Navigating Fractional Share Investing: A Comprehensive Guide for 2023
Investing in fractional shares has become increasingly popular, especially among investors looking to diversify their portfolios without the burden of buying whole shares. This article provides an overview of the current landscape of online brokerage accounts that offer fractional share investing, including popular platforms such as Robinhood Square, Fidelity, M1 Finance, and others.
Overview of Fractional Share Investing
Traditional stock trading typically requires the purchase of whole shares, which can be daunting for new or small investors due to the high cost of one share. However, with fractional share investing, you can buy small, fractional (partial) shares of stocks. This option first became available in 2020, allowing investors to diversify without the financial commitment of full shares.
Top Brokerages for Fractional Share Investing
Robinhood Square
Robinhood Square, a subsidiary of the popular trading app Robinhood, allows users to trade fractional shares. This feature is excellent for those who want to dip their toes into the stock market with less risk and more flexibility. Robinhood Square also offers competitive commission rates, making it a cost-effective option for frequent traders.
Fidelity
Fidelity also offers the opportunity to purchase fractional shares. As one of the leading financial institutions, Fidelity provides a wide range of investment options, making it a solid choice for both newcomers and experienced investors. Along with fractional shares, Fidelity offers low transaction fees and a user-friendly platform.
M1 Finance
A standout among the available options, M1 Finance is designed specifically for long-term investors. With M1 Finance, you can not only purchase fractional shares but also create custom portfolios using a pie and subpie system. This allows for a flexible and granular approach to managing your investments, making it particularly appealing for those seeking control over their investment strategies.
Other Brokerages Offering Fractional Shares
Folio
Folio offers fractional shares for those who want to control their investment allocations. This platform caters to a range of investors, whether they are looking to invest in specific sectors or build a diversified portfolio. Folio is particularly useful for those who want to customize their investment options based on their specific needs.
LOYAL3 and Motif
LOYAL3 and Motif are also notable for offering fractional shares. LOYAL3, for instance, provides free investment services to investors, being funded by companies interested in collecting data. The downside is that it has a limited selection of stocks. On the other hand, Motif offers a platform where users can implement specific investment strategies, making it a good fit for those who want to follow a defined investment approach.
Betterment
Betterment is another option that stands out. It offers fractional shares of ETFs, allowing users to invest in a curated portfolio. This is ideal for investors who prefer a hands-off approach and are willing to let an algorithm manage their money. However, it also means that users do not have the flexibility to choose specific ETFs. This makes Betterment a good choice for those who value simplicity and the expertise of professionals.
Conclusion
The choice of brokerage for fractional share investing depends on individual needs and risk tolerance. Whether you are a long-term investor looking for flexibility or a day trader seeking cost-effective transactions, there is an option that fits your requirements. As the stock market continues to evolve, we can expect even more innovative features and platforms to emerge, making investing more accessible and flexible than ever before.
Remember, that while fractional share investing can be a valuable tool, thorough research and a long-term perspective are crucial. Always consider your financial goals and the stock market's complexities before making any investment decisions. Consulting with a financial advisor or doing your own due diligence could be beneficial in ensuring that your investments align with your financial objectives.