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.

Where to buy fractional shares Learn more
Are fractional shares worth it? Bottom line

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. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

Just one share of some companies can set you back thousands of pounds, fractional shares give you the opportunity to invest in these companies by buying small parts of their shares. Find out what fractional shares are, how they’re created and how you can invest in some.

What are fractional shares?

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 reinvest the dividends you receive to buy more shares.

Image of a cherry pie with a description of fractional shares: A fractional share is a slice of a slice of company pie.

How much do fractional shares cost?

The size of your slice of the company pie depends on the size of the company and the cost per share. For example, with a worth of around US$1.3 billion (around £1 billion) and a share price of around $350 (£280) at time of writing, you’d need to have around 37,000 shares in Apple to own 1% of its pie. That’s an expensive dessert! These figures change all the time. If you’re interested in finding out more about Apple’s share price then check out our page on buying Apple 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.

How to invest in fractional shares

  1. Find a stock broker. You’ll need one that lets you invest in fractional shares. Take a look at our list below and read reviews to make sure they suit your needs.
  2. Sign up and fund your account. You’ll need to provide some personal details and information about how you’ll fund your account.
  3. Find a fractional share. Research some of the shares you’re interested in and find it on your chosen platform.
  4. Choose how much you want to invest. With these platforms you typically type in how much you want to invest and the provider will deal with how much of a share that equates to.
  5. Hit buy. It’s as easy as that!

Where to buy 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:

Can you buy fractional shares in UK companies?

Yes, you can. UK fractional shares aren’t very common – maybe because the UK stock market doesn’t have the tech giants everyone raves about. From what we can find out, Wombat is the first platform to offer UK fractional shares, allowing you to invest in companies like Greggs with only enough money to buy a sausage roll.

Compare investment services

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Name Product Ratings Finder rating Customer rating Min. initial deposit Price per trade Frequent trader rate Platform fee Offer Link
FREE TRADES
IG Share Dealing
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Receive a free share worth between £3-200. T&Cs apply. The probability is weighted, so more expensive free shares will be rarer. Other charges may apply.

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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. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital 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.

Pros and cons of fractional shares

Pros

  • They get you access to expensive stocks and shares.
  • Suitable for those with only a small amount of money to invest.

Cons

  • They are sometimes difficult to sell, but increasingly it’s becoming easier
  • If your provider has quite high fees, you could end up spending a lot of money on your fractional shares.

Bottom line: Are fractional shares worth it?

Fractional shares can get you access to expensive shares that you might not get the opportunity to invest in otherwise. You can choose to invest in other companies with lower priced stocks if you don’t think it’s worth buying a fraction of a share. Make sure you’ve worked out the fees you’d pay for your shares – buying half a share doesn’t halve your fees!

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. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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