How to invest in fractional shares

Find out what fractional shares are, how they come about and how you can get your hands on some.

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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Capital is at risk.

What is a fractional share?

When you buy shares in a company, you buy a little slice of it. A fractional share is a slice of a slice of company pie. The original slice was the “share”, but if you cut that slice in half, you have two fractional shares instead. Sometimes fractional shares are created accidentally, such as with a dividend reinvestment plan (see the box below), stock splits or mergers. Other times, the splitting is completely intentional, and done by a broker – this is quite new in the investing world and offered by Wombat, eToro and Trading 212, to name a few.

What is a dividend reinvestment plan?

A dividend reinvestment plan is when you agree with your broker that they will re-invest the dividends you receive to buy more shares.

Intentional fractional shares

When a company or broker offers fractional shares, it is allowing you to get access to stocks and shares that you might not usually have access to due to the cost of one share.

For example, chocolate company Lindt has a share price of 80,400 Swiss Francs, which is around £67,600. Unless you have that kind of money you wouldn’t be able to have exposure to Lindt. With fractional shares, you can buy a fraction of one share, at a proportionately lower price point.

Fractional shares also allow investors with limited funds to start investing. One of the best ways to manage risk in a portfolio is to diversify it, which is impossible if you only have enough for one share. With fractional shares, you can still split your available funds between a range of different companies and diversify your portfolio like any other investor, just on a significantly smaller scale.

Which platforms offer fractional shares?

You can buy fractional shares on certain share-dealing platforms – we’ve listed some major ones below. Some platforms allow you to invest in fractional shares through exchange traded funds (ETFs). We list these below, too.

Platforms that offer fractional shares include:

Platforms that offer fractional shares through ETFs:

Compare investment services

Table: sorted by promoted deals first
Data indicated here is updated regularly
Name Product Price per trade Frequent trader rate Platform fees Brand description
Fineco
£2.95
£2.95
Zero platform fee
Fineco Bank is good for share traders and investors looking for a complete platform and wide offer. Your first 50 trades are free with Fineco, until 30/09/2020. T&Cs apply. Capital at risk.
IG
0% commission on US shares, and £3 on UK shares
From £5
£0 - £24 per quarter
IG is good for experienced traders, and offers learning resources for beginners, all with wide access to shares, ETFs and funds. Capital at risk.
Hargreaves Lansdown Fund & Share Account
£11.95
£5.95
Transfer out fee
Hargreaves Lansdown is the UK's biggest wealth manager, with the depth of features you'd expect from an established platform. Capital at risk.
eToro Free Stocks
0% commission, no markup, no ticket fee, no management fee
N/A
Withdrawal fee & GDP to USD deposit conversion
eToro is good for social trading - letting you mirror the portfolios of other traders. Capital at risk. 0% commission but other fees may apply.
Interactive Investor
From £7.99 on the Investor Service Plan
From £7.99 on the Investor Service Plan
No transfer fees or exit fees. £9.99 a month on the Investor Service Plan
Capital at risk.
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Data indicated here is updated regularly
Name Product Minimum deposit Maximum annual fee Price per trade Brand description
Hargreaves Lansdown stocks and shares ISA
£100
0.45%
£11.95
Hargreaves Lansdown is the UK's biggest wealth manager. It's got everything you'll need, from beginners to experienced investors. Capital at risk.
Interactive Investor stocks and shares ISA
£100 or £25 a month
£119.88
£7.99
Interactive Investor offers everything most investors need. Its flat fees makes it pricey for small portfolios, but cheap for big ones. Capital at risk.
Saxo Markets stocks and shares ISA
No minimum deposit requirement
0.12%
£8.00
Saxo Markets offers a wide access to a range of stocks, ETFs and funds. Capital at risk.
AJ Bell stocks and shares ISA
£500
0.25%
£9.95
AJ Bell is a good all-rounder for people who to choose between shares, funds, ISAs and pensions. Capital at risk.
Fidelity stocks and shares ISA
£1000 or a regular savings plan from £50
0.35%
£10.00
Fidelity is another good all-rounder, offering a good package at a decent price. Not suited for trading shares. Capital at risk.
Nutmeg stocks and shares ISA
£100
0.75%
£0
Nutmeg offers three types of portfolios. Choose the one that goes with your investment style. Capital at risk.
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Data indicated here is updated regularly
Name Product Minimum investment Choose from Annual fee Brand description
PensionBee Pension
No minimum
7 funds
0.5% - 0.95%
Pension Bee is a newbie in the pension market. It helps consolidate your pension plans into one place. Capital at risk.
Hargreaves Lansdown Pension
£100
2,500 funds
0-0.45%
Hargreaves Lansdown is the UK's biggest wealth manager. It's got three different retirement options. Capital at risk.
Interactive Investor Pension
£25/month
Over 2,500 funds
£10/month
interactive investor is a flat-fee platform, which makes it cost effective for larger portfolios. Capital at risk.
Saxo Markets Pension
Saxo Markets Pension
£10
Over 11,000 funds
No annual fee
Saxo Markets gives flexibility and control over your investment strategy. Capital at risk.
AJ Bell Pension
£1,000
Over 2,000 funds
0.05-0.25%
AJ Bell has two different pension options, a self managed pension and one that is managed for you. Capital at risk.
Moneybox Pension
£1
3 funds
0.15% - 0.45% charged monthly
Manage your money with an easy-to-use Moneybox app. Capital at risk.
Moneyfarm Pension
Moneyfarm Pension
0.35%-0.75%
7 funds
£1,500 (initial investment)
Moneyfarm has pensions that are matched against your risk appetite, goals and planned retirement date. Capital at risk.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Capital is at risk.

Dividend reinvestment

Dividend reinvestment plans allow you to reinvest your dividend payments into more shares, which slowly increases your equity. If you don’t receive enough in dividends to purchase a full share, then you’ll get a fractional share. If you hold the shares over a long period and receive several fractional shares in this way, then they’ll be added up to make full shares, like loose change.

Stock splits

There are several different terms for stock splits, including “scrip issues”, “bonus issues”, “capitalisation issues” or “free issues”. No matter what they’re called, they do the same thing.

Sometimes companies choose to split their shares up to create more and make them more liquid. The split doesn’t add any additional value to what there was before. There isn’t a set way to split the stocks, sometimes it might be 2 for every 1 the shareholder owns, another time it may be 3 for every 2 the shareholder owns.

In the latter example, if a shareholder owns an odd number of shares, then the remaining share will turn into 1.5 shares, leaving the shareholder with a fractional share.

A recent example of a stock split is Apple’s latest one in 2014. It issued a split of 7 for 1, which meant that for every share a shareholder owned, they had 7 after the stock split. This lowered the share price from around $650 to just over $90, which increased demand for Apple’s shares.

Mergers and acquisitions

When two companies merge together, or one company acquires another, fractional shares may be inadvertently created. This is because an attempt will be made to ensure that one share in one company is equal to one share in the other. This might result in some stock splits or reverse stock splits.

Can you still receive dividends when you have fractional shares?

Yes, you can. Although, it’s worth noting that if rounding means that you’re due less than a penny in dividends, you’re unlikely to see it hit your account. Fractional share dividends will be split based on the portion of a share that you own. So if shareholders will receive £1 per share in dividends, then 50% of a share will get you 50p.

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