Partial shares of stock are created when your broker or a company you’ve invested in credits you with part of a share of stock. Such fractional shares are a plus for investors who prefer to invest in terms of dollars. For example, you might plan to add $500 per month to your investment account. Usually, investing a set amount will leave some cash left over after you’ve bought all the whole shares you can. Partial shares allow all of your money to be invested. Buying partial shares is also a convenient way to invest in high-priced stocks. For example, as of December 7, 2012, Apple sold for $533.25 per share. With partial shares, you can invest in companies like this without having to pony up so much cash all at once.
Open an account with a brokerage firm that offers investment plans that allow purchase of fractional shares. Traditional brokers might not offer this option. However, several discount and online brokers do. Two examples are Buy and Hold and Sharebuilders. An added advantage is that these accounts feature low minimum investments and transaction fees.Step 2
Select a stock and an investment plan that meet your needs. For example, you might want to put $250 each month into your account to buy shares of Apple. Each month, all of the money you deposit, minus a transaction fee, will be used to buy a partial share. None of your cash will sit idle in the account. You can arrange for automatic debits from your checking or savings account to make buying partial shares even more convenient.Step 3
Buy partial shares directly from the company instead of going through a broker. Many firms offer direct stock purchase plans (DSPP) through their transfer agents. A DSPP works much like buying shares through a broker, except you usually pay only $2 to $5 per transaction, plus a few pennies per share. Some companies even pay purchase fees for you. DSPPs use your money to buy whole and partial shares, and feature minimum investments as low as $250. Many waive this initial requirement entirely if you set up automatic monthly debits from a bank account of $25 to $50.Step 4
Sign up for a dividend reinvestment plan (DRIP) for stocks you already own. Brokerage investment plans that offer partial share purchase and DSPPs usually offer dividend reinvestment as options as well. With a DRIP, you agree to have your stock dividends used to buy more of the company’s stock instead of receiving a dividend check. When the dividend amount won’t buy a whole share, your account is credited with a fractional share.