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Fractional shares are becoming increasingly more popular among traders today. There has been huge growth in the sector and number of brokers offering the opportunity to buy fractional shares.
There are a number of situations where you may find buying these kinds of fractional shares beneficial whether you are a new or experienced trader.
Here we will take a closer look at exactly what to expect, and provide a complete run through of how to buy fractional shares with some of the top brokers.
What Are Fractional Shares?
A fractional share very simply is an amount less than one of a share in a particular company. Traditionally, it would not have been possible to purchase this amount of stock in a company since brokers only facilitated the purchase of stock in units of 1 or more. The only exception would have been in mergers and acquisitions where companies reach deals that could include fractions of a stock.
Nowadays however, fractional shares trading is convenient and fast. Instead of having to make your stock purchases based on the unit value of the stock, you can now buy as much or little of a stock as you like, based on the Dollar amount you have to spend.
How to Buy Fractional Shares
There are many online stock trading brokers today who offer you the chance to buy fractional shares. These include some major players who are doing a lot to innovate within the sector. Here we will take a look, step by step, at how you can get started trading fractional shares with two of the most popular services in the industry, M1 Finance, and Public.com.
Trading With M1 Finance
M1 Finance has been around since 2015 and is now one of the most popular ways to start investing in fractional shares. They are extremely well-regulated and trustworthy with a user-friendly, intuitive platform for trading and a number of highly innovative features that resemble a hybrid robo-advisor alongside allowing you to unlock the equity from your portfolio through their Lend feature, and much more. Getting started and placing a trade is as easy as these steps:
- Start the three-step funding process by heading to the M1 Finance sign-up page to register with the broker. Here you will need just a couple of basic details like your email address and phone number that you can verify.
- You will receive a text or call to verify your identity through the phone number you entered and also have to input some more personal information. Once completing this you will be able to fund your account and make a deposit through the methods they offer.
- You can invest in single stocks and ETFs with M1 but the core concept is based around investment “Pies”. You can find out more about these in our full M1 Finance review. Your aim though will be to choose from the M1 Finance curated pies, or create your own. You can use the convenient search bar on the M1 platform to find and select your favorite stocks and ETFs to add if you choose to customize.
- Next you will have to choose the weight of each stock within your pie. This is how much will be allocated to that particular stock or ETF and is set equal as default though you can easily change this. Remember with fractional share trading this will all be allocated based on the US Dollar amount in your balance.
The final step of buying with M1 Finance is to actually execute the trades but since this is done automatically by the system, you cannot decide the exact execution time of your purchases. Instead they are allocated within a trade window that takes place daily between 10am and the close of the market.
Trading With Public.com
Public is a relatively new offering when it comes to fractional share trading, but there completely app-based service has really taken off in the last 12-months. They offer completely commission-free and fee-free trading services with a host of social and copy trading features embedded in the app for a user-experience that is ultimately very smooth and easy to get started with.
- Your first step with Public will be to download the app. It is available for both iOS and Android and you can enter your phone number on the Public.com homepage to get a download link right away.
- Once you have downloaded the app, simply complete the step-by step sign up process as directed by the on-screen prompts. This can be done as quickly as a few minutes and you can make your deposit although this can take a few days to process depending on the method you choose. For more information on the Public deposit methods and more, feel free to check out our full Public Review.
- Once funded, everything is controlled within your Public app. This means making trades, accessing news, charts, and the entire social side of the platform including the messaging service to communicate with other traders. You can then easily browse through the app where you will find a selection of curated theme portfolios you can browse and invest in, or the individual stocks and ETFs you can purchase.
- Buying a stock or ETF through the app is then as easy as clicking the buy button, choosing the amount (Public refers to fractional shares as “slices”), and executing the trade. The amount you purchase will then be added to your Public.com portfolio which is also visible through the app.
With Public, if you choose to make a deposit and do not allocate all of those deposited funds to any stocks or ETFs, then the money will remain in your cash balance and accumulate an interest of 2.5% while it is there.
Getting started in online stock trading has never been easier than now with the advent of fractional shares and the presence of such easy to use services that can provide everything from trustworthy trading to automated reinvesting, and a continued learning infrastructure.
Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.