not available on the open market.
Investing in fractional shares has numerous perks including:
Fractional share gives you a more comprehensive array of stocks. For a similar amount of money, one can buy fractional shares of more than one company.
There’s always the possibility of losses from investing in fractional shares, just like shares traded in the open market. However, investors focused on investing for the long haul will find investing in fractional shares profitable.
Since investing in fractional shares is the most recommended investment for beginners, one needs to invest in as wide a variety of stock as possible while striving to do adequate research before investing.
Various brokers offer fractional shares;
Here is our review of some of the best fractional share investment sites.
If the stocks you buy pay dividends, then fractional shares purchased from such the same company will also earn a dividend. Investors should utilize dividend-earning stocks. At the end of the financial year, dividend-paying stocks grow the investor’s portfolio without additional cash.