You've found the perfect stock to invest in. The company is solid, their financials look great, and you're ready to buy. There's just one problem: at €500 per share, you only have enough money to buy half a share.
Until recently, this would have been the end of your investment journey. Traditional brokers only let you buy whole shares, forcing you to save up or look elsewhere.
But fractional shares are changing this. They're making expensive stocks accessible to everyone, and we'll show you exactly how they work.
What are fractional shares?
A fractional share is a portion of a share that is less than one full share. Fractional shares allow you to buy shares based on the exact amount you want to invest, so you may end up with part of a share, a whole share or more than one share.
Fractional shares are particularly useful when investing in high-priced stocks or ETFs, making them more accessible to investors. For example, if a stock trades at €500 per share, you can buy a fraction of it, such as €50 worth, instead of having to purchase a whole share. This makes it ideal when investing fixed amounts at regular intervals (for example monthly), which helps in building long-term wealth over time with less initial capital.
Another advantage of fractional shares is that all your money is put to work. You're not left with cash on your broker account that's not invested.
How do fractional shares work?
With fractional shares, the broker buys the entire share and then cuts it into smaller pieces. For example, the broker buys a share of an expensive stock, such as Warren Buffet's Berkshire Hathaway which is valued at the time of writing at $551,800. You can then buy a piece of that share, which the broker holds for you.
With fractional shares, you receive dividends proportionally. For instance, if you own half a share and the stock pays a €2 dividend per share, you would receive a €1 dividend. However, fractional shares typically do not offer voting rights in the company, which are usually reserved for owners of whole shares. In the case of corporate actions like stock splits, dividends, and mergers, the handling of fractional shares can vary by broker, with some opting to pay out the fraction's value in cash or adjust the fractional share accordingly.
Pros and cons of fractional shares
Which brokers offer fractional shares?
The popular US brokerage app Robinhood were one of the first to offer fractional shares and helped popularise the movement. In Europe, some of the more recent broker apps allow fractional shares, such as BUX, MEXEM, Interactive Brokers, Trading 212 and Trade Republic.
If you're a Belgian investor 🇧🇪, the bad news is that most Belgian brokers do not offer fractional shares (for example Bolero, Saxo Bank, Keytrade or MeDirect). But the workaround is to open an account with one of the European brokers that have fractional shares.
All your money is invested through Curvo
We created our app Curvo in order to facilitate monthly investing. Through the app, you can set up a monthly savings plan where your selected amount is automatically debited from your bank account and invested in your portfolio at the start of each month. This way, it's easy to adopt the best saving habits. These investments support fractional shares, meaning all your money is invested and no cash is left on the side. This makes Curvo ideal for monthly investing. You can put your money to work from €50.
Learn more on the benefits of investing through Curvo.
Our conclusion
Fractional shares have made investing more accessible than ever before. You no longer need large amounts of money to start building a diversified portfolio. Whether you want to invest €50 or €5000, you can put your entire savings to work without leaving cash uninvested.
As a Belgian investor, while your options for fractional shares through traditional brokers are limited, several European investment apps now offer this feature. And if you're looking for a simple way to invest monthly with fractional shares, Curvo automates this entire process for you. You can start building your long-term wealth from as little as €50 per month.