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Are Fractional Shares Worth Buying?

Fractional shares are a useful way to allow new investors to get their feet wet by investing small amounts of money into parts of a share of stock. For some investors, fractional shares are worth it because it means they can own a part of a stock from a company they are interested in, without committing to buying a whole share.

While fractional shares have much in common with whole shares, they don’t trade on the open market as a standalone product. Because of that, fractional shares must be sold through a major brokerage.

Recommended: How to Open a Brokerage Account

What Does It Mean to Buy Fractional Shares?

A fractional share is less than one whole equity share (e.g. 0.34 shares). Fractional shares appreciate or depreciate at the same rate as whole shares, and distribute dividends at the same yield proportionate to the fractional amount.

Fractional shares were previously only available to institutional investors at one-sixteenth intervals, but have recently become widely available to retail investors at exact decimals (in order to increase market pricing precision and lower trading costs).

This new capability offers another layer of financial inclusion to casual investors by lowering minimum investing requirements to thousands of stocks and assets and making them available in smaller quantities. According to Gallup, 45% of all Americans have no stock investments—but fractional shares provide an increasingly lower barrier to investing than in previous generations.

Why Fractional Shares Are Worth Buying

For some investors, these positives make buying fractional shares worth it.

Access to Unaffordable Stocks

Fractional shares can help build a portfolio made of select stocks, some of which may be too expensive for some investors to afford one whole share. With fractional shares, an investor can choose stocks based on more than just price per share.

Previously, new investors would face price discrimination for not having enough funds to buy one whole share. But with fractional shares, an investor with $1,000 to spend who wants to buy a stock that costs $2,000 per share, can buy 0.5 shares of that stock.

Fractional shares make it easier to spread a modest investment amount across a variety of stocks. Over time, it may be possible to buy more of each stock to total one or more whole shares. In the meantime, buying a fractional share allows an investor to immediately benefit from a stock’s gain, begin the countdown to qualify for long-term capital gains (if applicable), and receive dividends.

A Doorway to Investing

History has shown that the stock market typically outperforms fixed-income assets and interest-bearing savings accounts by a wide margin. If equities continue to provide returns comparable to the long-term average of 7%, even a small investment can outperform money market savings accounts, which typically yield 1-2%. (Though as always, it’s important to remember that past performance does not guarantee future success.)

By utilizing fractional shares, beginners can make small investments in the stock market with significantly more growth potential even with average market returns versus savings accounts that typically don’t even match inflation.

Maximized Dollar-Cost Averaging

Fractional shares help maximize dollar-cost averaging, in which investors invest a fixed amount of money at regular intervals.

Because stock shares trade at precise amounts down to the second decimal, it’s rare for flat investment amounts to buy perfectly-even amounts of shares. With fractional shares, the full investment amount can be invested down to the last cent.

For example, if an investor contributes $500 monthly to a mutual fund with shares each worth $30, they would receive 16.66 shares. This process then repeats next month and the same investment amount is used to purchase the maximum number of shares, with both new and old fractional shares pooled together to form a whole share whenever possible.

Maximized Dividend Reinvestment Plans

This same scenario applies to dividend reinvestment plans (also known as DRIP investing). In smaller dividend investment accounts, initial dividends received may be too small to afford one whole share. With fractional shares, the marginal dividend amount can be reinvested no matter how small the amount.

Fractional shares can be an important component in a dividend reinvestment strategy because of the power of compounding interest. If an investor automatically invests $500 per month at $30 per share but can’t buy fractional shares, only $480 of $500 can be invested that month, forfeiting the opportunity to buy 0.66 shares. While this doesn’t seem like much, not investing that extra $20 every month can diminish both investment gains and dividends over time.

Stock Splits

Stock splits occur when a company reduces its stock price by proportionately issuing more shares to shareholders at a reduced price. This process doesn’t affect the total value of an investment in the stock, but rather how the value is calculated.

For some investors, a stock split may cause a split of existing shares resulting in fractional shares. For example, if an investor owns 11 shares of a company stock worth $30 and that company undergoes a two-for-three stock split, the 15 shares would increase to 22.5 but each share’s price would decrease from $30 to $20. In this scenario, the stock split results in the same total of $450 but generated a fractional share.

Mergers or Acquisitions

If two (or more) companies merge, they often combine stocks using a predetermined ratio that may produce fractional shares. This ratio can be imprecise and generate fractional shares depending on how many shares a shareholder owns. Alternatively, shareholders are sometimes given the option of receiving cash in lieu of fractional shares following an impending stock split, merger, or acquisition.

Too expensive? Not your favorite stocks.

Own part of a stock with fractional share investing.

Invest with as little as $5.

Disadvantages of Buying Fractional Shares

Fractional shares can be a useful asset if permitted, but depending on where you buy them could have major implications on their value.

Order Type Limitations

Full stock shares are typically enabled for a variety of order types to accommodate different types of trading requests. However, depending on the brokerage, fractional shares can be limited to basic order types such as market buys and sells. This prevents an investor from setting limit orders to trigger at certain price conditions and from executing trades outside of regular market hours.


Not all brokerages allow fractional shares to be transferred in or out, making it difficult to consolidate investment accounts without losing the principal investment or market gains from fractional shares. This can also force an investor to hold a position they no longer desire, or sell at an undesirable price to consolidate funds.


If the selling stock doesn’t have much demand in the market, selling fractional shares might take longer than hoped or come at a less advantageous price due to a wider spread. It may also be possible to come across a stock with full shares that are liquid but fractional shares that are not, providing difficulty in executing trades let alone at close to market price.


Brokerages that charge trading commissions may charge a flat fee per trade, regardless of share price or quantity of shares traded. This can be disadvantageous for someone who can only afford to buy fractional shares, as they’re being charged the same fee as someone who can buy whole or even multiple shares. Over time, these trading fees can add up and siphon limited capital that could otherwise be used to buy additional fractional shares.

Higher transaction fees

Worse yet, some brokerages may even charge higher transaction fees for processing fractional shares, further increasing investor overhead despite investing smaller amounts.

What Happens to Fractional Shares When You Sell?

As with most brokerages that allow fractional shares, fractional shares can either be sold individually or with other shares of the same asset. Capital gains or losses are then calculated based on the buy and sell prices proportionate to the fractional share.

The Takeaway

Fractional shares are an innovative market concept recently made available to investors. They allow investors of all experience and income levels access to the broader stock market—making it worth buying fractional shares for many investors.

Fractional shares have many other benefits as well—including the potential to maximize both DRIP and dollar-cost averaging. Still, as always, it makes sense to pay attention to downsides as well, such as fees disproportionate to the investment, and order limitations.

For investors who are curious about fractional shares, SoFi Invest® online brokerage makes it easy to start investing in partial stocks with as little as $5.

Find out how to invest in fractional shares with SoFi Invest.

SoFi Invest®


SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA ( Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Stock Bits
Stock Bits is a brand name of the fractional trading program offered by SoFi Securities LLC. When making a fractional trade, you are granting SoFi Securities discretion to determine the time and price of the trade. Fractional trades will be executed in our next trading window, which may be several hours or days after placing an order. The execution price may be higher or lower than it was at the time the order was placed.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


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Guide to Building an Investment Portfolio for Beginners

Investing can seem intimidating, especially for beginners who are just starting out. But building an investment portfolio is one of the best ways to grow your wealth over time.

Before you start pondering what you want to invest in and build an investment portfolio, think this through: Why am I investing? In the end, most of what matters is achieving your financial goals. And what are you saving for? By answering these questions, you can match your goals with your investment strategy — which is important if you want to give yourself a shot at your desired financial outcome.

The Basics: What Is an Investment Portfolio?

An investment portfolio is a collection of investments, such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, and other assets. An investment portfolio aims to achieve specific investment goals, such as generating income, building wealth, or preserving capital, while managing market risk and volatility.

A well-diversified investment portfolio can help investors achieve their financial objectives over the long term.

Recommended: Investing for Beginners: Considerations and Ways to Get Started

Why Building a Balanced Portfolio Matters

Building a balanced investment portfolio matters for several reasons. As noted above, a balanced, diversified portfolio can help manage the risk and volatility of the financial markets. Many people avoid building an investment portfolio because they fear the swings of the market and the potential to lose money. But by diversifying investments across different asset classes and sectors, the impact of any one investment on the overall portfolio is reduced. This beginner investment strategy can help protect the portfolio from significant losses due to the poor performance of any one investment.

Additionally, a balanced portfolio can help investors achieve their long-term investment objectives. By including a mix of different types of investments, investors can benefit from the potential returns of different asset classes while minimizing risk. For example, building a portfolio made up of relatively risky, high-growth stocks and stable government bonds may allow you to benefit from long-term price growth from the stocks while also generating stable returns from the bonds.

What Is Your Risk Tolerance?

When it comes to braving risk, everyone is different. And in life, there are no guarantees. So where does that leave you? Take your risk temperature and see which type of investing you can live (and grow) with. Below are two general strategies many investors follow depending on their risk tolerance.

Aggressive Investing

An aggressive investment strategy is for investors who want to take risks to grow their money as much as possible. High risk sometimes means big losses (but not always). The idea here is to “go for it.” Find investments that feel like they have a lot of potential to generate significant gains.

Your stock picks can ride the rollercoaster, and if you opt for an aggressive investing strategy when you’re young and just starting out, you can watch them take the ride without you doing much hand-wringing.

If it doesn’t work out, you can own the loss and move on. Downturns happen. So do bull markets. And when you’re young, you can likely afford to take risks.

Conservative Investing

Conservative investing is for investors who are leery of losing a lot of their money. It may be better suited for older investors because the closer you get to your ultimate goal, the less room you will have for big drawdowns in your portfolio should the market sell off.

You can prioritize lower-risk investments as you inch closer to retirement. Research investments with more stable and conservative returns. Lower-risk investments can include fixed-income (bonds) and money-market accounts.

These investments may not have the same return-generating potential as high-risk stocks, but often the most important goal is to not lose money.

Choosing a Goal for Your Portfolio

Long- and short-term goals depend on where you are in life. Your relationship with money and investing may change as you get older and your circumstances evolve. As this happens, it’s best to understand your goals and figure out how to meet them ahead of time.

If you’re still a beginner investing in your 20s, you’re in luck. Time is on your side, and when building an investment portfolio, you have that time to make mistakes (and correct them).

You can also potentially afford to take more risks because you’ll have more time to work on reversing losses or at least shrugging them off and moving on.

If you’re older and closer to retirement age, you can reconfigure your investments so that your risks are lower and your investments become more conservative, predictable, and less prone to significant drops in value.

As you go through life, consider creating short and long-term goal timelines. If you keep them flexible, you can always change them as needed. But of course, you’d want to check on them regularly and the big financial picture they’re helping you create.

Short Term: Starting an Emergency Fund

Before you do any serious investing, making sure you have enough money stashed away for emergencies is a good idea. Loss of income, unplanned moves, health situations, auto repairs, and all of those other surprises can tap you on the shoulder at the worst possible time — and that’s when your emergency fund comes in.

It may make sense to keep your emergency money in liquid assets for short-term expenses. Liquidity helps ensure you can get your money if and when you need it. Try to take only a few risks with emergency money because you may not have time to recover if the market experiences a severe downturn.

Long Term: Starting a Retirement Fund

Think about what age you would want to retire and how much money you would need to live on yearly. You can use a retirement calculator to get a better idea.

One of the most frequently recommended strategies for long-term retirement savings is opening a 401(k), an IRA, or both. The benefit of this type of investment account is that they have tax advantages.

Another benefit of 401(k)s and IRAs is that they help you build an investment portfolio over decades: the long term.

Prioritizing Diversification

As mentioned above, portfolio diversification means keeping your money in more than one place: think stocks, bonds, and real estate. And once you diversify into those asset classes, you’ll need to drill down and diversify again within each sector.

Understanding Systematic Risk

Big things happen, like economic uncertainty, geopolitical conflicts, and pandemics. These incidents will affect almost all businesses, industries, and economies. There are not many places to hide during these events, so they’ll likely affect your investments too.

One smart way to fight this: diversify. Spread out. High-quality bonds, like U.S. Treasuries, tend to do well in these environments and have offset some of the negative performances that stocks usually suffer during these times.

It might also be helpful to calculate your portfolio’s beta, the systemic risk that can’t be diversified away. This can be done by measuring your portfolio’s sensitivity to broader market swings.

Understanding Idiosyncratic Risk

Smaller things happen. For instance, a scandal could rock a business, or a tech disruption could make a particular business suddenly obsolete. This risk is more micro than macro; it may occur in a specific company or industry.

As a result, a stock’s value could fall, along with the strength of your investment portfolio. The best way to fight this: diversify. Spread out. If you only invest in three companies and one goes under, that’s a big risk. If you invest in 20 companies and one goes under, not so much.

Owning many different assets that act differently in various environments can help smooth your investment journey, reduce your risk, and hopefully allow you to stick with your strategy and reach your goals.

4 Steps Towards Building an Investment Portfolio

Here are four steps toward building an investment portfolio:

1. Set Your Goals

The first step to building an investment portfolio is determining your investment goals. Are you investing to build wealth for retirement, to save for a down payment on a home, or another reason? Your investment goals will determine your investment strategy.

2. What Sort of Account Do You Want?

Investors can choose several kinds of investment accounts to build wealth. The type of investment accounts that investors should open depends on their investment goals and the investments they plan to make. Here are some common investment accounts that investors may consider:

•   Individual brokerage account: This is a standard brokerage account that allows investors to buy and sell stocks, bonds, mutual funds, ETFs, and other securities. This account is ideal for investors who want to manage their own investments and have the flexibility to buy and sell securities as they wish.

•   Retirement accounts: These different retirement plans, such as 401(k)s, IRAs, and Roth IRAs, offer tax advantages and are specifically designed for retirement savings. They have contribution limits and may restrict when and how withdrawals can be made.

•   Automated investing accounts: These accounts, also known as robo advisors, use algorithms to manage investments based on an investor’s goals and risk tolerance.

Recommended: What Is Automated Investing?

3. Choosing Investments Based on Risk Tolerance

Once you have set your investment goals, the next step is to determine your investments based on your risk tolerance. As discussed above, risk tolerance refers to the amount of risk you are willing to take with your investments. If you are comfortable with higher levels of risk, you may be able to invest in more aggressive assets, such as stocks or commodities. If you are risk-averse, you may prefer more conservative investments, such as bonds or certificates of deposit (CDs).

Recommended: How to Invest in Stocks: A Beginner’s Guide

4. Allocating Your Assets

The next step in building an investment portfolio is to choose your asset allocation. This involves deciding what percentage of your portfolio you want to allocate to different investments, such as stocks, bonds, and real estate.

Once you have built your investment portfolio, it is important to monitor it regularly and make necessary adjustments. This may include rebalancing your portfolio to ensure it remains diversified and aligned with your investment goals and risk tolerance.

Paying Off Debt First

Student loans and credit card debt may stand in the way of pumping money into your investment portfolio. Do what you can to pay off most or all of your debt, especially high-interest debt.

Get an aggressive repayment plan going. Also, remember it can be wise to pay yourself first (by that, we mean to keep a steady flow of cash flowing into your short and long-term investments before you pay anything else).

Investing in the Stock Market

Building an investment portfolio is a process that depends on where a person is in their life as well as their financial goals. Every individual should consider long-term and short-term investments and the importance of portfolio diversification when building an investment portfolio and investing in the stock market.

These are big decisions to make. And sometimes you may need help. That’s where SoFi comes in. With a SoFi Invest® online brokerage account, you can trade stocks, ETFs, fractional shares, and more with no commissions for as little as $5. And you can get access to educational resources to help learn more about the investing process.

Take a step toward reaching your financial goals with SoFi Invest.


How much money do you need to start building an investment portfolio?

The amount of money needed to start building an investment portfolio can vary depending on the type of investments chosen, but it is possible to start with a small amount, such as a few hundred or thousand dollars. Some online brokers and investment platforms have no minimum requirement, making it possible for investors to start with very little money.

Can beginners create their own stock portfolios?

Beginners can create their own stock portfolios. Access to online brokers and trading platforms makes it easier for beginners to buy and sell stocks and build their own portfolios.

What should be included in investment portfolios?

Experts recommended that investment portfolios should be diversified with a mix of different types of investments, such as stocks, bonds, mutual funds, ETFs, and cash, depending on the investor’s goals, risk tolerance, and time horizon. Regular monitoring and rebalancing are important to keep the portfolio aligned with the investor’s objectives.

SoFi Invest®


SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA ( Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.


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