A Guide to Purchasing Fractional Shares on Fidelity Investments

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Investing wisdom emphasizes the importance of diversifying one’s portfolio to mitigate market risks. For newcomers or those with limited capital, achieving this diversification can be challenging. However, fractional shares offered by online brokers create opportunities for investors to buy portions of expensive stocks. This article explores how fractional share investing functions at Fidelity, providing essential information to help you determine whether this investment strategy aligns with your goals.

How to Buy Fractional Shares on Fidelity

Purchasing fractional shares through Fidelity is straightforward. Investors can choose from over 7,000 U.S. stocks and ETFs, with the flexibility of multiple account types designed for fractional share trading. Fidelity’s platform makes it accessible to begin investing with minimal fees and investment requirements.

Step 1: Open a Fidelity Account

Creating an online account with Fidelity is a quick process. Users must provide essential personal details and decide on the specific type of account to establish.

Step 2: Log in to Your Fidelity Account

After setting up the account, log in and fund it to begin trading. Since fractional share transactions are conducted in real-time, it is important that the funds are readily available in your account for trading.

Step 3: Click the “Trade” Tab

On your Fidelity dashboard, the “trade” tab is located in the upper left corner. Clicking this tab will reveal a dropdown menu where you can indicate the type of trade you wish to execute.

Step 4: Change the Setting From “Shares” to “Dollars”

To initiate fractional purchases, you must switch the setting from “Shares” to “Dollars.” This will allow you to specify a dollar amount for your investment instead of a predetermined number of shares. You can enter amounts precisely, such as $50.75, which will then convert to shares rounded down accordingly.

Step 5: Submit Your Order

Orders for fractional shares can be submitted as either market or limit orders and remain valid only for the trading day. After completing the trading form, click “Preview order” to access a confirmation screen where you can make adjustments, cancel, or finalize your order. Real-time trading during market hours ensures you are aware of the share price at the moment of purchase.

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What You Need to Open a Fidelity Brokerage Account

To establish an account with Fidelity, you’ll need to submit basic personal and financial information. Depending on your investing needs, you can select from various account types eligible for fractional share purchases, including:

• Standard brokerage accounts
• Individual retirement accounts
• Youth accounts
• Health savings accounts (HSAs)
• BrokerageLink accounts (available through certain employer plans)

Personal Information

During the online account setup, you will be required to provide personal details such as:

• Full name
• Address
• Social Security number
• Date of birth
• Phone number
• Email address

Financial Information

In addition to personal information, you will disclose financial details, which aid Fidelity in ensuring you are matched with suitable investment options. This overview of your financial situation will familiarize Fidelity with your investing goals. Options to fund your account include linking a bank account or using mobile deposits, alongside traditional methods such as sending a check.

The Benefits of Trading on Fidelity

There are numerous advantages associated with opening a Fidelity brokerage account for fractional share trading:

• Access to over 7,000 U.S. stocks and ETFs for fractional trading
• Direct indexing opportunities through the Fidelity Managed FidFolios program, allowing actual stock ownership instead of ETF participation
• Commitment to reducing common account fees
• Intuitive account features and comprehensive portfolio analysis tools
• Efficient order execution
• Dynamic trading platform with Active Trader Pro
• Enhanced mobile trading experience, including an updated app dashboard

Fidelity is recognized for providing a broad spectrum of stocks and ETFs for fractional investing, surpassing the limited options that some competitors may offer.

The firm also maintains competitive, low-fee structures, continuously adapting to meet investor needs while expanding into new markets, such as cryptocurrency and digital payments. A user-friendly platform coupled with clear dashboards helps investors track their investments and financial objectives.

Factors to Consider When Investing in Fractional Shares

Selection of Available Stocks and ETFs

Fidelity’s extensive selection of stocks and ETFs for fractional investing, exceeding 7,000 options, supports diverse investment strategies like dollar-cost averaging. The unique FidFolios feature also empowers investors to create customized indexes of stocks and ETFs.

Fees and Commissions

Investing at Fidelity is made accessible with $0 commissions on online trades of U.S. stocks and ETFs, with no account fees or minimum requirements for retail accounts.

Account Minimums

Investors can begin purchasing fractional shares for as little as $1, and there are no minimum balances required for self-managed accounts. However, participating in Fidelity Managed FidFolios requires a minimum investment of $5,000.

Research Amenities

Once registered, Fidelity account holders gain access to diverse research tools directly from their account interface. The “News & Research” section provides updates on a vast array of resources, including the latest market news, alerts, and watchlists.

Educational Content

Fidelity prioritizes investor education, offering valuable resources through the “Planning & Advice” section. This feature covers topics from fundamental investing principles to detailed planning strategies. Moreover, users can easily find information regarding stocks, mutual funds, and ETFs.

Frequently Asked Questions (FAQs)

What Are Fractional Shares?

Fractional shares provide investors with an effective means to diversify their portfolios, allowing investments in companies that might otherwise seem financially out of reach. Fidelity refers to these as “Stocks by the Slice,” permitting individuals to invest based on a dollar amount rather than the stock price or share quantity. This method not only lowers entry barriers for investors but also facilitates dollar-cost averaging across various larger stocks, thereby offering smaller investors diversified access akin to that of larger investors.

What Is Fidelity?

Fidelity Investments, founded in 1943 and headquartered in Boston, stands as the largest brokerage firm in the U.S. With approximately 40 million individual investors and managing over $10 trillion in assets, Fidelity effectively utilizes its scale to offer competitive pricing and a variety of investment services. The firm remains at the forefront of the financial services industry by consistently embracing technology and innovating its offerings, including mobile investment management and engagement with digital currencies.

Do Fractional Shares Make You Money?

Like any investment, fractional shares can yield both profits and losses, contingent upon asset performance. This investment approach allows for consistent dollar-cost averaging by enabling investors to regularly acquire fractional portions of multiple stocks. This strategy not only capitalizes on market dips but also builds a diversified portfolio over time, enhancing overall investment safety throughout the accumulation period.

Can You Buy Exchange-Traded Funds (ETFs) as Fractional Shares?

Indeed, Fidelity facilitates the purchase of ETFs as fractional shares, offering a selection exceeding 7,000 different stocks and ETFs for such investments. The FidFolios program allows the crafting of personalized indexes, albeit with a minimum investment requirement of $5,000. However, starting to invest in fractional shares of individual stocks or ETFs can be accomplished for as little as $1.

Are Fractional Shares Harder to Sell?

Fidelity provides real-time trading during market hours; however, the liquidity of fractional shares for certain securities may not be guaranteed. National Financial Services may handle fractional share components differently compared to whole shares, which could potentially limit immediate market availability. While fractional shares cannot be transferred without prior sales, larger, liquid stocks generally retain comparable ease of selling as their full-share counterparts.

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