The 7 Best Fractional Share Investing Brokerages of 2020
Find the best places to buy partial shares of high-cost stocks
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If you want to invest in the stock market, you might be scared off by the perception that you need thousands of dollars right from the start. But that isn’t true — in fact, you can get involved without even buying a whole share of stock at once. With fractional share investing, you can buy as little as $5 or $10 of a stock in a single trade.
This method of buying partial shares of stock is known as fractional share investing. On major stock exchanges like the New York Stock Exchange, the exchange itself requires you buy at least one share at a time. For stocks like Alphabet ($1,200+ per share), Amazon ($1,700+ per share), or Berkshire Hathaway (over $300,000 per share), that means many smaller investors would be left out of the action.
To fill in the gap, a number of brokerage firms are willing to buy whole shares of stock and divvy them out to investors in partial-share increments known as “fractional shares.” This allows you to buy stocks with a high single share price at a much lower entry point, making it a great option for new investors.
Important: Keep in mind that a stock’s high price per share does not necessarily indicate a successful company or investment. Use other metrics, like a company’s market capitalization (the value of all shares of stock combined) as a guide for your stock market investment analysis.
So you think fractional share investing might be for you — now what? Now, it’s time to pick a brokerage. Not all of them support this kind of investing. Brokerages in the fractional share space tend to come in two varieties: First, there are the discount brokers like Stockpile and Stash that allow you to buy single shares for a fee. There are also portfolio-centric brokerages like Motif and Folio that allow you to buy fractional shares when funding a larger portfolio strategy.
The right choice for you depends on your personal investment goals and needs. But one thing you always want to watch out for is fees — specifically, avoiding them (or at least keeping them as small as possible). Large fees can put a sizeable dent in small investments, so this should definitely be a factor when choosing your brokerage. A $5 fee is only 0.1% of a $5,000 investment, but it’s 10% of a $50 investment.
If you think this kind of investment might be for you, read on for a list of our picks for the best brokerages that support fractional share investing.
For both brand new investors and those looking to gift stocks, Stockpile is the best overall investment brokerage. Stockpile is a newer brokerage and does not offer every stock on the market, but it does offer fractional shares of over 1,000 stocks and ETFs.
Trades are just 99 cents each, making them a very inexpensive place to buy and sell. There are no account minimums, monthly fees, or surprise charges to worry about.
Not only does Stockpile let you buy fractional shares, it is a great platform for learning about the stock market for future investing. The stockpile app offers stock market lessons. If you are a parent or guardian, you can link with a kid or teen account so they can track their performance and enter trades with your approval.
Stockpile also has a unique gifting feature. You can request stocks as gifts in a wish list or give a share of stock (or part of one) to someone special. That’s a unique and useful feature, and a great way to build your portfolio without a lot of cash.
One of the biggest challenges for new investors in the markets is diversification. When you're starting out with just a small nest egg, getting diversification across your portfolio of individual stocks may be impossible without looking to ETFs.
Motif solves that problem by allowing you to build a portfolio of multiple stocks following your own investment theme or theory. Once you have your target portfolio or "Motif" set, you can buy in and get fractional shares of the included securities.
Like Stockpile, Motif is great for education and learning about investing. But where Stockpile focuses on brand new and beginning investors, Motif is best for experienced investors looking to hone a strategy, learn from other investors’ public Motifs, and build out a winning portfolio.
If you regularly buy shares of the same investments over time, you are doing something called “dollar cost averaging" — this strategy allows you to build up a portfolio over time that rides out the volatility of rising and falling stock prices over the period you invest.
With M1 Finance, you can build a portfolio using a tool called “The Pie.” This visual portfolio helps you see exactly how your dollars break out in your investments. Next, fund your portfolio one time or automatically to buy fractional shares of the stocks in the portions you picked in your pie.
Long-term investing is the best way for most investors to get started. Rather than picking single stocks that may go up and down in the short-term, this investment strategy allows you to invest a little at a time with a long-term focus.
Folio Investing offers two plans for investors that both give you an opportunity to buy fractional shares. The Basic Plan offers $4 trades while the unlimited plan offers 2,000 free trades per month. Either plan is a bargain compared to the average investing fee.
In both cases, you can buy into a portfolio called a Folio. Each Folio has up to 100 stocks, ETFs, and mutual funds. You can create your own or invest in one of over 160 Folios pre-built by the Folio Investing team.
There are fees for using Folio in some cases. Basic Plan customers pay $15 per quarter if you make three or fewer trades per quarter. The Unlimited Plan costs $29 per month or $290 per year.
Betterment is the first of the major robo-advisors. A robo-advisor is a service where you fill out a questionnaire explaining your investment goals and risk tolerance, and it takes care of the rest investing your funds in a portfolio of ETFs in-line with your answers.
Betterment charges 0.25% in management fees and there are no trade fees. In fact, Betterment can even place trades for you. It automatically keeps your portfolio in balance and can place trades for a tax benefit through a process known as tax loss harvesting.
For a do-it-yourself investor that does not want to do all that much, Betterment is the perfect product. You just tell it how you want to use your investments and when you plan to need them. Betterment takes care of everything else.
Stash offers an opportunity to invest by theme with a focus in a specific industry, cause, or strategy, like green investing, tech investing, global entertainment, online media, and more. Stash supports a limited number of investments with 150+ stocks supported.
You start investing with just $5, and accounts start at $1 per month, plus any fees from the individual investments you choose. You get unlimited trades, a curated stock portfolio with fractional share support, and a personalized guidance coach features available any time you log in.
For fractional share trades, you can buy both single stocks and ETFs from a growing list.
Direct stock purchase plans (DSPPs) and dividend reinvestment plans (DRIPs) let you buy stock directly from the issuing company, sometimes with no purchase fees. Some of the most popular direct purchase plans include Exxon Mobil, Coca-Cola, Walmart, AT&T, Verizon, Ford, IBM, McDonald's, and Intel.
A number of public companies allow you to buy stocks right from their stock servicing agent. Computershare is a top vendor to manage your direct stock purchase portfolio, and DirectInvesting.com is another great resource for DSPPs with a focus on DRIP plans.