fractional shares
A portion of a whole share of stock, allowing investors to buy less than one full share.
Example
“With fractional shares, she was able to buy $10 worth of Amazon stock even though one full share cost $3,000.”
Memory Tip
FRACTIONAL = a FRACTION. You buy a FRACTION of one share instead of the whole thing.
Why It Matters
Fractional shares democratize investing by removing the barrier of high stock prices, allowing people with limited capital to build diversified portfolios and start investing with small amounts of money. This makes it easier for beginners to participate in the stock market without needing thousands of dollars to purchase whole shares of expensive stocks.
Common Misconception
Many people mistakenly believe that fractional shares are a new invention or only available through certain brokers, when in reality many major investment platforms have offered them for years. Another misconception is that fractional shares have different ownership rights or voting power compared to whole shares, but they provide proportional ownership just like any other share.
In Practice
If a stock is trading at 500 dollars per share and you only have 100 dollars to invest, you can purchase 0.2 fractional shares instead of being locked out entirely. A few years later when that stock rises to 1000 dollars, your 0.2 shares would be worth 200 dollars, demonstrating how fractional ownership allows your investment to grow proportionally.
Etymology
Fractional (a fraction of) + shares — buying a fraction of a full share.
Common Misspellings
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Related Terms
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See Also
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