Investing might seem out of reach if you’re working with a smaller budget, but that’s changing thanks to the rise of fractional shares. These allow you to buy small portions of expensive stocks, making it easier than ever for new investors to get started.

Whether you’ve been hesitant because of high stock prices or simply didn’t know where to begin, fractional shares open the door to investing at a pace that works for you. With just a few dollars, you can start building your portfolio, gain exposure to top companies, and take the first step toward growing your wealth.

What Are Fractional Shares?

Simply put, fractional shares are pieces of a whole stock. Instead of having to buy an entire share of a company, fractional shares allow you to purchase just a small portion. This makes it possible to invest in big-name companies, even if their stock prices are too high for your budget.

Imagine you want to invest in Company X, but the cost of a single share is $500. With fractional shares, you can buy a piece of that stock for as little as $5, $10, or however much you’re comfortable investing.

Fractional shares are a relatively new addition to the investing world, but they’ve become a game-changer for small-budget investors. They eliminate the need to wait until you save up enough to buy an entire share, meaning you can start investing sooner.

Why Fractional Shares Are a Great Choice for New Investors

Fractional shares come with several advantages that can help you dip your toes into the investing world without feeling overwhelmed. Here are some reasons they’re worth considering:

  • Affordability: Traditional investing often required saving large sums of money to buy full shares of stocks. With fractional shares, even $5 can get you started.
  • Accessibility: You can invest in high-priced stocks from popular companies like Amazon, Apple, or Tesla without breaking the bank.
  • Diversification: Since you’re not restricted to buying full shares, you can spread your budget across multiple stocks and create a well-rounded portfolio.
  • Flexibility: Fractional shares offer the ability to invest at your own pace, whether you want to start with a few dollars or increase your contributions over time.

For new investors, fractional shares are an excellent introduction to the stock market and can help build confidence in managing your investments.

How Do Fractional Shares Work?

When you purchase a fractional share, you’re essentially buying a small slice of a single stock, made possible by brokerage platforms that divide shares into smaller, more manageable pieces. For example, if a share costs $1,000 and you buy $50 worth, you would own 1/20th of a share. Your ownership percentage determines any returns or dividends you’ll earn.

Brokerages that offer fractional shares handle all the details, so you don’t need to worry about the math or logistics. Once you make your purchase, your fractional shares perform just like regular shares in terms of value and growth.

How to Get Started with Fractional Shares

Now that you understand fractional shares and their benefits, it’s time to take the next step. Here’s a simple guide to help you begin:

1. Choose a Brokerage Platform

The first step is selecting a brokerage that offers fractional shares. Many popular investment platforms now provide this feature, so spend some time researching your options. When choosing a platform, consider:

  • Ease of Use: Look for apps or websites with user-friendly interfaces, especially if you’re new to investing.
  • Fees and Costs: Some brokerages charge fees, while others allow you to trade fractional shares for free. Pay attention to these details to avoid unnecessary costs.
  • Investment Options: Make sure the broker offers a variety of stocks, exchange-traded funds (ETFs), or other assets you’re interested in.

Some beginner-friendly brokerage platforms to explore include Robinhood, Fidelity, and Charles Schwab, among others.

2. Set Your Financial Goals

Before you start investing, think about what you want to achieve with your money. Are you saving for a big purchase, building an emergency fund, or working towards long-term wealth? Your goals will shape how you approach investing.

For instance, if you’re aiming for short-term savings, you might prefer lower-risk investments. Long-term goals, such as retirement, usually allow for slightly more risk since you have time to ride out market fluctuations.

3. Decide How Much to Invest

One of the beauty’s of fractional shares is that you can start with whatever amount feels comfortable. That said, it’s crucial to only invest money you can afford to set aside and not need in the immediate future. A good rule of thumb is to invest leftover funds after you’ve covered essentials, such as bills, debt payments, and savings for emergencies.

4. Diversify Your Investments

A key principle of investing is diversification, which means spreading your money across different assets to reduce risk. Fractional shares make this easy because you’re not limited to buying whole shares. Instead of putting all your money into one stock, you can divide it among several companies or industries. For example, you might invest $25 in a tech stock, $25 in healthcare, and $50 in a broad market ETF.

By diversifying, you’re less likely to experience significant losses if one stock doesn’t perform well.

5. Monitor and Adjust

Once you’ve started investing, it’s important to keep an eye on your portfolio. Check in regularly to see how your investments are performing. If your goals or financial situation change, you can always adjust your contributions or explore new stocks. Many trading platforms also offer resources to help you learn and grow as an investor.

Take the First Step Toward Your Financial Future

Getting started with fractional shares is a simple and effective way to enter the world of investing, no matter your budget. With just a few dollars, you can begin building a diversified portfolio and working toward your financial goals.