Imagine wanting to invest in Amazon or Tesla, but realizing one single share costs more than your monthly rent. That’s where fractional shares come in. They let you buy just a slice of a stock — say $5 worth of Amazon instead of shelling out hundreds or even thousands of dollars for one full share.
Today, fractional shares are everywhere in the U.S. — but that wasn’t always the case. Let’s explore how they started, who offers them, and what they’ve done to the stock market.
A Quick History of Fractional Shares
- Before 2010s: Fractional shares mostly popped up by accident — from dividend reinvestment plans (DRIPs) or stock splits. They weren’t something investors could directly buy.
- 2019: Everything changed when Robinhood launched fractional trading. Suddenly, anyone with a few dollars could buy a piece of Apple, Google, or Tesla. Other brokers rushed to follow.
- 2020–2021: The pandemic, commission-free trading, and fractional investing created a retail investing boom. Millions of new investors jumped into the market, and many started small — with fractional shares.
- Now: Most big U.S. brokers (Fidelity, Schwab, Interactive Brokers, SoFi, Webull, and more) let you invest in fractions of stocks or ETFs.
How Does It Work?
There are two main ways brokers make fractional shares possible:
- The bookkeeping way (most common): The broker buys whole shares and then splits them into “slices” on its own system. You see 0.1 or 0.005 shares in your account, but the broker is the one that actually owns the whole shares.
- ✅ Easy for the investor
- ❌ You might not get direct voting rights
- The pooled way: Brokers group together money from multiple customers to buy whole shares and divide them. Again, you own your “slice,” but the broker manages the back-end details.
Either way, your fraction earns dividends and rises or falls in value just like a full share — only in proportion to your slice.
Who Offers Fractional Shares in the U.S.?
Today, almost every major U.S. broker has some version of it:
- Robinhood – the trendsetter (launched 2019)
- Fidelity – offers broad fractional access across many stocks
- Schwab – “Stock Slices,” popular among S&P 500 investors
- Interactive Brokers, SoFi, Webull, Vanguard, Merrill – all offer fractional investing in different forms
What started as a Robinhood experiment is now standard across the industry.
Why Did Fractional Shares Become So Popular?
- Lower barrier to entry – You don’t need $3,000 to own Amazon; $3 is enough.
- More diversification – With $100, you can own a bit of 10 different companies instead of just one.
- Younger investors love it – Apps and dollar-based investing appeal to first-time investors and millennials.
- More market participation – Millions of new investors entered the market because fractional investing made it feel accessible.
The Market Impact
Fractional shares didn’t just make investing easier — they actually changed how the stock market works in some ways:
- More retail power: At the peak of the pandemic boom, retail investors (many using fractional trades) made up around 20–25% of U.S. daily stock trading. That’s a huge jump from before.
- Volatility in “meme stocks”: When large groups of small investors bought fractions of stocks like GameStop or AMC, it created massive price swings.
- Liquidity boost: More investors meant more money flowing into the market, especially into high-priced blue-chip stocks that small investors couldn’t touch before.
The Catch: What You Don’t Get
Fractional shares are great, but they come with a few caveats:
- Voting rights are murky – Since brokers usually hold the real shares, you might not get a say in company decisions.
- Broker control – You rely on your broker’s system to handle dividends, taxes, and corporate actions.
- Speculation risk – Making investing “as easy as buying coffee” can encourage some people to treat it like a game.
Final Thoughts
Fractional shares have democratized investing in the U.S. in just a few years. They’ve opened the door for millions of small investors, fueled a retail investing boom, and made it possible for anyone to own a piece of America’s biggest companies.
But they’ve also raised questions about voting rights, broker responsibilities, and whether easy access encourages reckless speculation.
Either way, fractional investing is here to stay — and it’s reshaping what it means to be an investor in the U.S.