How to Buy Stocks in Fractions? with Small Capital

3 StockSlices RightImage
Image Source: Charles Schwab

In the vast world of investing, there was a time when purchasing stocks meant having to buy whole shares, often limiting opportunities for small investors or those aiming to diversify their portfolios without hefty capital.

However, with the advent of fractional share investing, the doors to the stock market have swung open for everyone. This revolutionary approach allows you to invest in your favorite companies with as little as a few dollars, making the stock market more accessible and inclusive than ever before.

In this easy-to-follow guide, we will demystify the process of buying stocks in fractions, empowering you to embark on your investment journey confidently. Whether you’re a seasoned investor or just starting out, join us as we explore the simplicity and possibilities of fractional share investing.

Step-by-Step guide to Buy Fractional Shares:

Step 1: Choose a brokerage platform that offers fractional share investing.

When it comes to investing in stocks, the first crucial step is to find a brokerage platform that allows you to buy fractional shares. A brokerage platform acts as the intermediary that facilitates your stock trades. Luckily, many popular brokerage firms now offer fractional share investing, making it easier for small investors to participate in the market.

To begin, you’ll need to research and compare different brokerage platforms. Look for ones that specifically mention fractional share investing as one of their features. Some well-known platforms that offer fractional shares include Robinhood, Fidelity, and Charles Schwab.

Once you have identified a brokerage platform, you’ll need to create an account. This typically involves providing your personal information, such as your name, email address, and sometimes your social security number. The platform may also require you to verify your identity through a process like uploading identification documents.

Let’s take an example using Robinhood, a popular brokerage platform. To open an account, you would visit the Robinhood website or download their mobile app from the app store. From there, you would follow their account creation process, providing the necessary information and agreeing to their terms and conditions.

During the account setup, you may also be asked to link a bank account. This allows you to transfer funds from your bank to your brokerage account, enabling you to make investments.

Remember, while choosing a brokerage platform, it’s essential to consider factors such as fees, user experience, customer support, and the variety of investment options available.

By selecting a brokerage platform that offers fractional share investing, you’re laying the foundation for an accessible and flexible investing journey. So take your time, explore different options, and find the brokerage platform that suits your needs and goals.

Step 2: Fund your account with the chosen brokerage platform.

Now that you have chosen a brokerage platform that offers fractional share investing and opened an account, the next step is to fund your account. This process allows you to add money to your brokerage account so that you can start investing in fractional shares.

1. Link your bank account: Most brokerage platforms provide an option to link your bank account. This allows you to transfer funds electronically between your bank and brokerage accounts. To link your bank account, you will typically need to provide your bank’s routing number and your account number. This information can usually be found on your checks or by contacting your bank.

2. Deposit funds: Once your bank account is linked, you can deposit funds into your brokerage account. The brokerage platform will have a designated area where you can initiate the deposit. You can specify the amount you want to transfer from your bank account to your brokerage account. Some platforms may also provide alternative funding methods, such as wire transfers or mobile payment services.

3. Set a budget and be mindful of minimum requirements: Determine the amount of money you are comfortable investing and set a budget. Take into account any minimum deposit requirements or fees associated with maintaining your account. It’s essential to be mindful of these factors to ensure your investment strategy aligns with your financial goals.

4. Confirm the deposit: Once you have initiated the deposit, the brokerage platform will process the transaction. It may take a few business days for the funds to be available in your brokerage account, depending on the processing time of your bank and the brokerage platform.

By funding your brokerage account, you are now ready to actively participate in the fractional share investing experience. With funds in place, you can begin exploring investment opportunities and diversify your portfolio with fractional shares of your favorite companies.

Remember, each brokerage platform may have its own specific steps and procedures for funding your account. Be sure to consult the platform’s instructions or support resources if you encounter any difficulties along the way.

Step 3: Research and select stocks for fractional-share investing.

Once you have opened and funded your brokerage account, the next step is to research and select stocks that you want to invest in using fractional shares. This step is crucial as it allows you to make informed investment decisions based on your financial goals, risk tolerance, and market analysis.

Here’s a simple guide to help you through the process:

1. Define your investment goals: Start by clarifying your investment objectives. Are you looking for long-term growth, dividend income, or a combination of both? Understanding your goals will help you choose stocks that align with your investment strategy.

2. Conduct thorough research: Explore different companies and industries to identify potential investment opportunities. Look for companies with strong financials, a competitive edge in their respective markets, and a track record of consistent performance. Utilize reputable financial news sources, company reports, and analyst insights to gather relevant information.

3. Evaluate company fundamentals: Analyze key financial metrics such as revenue, earnings, profit margins, and debt levels to assess the financial health of the company. Consider factors like market share, competitive positioning, and management expertise. Additionally, review the company’s growth prospects and any potential risks or challenges they may face.

4. Diversify your portfolio: Aim for a well-diversified portfolio by investing in a variety of stocks across different industries. This can help mitigate risk and maximize potential returns. Consider investing in sectors that you believe will have long-term growth potential and avoid overconcentration in a single stock or industry.

5. Utilize fractional share investing features: Take advantage of the fractional share investing feature offered by your brokerage platform. This allows you to invest in high-priced stocks with a smaller amount of capital. For example, instead of purchasing a full share of a company that trades at $1,000 per share, you can invest $100 and own 1/10th of a share.

6. Stay updated and adapt: The stock market is dynamic, so it’s important to stay informed about market trends, company news, and economic developments. Regularly review your investment portfolio and make adjustments as needed to align with your investment strategy.

Step 4: Check for fractional share availability on the chosen brokerage platform.

Before proceeding with the purchase of fractional shares, it’s important to ensure that the chosen brokerage platform offers fractional share investing for the stocks you are interested in. Not all stocks may be available for fractional investing, so it’s crucial to verify this information beforehand.

Here’s how you can check for fractional share availability:

1. Explore the brokerage platform’s website or mobile app: Log in to your brokerage account and navigate to the section where you can search for stocks or explore investment options. Look for features or information specifically mentioning fractional shares or fractional investing.

2. Search for the desired stocks: Use the search function provided by the brokerage platform to look for the stocks you want to invest in. Enter the stock symbol or the company name to initiate the search.

3. Verify fractional share availability: Once you have found the desired stock, review its details or profile. Look for indications or statements that confirm the availability of fractional shares for that particular stock. The brokerage platform may explicitly state that fractional shares are available, or they may provide information about the minimum investment amount required for fractional investing.

4. Ensure the desired investment amount is achievable: Take note of the minimum investment requirement for fractional shares, if applicable. Ensure that the amount you intend to invest aligns with the platform’s guidelines. Some platforms may have a minimum investment threshold for fractional shares, so it’s essential to verify this information.

5. Explore alternative stocks: If the specific stock you had in mind is not available for fractional investing, consider exploring alternative stocks within the same industry or sector. Check if those stocks are available as fractional shares, allowing you to diversify your investments even if your initial choice is not available.

Remember that the availability of fractional shares may vary depending on the brokerage platform and the specific stocks you are interested in. Some brokerage platforms may offer a wide range of stocks as fractional shares, while others may have limitations. It’s always advisable to consult the platform’s support resources or reach out to their customer service if you have any specific questions regarding fractional share availability.

Step 5: Place an order to buy fractional shares.

Now that you have identified the stocks available for fractional investing on your chosen brokerage platform, it’s time to place an order to buy fractional shares.

Here’s a step-by-step guide to help you through the process:

1. Navigate to the trading section: Look for the trading or investing section within the platform. This is where you can initiate stock transactions.

2. Search for the desired stock: Use the search function provided by the platform to find the specific stock you want to invest in. Enter the stock symbol or the company name to begin the search.

3. Select the fractional share option: Once you have located the desired stock, check if there is an option to buy fractional shares. This may be indicated by a checkbox or toggle button specifying fractional shares. Select this option to proceed with fractional investing.

4. Specify the investment amount: Enter the amount of money you want to invest in fractional shares of the selected stock. The brokerage platform will calculate the corresponding fraction or portion of a whole share that you will own based on your specified amount.

5. Review the order details: Take a moment to review the order details, including the investment amount, the fraction of shares you will own, and any associated fees or commissions. Ensure that the information is accurate and aligns with your investment goals.

6. Place the order: Once you are satisfied with the order details, proceed to place the order. Click on the appropriate button, such as “Buy” or “Place Order,” to initiate the transaction.

7. Confirm the order: After placing the order, you may be prompted to confirm the transaction. Review the details once again and verify that everything is correct. Confirm the order to finalize the purchase of fractional shares.

8. Monitor your investment: After executing the order, keep track of your investment. Monitor the performance of the stock and stay informed about any relevant news or updates that may impact its value.

It’s important to note that the process may vary slightly depending on the brokerage platform you are using. Some platforms may offer additional order customization options or provide order types like market orders or limit orders. Familiarize yourself with the specific features and functionalities of your chosen platform to make the most of your fractional share investing experience.

Step 6: Review and confirm your fractional share order.

After specifying the investment amount and selecting the desired fractional shares, it’s crucial to review and confirm the order details before finalizing the transaction. This step ensures accuracy and helps prevent any errors or unintended purchases. 

Here’s how you can review and confirm your fractional share order:

1. Check the stock symbol: Verify that the stock symbol entered is correct. A stock symbol is a unique series of letters assigned to a particular company’s stock. Make sure it matches the intended company you wish to invest in. 

Example: If you want to buy fractional shares of Apple Inc., the correct stock symbol is “AAPL.” Double-check that you have entered “AAPL” and not a similar symbol representing a different company.

2. Review the investment amount: Confirm the dollar amount you have entered for the fractional share purchase. Ensure it aligns with your investment plan and the available funds in your brokerage account.

Example: If you want to invest $500 in fractional shares of Apple Inc., verify that you have entered the correct amount.

3. Assess any associated fees: Take note of any transaction fees or commissions associated with the fractional share purchase. These fees can vary depending on the brokerage platform and the specific transaction. Ensure that you are aware of any additional costs and consider their impact on your investment. Example: If your brokerage charges a $5 transaction fee, be aware that this fee will be applied to your order.

4. Double-check order details: Review all the order details displayed on the screen. Check that the stock symbol, investment amount, fees, and any other relevant information are accurate and align with your investment intentions.

5. Confirm the order: Once you have thoroughly reviewed the order details and verified their accuracy, proceed to confirm the order. Look for a button or option that allows you to finalize the transaction. Clicking or selecting this option indicates your intent to purchase the specified fractional shares. 

Example: Click the “Confirm” or “Place Order” button to initiate the purchase of your fractional shares.

6. Keep a record of the confirmation: After confirming the order, make a note of the order confirmation number or any reference provided by the brokerage platform. This information will be useful for future reference and tracking your investments.

Step 7: Monitor and manage your fractional share investment.

Once your fractional share purchase is complete, it’s important to actively monitor and manage your investment. By keeping a close eye on your portfolio, you can make informed decisions and potentially maximize your returns. 

Here’s how you can monitor and manage your fractional share investment: 

1. Track performance: Regularly monitor the performance of your fractional share investment. Keep an eye on the stock’s price movements, any dividend payments received, and overall portfolio performance. Many brokerage platforms provide portfolio tracking tools that offer real-time updates on your investments.

2. Stay informed: Stay updated with relevant news and developments that may impact the stock you have invested in. Keep track of company news, financial reports, industry trends, and any other information that could affect the stock’s value. Utilize reliable financial news sources, research reports, and company announcements to stay informed.

3. Evaluate your investment strategy: Periodically evaluate your investment strategy and assess whether it aligns with your financial goals and risk tolerance. Consider factors such as your investment time horizon, financial objectives, and overall portfolio diversification. Adjust your strategy as necessary to ensure it remains consistent with your investment objectives.

4. Consider buying or selling more fractional shares: If you believe in the long-term prospects of the stock and have additional funds available, you may consider buying more fractional shares to increase your position. Conversely, if your investment thesis has changed or you need to rebalance your portfolio, you may decide to sell some or all of your fractional shares. Make these decisions based on careful analysis and consideration.

5. Review and adjust your holdings: As your investment goals or market conditions change, it’s important to review and potentially adjust your fractional share holdings. Regularly reassess the performance and prospects of the stock, and compare it to other investment opportunities. If necessary, reallocate your investments to maintain a well-diversified and balanced portfolio.

6. Stay disciplined: Investing in the stock market can be subject to short-term volatility and market fluctuations. It’s important to remain disciplined and avoid making impulsive decisions based on short-term movements. Stick to your long-term investment plan and avoid being swayed by emotions or market noise.

7. Seek professional advice if needed: If you feel uncertain about managing your fractional share investment or require expert guidance, consider consulting with a financial advisor. They can provide personalized advice based on your specific financial situation and help you make informed investment decisions.

By actively monitoring and managing your fractional share investment, you can adapt to changing market conditions, optimize your portfolio, and work towards achieving your financial goals. Regularly review the performance of your investment, stay informed about relevant news, and make adjustments as necessary to maintain a successful investment strategy.

You May Also Like

Related Posts