How to Start Investing in Fractional Shares: A Complete Beginner’s Guide (2025)
Investing used to appear like a privilege reserved for the wealthy. It once cost hundreds or even thousands of dollars to purchase a single share of companies like Amazon, Google, or Tesla.
Thankfully, times have changed. Thanks to fractional shares, everyday people can now invest in top companies without needing a fortune. Whether you’ve got $5 or $500, you can now own a piece of your favorite businesses.
In this article, you’ll learn exactly what fractional shares are, how fractional investing works, which platforms are best, and how to build your portfolio step by step — even if you’re a complete beginner.
What Are Fractional Shares?
A fractional share is simply a portion of a full share of company stock.
Example: Let’s say Amazon stock trades at $250. If you invest $25, you own 0.1 shares of Amazon. You’ll still earn returns and dividends on that portion just like a full shareholder.
Fractional share investing allows you to start with a small amount, invest in different companies, and grow your money gradually—without spending too much.
How Fractional Shares Work
When you buy fractional shares, your brokerage (like Fidelity, Robinhood, or Schwab) collects orders from many investors.
- The brokerage buys whole shares in the stock market.
- It divides those shares into smaller fractional portions.
- You receive ownership proportional to the amount you invest.
Example:
If Tesla trades at $500 and you invest $50, you’ll own 0.1 share.
Another investor puts $250 and owns 0.5 share.
Both are partial owners and receive proportional returns.
What About Dividends and Profits?
Dividends are paid based on your fraction size.
Example: If Tesla pays $1 per share and you own 0.1 share, you receive $0.10.
When you sell, you can sell your fractional portion just like a full share.
Why Fractional Shares?
- Affordable: Start investing with even $5.
- Diversification: Spread your money across multiple stocks to reduce risk.
- Automatic Dividend Reinvestment: Many brokers reinvest into additional fractional shares.
- Easy to Manage: Mobile-friendly apps and recurring deposits.
Best Platforms for Buying Fractional Shares (U.S., 2025)
| Platform | Minimum Investment | Best For | Key Features |
|---|---|---|---|
| Fidelity Investments | $1 | Long-term investors | Wide stock/ETF selection & automatic reinvestment |
| Charles Schwab | $5 | Retirement & beginners | Schwab Stock Slices & S&P 500 investing |
| Robinhood | $1 | App-first traders | Commission-free fractional shares |
| SoFi Invest | $5 | New investors | Auto investing & rewards |
| Public | $1 | Community investors | Follow expert portfolios |
Step-by-Step: How to Start Investing in Fractional Shares
- Pick Your Brokerage – choose an app like Fidelity, Schwab, or Robinhood.
- Open Your Account – provide basic info & bank details.
- Fund Your Account – start with any amount (even $10).
- Do Your Research – check performance, trends, financial health.
- Buy Fractional Shares – enter how much you want to invest.
- Reinvest & Stay Consistent – use automatic deposits.
Smart Tips for Fractional Investors
- Start small but consistent – even $20/week grows massively over time.
- Diversify your holdings across sectors.
- Don’t panic with market dips.
- Use ETFs for safe diversification (ex: SPY, QQQ).
- Rebalance every few months.
Are There Any Downsides?
- Fractional shares cannot always be transferred between brokers.
- Limited or no shareholder voting rights.
- May take time to sell depending on brokerage.
- Broker holds pooled shares, not individual certificates.
Taxes on Fractional Shares
Fractional shares are taxed the same as full shares:
- Capital Gains – taxed when you sell.
- Dividends – taxable income.
For retirement investing, consider a Roth IRA or Traditional IRA for tax advantages.
How Much Should You Start With?
You can start with as little as $1. The key is consistency.
Example:
Investing $50/week at 8% return grows to $37,000+ in 10 years.
The Future of Fractional Investing
- Fractional bonds and real estate
- Thematic portfolios (AI, Green Energy, Healthcare)
- Crypto + stock hybrid portfolios
Final Thoughts
Fractional investing has transformed access to the stock market. You no longer need thousands to invest in companies like Apple, Tesla, or Microsoft.
Start small, stay consistent, and keep learning.
Those tiny fractions you buy today could grow into something life-changing tomorrow.
Your path to financial freedom starts with your first $5.
Frequently Asked Questions (FAQ)
1. Can you really make money from fractional shares?
Yes. Fractional shares grow in value just like full shares. You also earn dividends based on your fractional ownership percentage.
2. What is the minimum amount required to start investing in fractional shares?
You can start with as little as $1 depending on the brokerage platform. Consistency is more important than the starting amount.
3. Can I sell fractional shares anytime?
Yes, you can sell fractional shares just like full shares. However, execution times may vary slightly by broker.
4. Do fractional shares pay dividends?
Yes. Dividends are paid proportionally based on how much of the share you own. For example, 0.1 shares receive 10% of the full dividend.
5. Are fractional shares safe?
Fractional shares are safe as long as you use a trusted, regulated U.S. brokerage. They carry normal stock market risks—not broker risks.
6. Do I get voting rights with fractional shares?
In most cases, fractional shareholders do not receive full voting rights. Policies vary by broker.
7. Which is better for beginners: fractional shares or ETFs?
ETFs are better for simple diversification, while fractional shares allow you to focus on specific companies. Most investors use a combination of both.
8. What is the best platform to buy fractional shares in 2025?
Some of the best options include Fidelity, Charles Schwab, Robinhood, SoFi, and Public.