Fractional Shares
Fractional shares are portions of a single share of stock or an ETF, allowing investors to invest a set dollar amount rather than buying whole shares.
Traditionally, stocks could only be bought in whole shares. If a stock cost $500 and you had $200, you could not buy it. Fractional shares change that. Many brokers now let you buy a slice of a share, such as 0.4 shares, or simply enter a dollar amount and receive whatever fraction that buys.
Fractional shares make it easier to invest small amounts, spread money across many companies, and invest a fixed sum regularly. They also arise naturally through dividend reinvestment plans and after some corporate actions.
A fractional share gives you a proportional share of price changes and dividends. Voting rights may be limited or handled differently depending on the broker. There are also practical limitations: fractional shares may not be transferable to another broker, and some brokers only execute fractional orders at certain times of day or only for selected stocks.
Example: a stock trades at $400 and you invest $100. You receive 0.25 shares. If the stock rises 10% to $440, your fraction is worth $110. If the company pays a $4 dividend per share, you receive $1.