What are Fractional Shares? A Beginner's Guide | Vantar

Fractional shares let you invest in a company without buying a whole share of its stock. When people think about investing in stocks, they often imagine buying one or more whole shares of a company. However, not every stock is priced within every investor's budget.

Some well-known companies have share prices that can be hundreds or even thousands of dollars per share. If you're starting with $25 or $50, waiting until you can afford a whole share can keep you on the sidelines for months. For new investors, purchasing an entire share may not always be practical.

This is where fractional shares comes in, fractional investing allows investors to purchase a portion of a share rather than a whole share.

In this guide, you'll learn what fractional shares are, how they work, and some of the reasons investors choose to use them.

What are fractional shares?

A fractional share is exactly what it sounds like: a fraction of a single share of stock.

Instead of buying one complete share, you purchase a percentage or portion of that share.

For example, if a company's stock trades at $500 USD per share and you invest $100 USD, you may receive $0.20 shares, depending on the investment platform and applicable fees.

Although you own only part of a share, it generally represents proportional ownership in the company, subject to the platform's terms and the rights associated with fractional holdings.

How do fractional shares work?

Fractional investing allows investors to specify how much money they want to invest rather than the number of whole shares they wish to buy.

A Simple Example

Imagine a company's stock is trading at $400 USD per share.

Instead of purchasing one full share, you invest $50 USD.

Your investment would purchase 0.125 shares (before considering any applicable fees or costs).

The basic math - Shares owned = dollars invested ÷ share price. Your holding moves in step with the stock. If the $400 stock rises 10%, your $50 becomes about $55. If it falls 10%, it becomes about $45. Fractional shares gain and lose value exactly like whole shares.

As the stock price changes, the value of your fractional share changes proportionally, just like a whole share.

What happens behind the scenes?

Stock exchanges trade whole shares, so your broker has to bridge the gap. Brokers typically do this by buying whole shares and dividing them among customers or by filling your order from their own inventory. What this means for you in practice:

• Timing: Some brokers execute fractional orders only during market hours, and some batch them into set windows, so your fill may not be instant.
• Order types: Many brokers support only market orders (buy at the prevailing price) for fractional amounts, not limit orders.
• Price: You get the price at execution, which can differ slightly from what you saw when you tapped "buy."

How fractional investing works on Vantar

Stock exchanges trade whole shares, so brokers have to do some work behind the scenes to let you invest by dollar amount. Here's how it works on Vantar.

• What you can buy on Vantar - Vantar supports fractional investing across eligible U.S. stocks and ETFs - start here. You can buy whole shares or fractional shares of both stocks and ETFs.What's the minimum to invest on Vantar? The minimum amount you can start buying stocks with is $1 on Vantar.
• Placing an order. Choose the stock or ETF you prefer, enter the dollar amount you'd like to invest (minimum ($1)), and review the estimated number of shares. For example, $50 in a stock priced at $100 buys about 0.5 shares.
• When does your order execute? Orders placed during U.S. market hours are submitted for execution during regular market hours. The execution price may differ from the price displayed when you place the order.
• Commission paid on stocks – Vantar charges $0 commission on US stocks and ETFs.

How to buy a fractional share on Vantar step by step

1. Sign up at vantar.co and create your account.
   

2. After setting up your account, from the dashboard, in the top right corner, click on the search icon.

3. Search for a stock or ETF you want.

4. Select the stock you want from the list

5. Enter the dollar amount you want to invest and review the estimated fractional quantity. For fractional orders, select the market order option and submit your order. Your order executes at the prevailing market price when it fills. The final execution price may differ from the price displayed when you placed the order.

6. To see your stocks on Vantar, navigate to the portfolio section on Vantar to view all the stocks you have or hold in your portfolio.

7. Selling your stock on Vantar - You can sell your stocks whenever you want, and sale proceeds from stocks sold on Vantar will be settled in your Vantar account.

What does $10 buy you in a stock?

The best way to see this is a real order on Vantar. Here's an actual fractional buy order placed on Vantar:

Stock - NVDA (NVIDIA Corporation Common Stock)

Order amount - $3.00

Order type - Market order

Filled quantity - 0.012809455 shares

Filled average price - $234.20

Status - Filled

A $3 order became 0.012809455 shares - a small slice of one share of NVIDIA, filled at that moment's market price. This is what "buying $3 of a stock" actually looks like on Vantar: you never have to round up to a whole share, and you can see the exact fraction you received.

Now scale that up to a more typical starting amount - suppose a stock is trading at $250 per share. If you invest $10, you would receive approximately 0.04 shares before any applicable costs. If the stock price later rises to $275, your 0.04 shares would be worth approximately $11. If the stock falls to $225, they would be worth approximately $9.

The smaller investment amount does not change the underlying market risk. Your fractional position still rises and falls with the stock, just like the NVDA position above will move with NVIDIA's share price.

Why do some investors use fractional shares?

Fractional investing has become increasingly common as more investment platforms offer this feature. Some investors choose fractional shares because they may provide greater flexibility in the following ways:

Access to higher-priced stocks - Fractional shares may make it possible to invest in companies with higher share prices without purchasing an entire share.

Portfolio diversification - Instead of investing all available funds in a single stock, some investors use fractional shares to spread investments across multiple companies or asset types.

Diversification does not eliminate investment risk, but it may reduce the impact of holding a concentrated portfolio.

Investing smaller amounts - Fractional shares let investors invest a specific amount of money rather than the cost of a whole share. This flexibility may support regular investing, depending on an individual's financial circumstances.

Limitations to know before you start with fractional shares

While fractional shares offer flexibility, keep a few things in mind.

Platform availability – Not every investment platform offers fractional investing, and available securities may differ; however, Vantar offers fractional investing on 12,000+ stocks and ETFs.

Shareholder rights - Depending on the platform, voting rights, proxy participation, or other shareholder benefits associated with fractional shares may differ from those attached to whole shares.

Transferability - Moving fractional shares between investment platforms may not always be possible. Vantar doesn't currently support share transfers.

Investment risk - Like whole shares, fractional shares can increase or decrease in value. Investing in fractional shares does not reduce market risk.

Things to consider before buying fractional shares

Before investing, consider:

• Your financial goals
• Your investment time horizon
• Platform fees
• Available investment options
• Your tolerance for investment risk

Understanding these factors can help you make more informed investment decisions.

Read Also: How much money do you need to start

Common beginner mistakes

1. Assuming a fractional share is diversified. It's still one company.
2. Spreading a tiny amount too thin. Ten positions of $5 each are hard to track and easy to lose interest in.
3. Chasing the "cheap" feeling. A smaller dollar amount doesn't make a stock a better deal. Judge the company, not the size of your check.
4. Buying without a plan. Decide your goal and time horizon first, then choose investments.

Final thoughts

Fractional shares have made stock investing more accessible by allowing investors to purchase portions of shares instead of whole shares.

They provide flexibility for investors who prefer to invest smaller amounts or build diversified portfolios over time.

However, like any investment, fractional shares involve risk, and their suitability depends on your financial goals, investment objectives, and personal circumstances.

Learning how fractional investing works is an important step toward understanding the broader investment landscape.

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