Does Fidelity Allow Fractional Shares?

Understanding Fractional Shares

Fractional shares are a relatively new innovation in the world of investing, enabling investors to purchase less than a full share of a stock. This approach allows individuals to invest in high-priced stocks without needing the capital to purchase an entire share. For example, if a stock is priced at $1,000 per share, and you only have $100 to invest, a fractional share lets you buy 0.1 shares of that stock. This method democratizes investing by lowering the barriers to entry, making it more accessible for those with limited funds.

Fidelity's Offerings with Fractional Shares

Yes, Fidelity does allow investors to purchase fractional shares. This feature is part of Fidelity’s commitment to expanding access to investments and helping individuals diversify their portfolios without requiring a large sum of money. Fidelity refers to this initiative as "Stocks by the Slice," which allows for greater portfolio diversification and access to top-tier stocks, even when investors are working with small amounts of capital.

Key Highlights of Fidelity's Fractional Shares:

• Minimum Investment: Investors can start investing in fractional shares at Fidelity with as little as $1.

• Stock Options: Fidelity provides fractional investing for a wide range of stocks in the S&P 500 index. This includes some of the biggest names in the market, allowing for ownership in companies like Amazon, Google, and Tesla without needing thousands of dollars.

• Investment Flexibility: Whether you want to invest $5, $50, or more, you can do so easily by specifying the dollar amount or fraction of a share you wish to purchase.

How to Buy Fractional Shares on Fidelity

Investing in fractional shares on Fidelity is straightforward, and it can be broken down into simple steps:

1. Log in to Your Fidelity Account: Ensure you have a Fidelity brokerage account. If not, you’ll need to open one, which involves providing some personal information and setting up funding.

2. Research Your Stocks: Use Fidelity’s research tools to identify which stocks or ETFs you’d like to buy fractions of. Consider looking into financial statements, market performance, and expert opinions to inform your decision.

3. Select the "Buy" Option: Once you have chosen your stock, go to the “Trade” tab, typically at the top of the Fidelity homepage. Here, you will select the type of security you want to trade.

4. Choose Fractional Shares: When placing an order, select the option for fractional shares. You can enter either the dollar amount you want to invest or the fraction of a share you wish to purchase.

5. Review Your Order: Fidelity allows you to confirm your order details before buying. Double-check the entered information, fees, and expected execution time.

6. Place Your Order: Once everything is in order, submit your order. You’ll receive a confirmation from Fidelity when the transaction is complete.

Benefits of Using Fractional Shares

Fractional shares on Fidelity offer several attractive benefits, especially for new investors or those looking to diversify without a large cash outlay:

• Diversification: By purchasing fractional shares, investors can build a diverse portfolio with limited funds. Instead of focusing on a single stock, they can own slices of multiple companies.

• Risk Management: With more varied investments, the risk is spread out, potentially reducing the impact of any single security's poor performance on the overall portfolio.

• Educational Tool for New Investors: Fractional shares can serve as an excellent starting point for beginners, offering a practical introduction to the stock market without significant risk.

Considerations When Investing in Fractional Shares

While fractional shares come with notable benefits, there are a few considerations investors should be mindful of:

• Dividend Payments: When owning fractional shares, dividend payments will also be fractional. If a company pays $2 per share in dividends and you own half a share, you’d receive $1.

• Voting Rights: Ownership of fractional shares might not come with the same voting rights typically granted to full shareholders. However, this depends on the brokerage.

• Liquidation and Resale: Selling fractional shares works similarly to full shares, though the resale market for fractional shares might be less robust, potentially affecting liquidity.

Frequently Asked Questions (FAQs)

Can I Buy Fractional Shares of Any Stock on Fidelity?

Currently, Fidelity offers fractional shares for stocks in the S&P 500. This includes a large selection but does not cover all available equities in the market.

Do Fractional Share Purchases Incur Higher Fees?

Purchasing fractional shares on Fidelity typically does not incur additional fees above their standard trading fees, making it an economical choice for small investments.

How Are Fractional Shares Reflected in My Portfolio?

Fractional shares held with Fidelity are reflected in your account just like whole shares. Your portfolio will show the percentage of shares owned and their corresponding value.

Conclusion

Fidelity allows investors to participate in fractional share investing through their intuitive platform, "Stocks by the Slice." This feature opens the doors of the stock market to more individuals, enabling them to invest in high-value stocks with unprecedented flexibility. With fractional shares, Fidelity democratizes access to the stock market, encouraging investors to diversify and engage with investing more confidently.

For those interested in further enhancing their investment understanding, exploring Fidelity's extensive educational resources and tools can provide additional guidance. Whether you’re a beginner or an experienced investor, fractional shares can be an integral part of a well-rounded investment strategy, presenting an opportunity to grow wealth steadily over time.

Remember, while fractional shares bring investments within reach for more individuals, every investment carries inherent risks, and it's always wise to conduct thorough research or consult with a financial advisor before making financial decisions.