One of the basic tenets of investing is to diversify your portfolio in order to hedge against market risk. This can be hard to do if you are just starting out or have a limited amount of money to invest. However, investing in fractional shares through online brokers opens up opportunities to purchase portions of higher priced stocks with the money you have on hand. We’ll take a deep dive into how investing in fractional shares works at Fidelity and answer the basic questions needed to help you decide if this approach is right for you.
How to Buy Fractional Shares on Fidelity
Buying fractional shares at Fidelity is quite simple. Investors have access to more than 7,000 U.S. stocks and ETFs for fractional share trading. Fidelity offers several types of accounts which investors can use to buy fractional shares and makes it easy to start investing with low fees and low minimum investment requirements.
Step 1: Open a Fidelity Account
Opening an online account at Fidelity is quick and easy. You will need to provide your basic personal information and select the type of account that you want to open.
Step 2: Log in to Your Fidelity Account
Once you have opened an account with Fidelity, you will need to log in and fund your account. Remember, fractional share trading takes place in real time, so the funds will need to be settled and available in your account in order to place a trade.
Step 3: Click the “Trade” Tab
The “trade” tab is at the top left of your Fidelity dashboard. Once you click on “trade,” a dropdown menu will open with a form to fill out regarding what type of trade you’d like to make.
Step 4: Change the Setting From “Shares” to “Dollars”
By selecting the “Dollars” setting, you will be able to buy fractional shares. This will base your order on a specific dollar amount, instead of buying a specific number of shares. Dollar amounts can be entered out to two decimal places, for example, $50.75. The order is then converted into shares out to three decimal places and rounded down to the nearest decimal.
Step 5: Submit Your Order
Fractional share orders are entered as market orders or limit orders, and are only good for the day. At the bottom of the trading form, you will then click “Preview order.” This will lead to a confirmation screen where you can edit, cancel, or place the order. Fractional share trading is done in real time, during market hours, so you will know your share price.
Compare Some Top Online Brokers
Broker | Minimum Deposit | Stock Trades | Per Contract Options | Fractional Share Trading |
---|---|---|---|---|
Fidelity | $0.00 | $0.00 | $0.65 | Yes |
Interactive Brokers | $0.00 | $0.00 | $0.65 | Yes |
tastytrade | $0.00 | $0.00 | $1.00/Open Only | No |
What You Need to Open a Fidelity Brokerage Account
To open your new account at Fidelity, you will need to provide your basic personal and financial information. You can also choose the type of account that you’d like to open, depending on your financial investing needs and goals. The following Fidelity retail accounts are approved for buying fractional shares:
- Standard brokerage accounts
- Individual retirement accounts
- Youth account
- Health savings accounts (HSAs)
- BrokerageLink accounts (offered through some employer plans)
Personal Information
When opening your account online, you will be asked to provide personal and contact information:
- Full name
- Address
- Social Security number
- Date of birth
- Phone number
- Email address
Financial Information
Besides providing your personal information, you will be asked to provide your financial information. This will include particulars regarding your current financial situation, as well as your investing goals. These are the “know your client” questions that Fidelity must ask to ensure you’re being matched to investments that are appropriate for your financial situation and risk tolerance. As part of this process, you may even choose to link your current bank account or use mobile deposit in order to fund your Fidelity account more quickly. That said, sending a check in the mail is also an option.
The Benefits of Trading on Fidelity
There are several benefits of opening an account and trading fractional shares at Fidelity:
- Offers over 7000 U.S. stocks and ETFs for fractional shares trading
- Direct indexing, via Fidelity Managed FidFolios, uses fractional shares with ownership of the actual stock rather than an ETF
- Committed to eliminating common account fees
- User-friendly account features and strong portfolio analysis
- Excellent order execution
- Dynamic Active Trader Pro platform
- Upgraded mobile experience
- Redesigned app dashboard
One of the key benefits to investing with Fidelity is that it offers over 7,000 U.S. stocks and ETFs for fractional share trading. Some brokers only offer a handful of stocks to choose from for this type of investing, so Fidelity gives you a larger chunk of the market to work with.
Fidelity has long been recognized as a leader in the industry for its low cost fees and delivering value to customers. Fidelity has continued to improve and offers new products to investors as markets have developed. Fidelity has introduced exposure to crypto and digital payments, in addition to stocks, bonds, ETFs, and fractional share trading. Fidelity does all this through a user-friendly desktop platform and mobile experience for investors, and effectively uses dashboards to make it easier for investors to keep up-to-date on their account and their progress towards financial goals.
Factors to Consider When Investing in Fractional Shares
Selection of Available Stocks and ETFs
Fidelity has a wide selection of stock and ETF offerings for fractional share investing, making over 7,000 shares available for dollar cost averaging via fractional shares. One unique product that Fidelity offers is FidFolios, which enables investors to construct their own customized index of stocks and ETFs.
Fees and Commissions
Getting started at Fidelity is made simple with $0 commissions for online US stock and ETF trades. There are also no account fees or minimums to open a retail brokerage account.
Account Minimums
Investors at Fidelity can buy fractional shares for as low as $1 and there is no minimum to open a self-managed investment account. Investing in Fidelity Managed FidFolios does require a $5,000 minimum, though.
Research Amenities
Once you open an account with Fidelity, you will have access to research amenities right from your account dashboard. Investors can access a plethora of research and news from the “News & Research” tab at the top of the dashboard, with a dropdown menu offering information on the latest news, watch lists, quotes, alerts, and much more.
Educational Content
Knowing how to invest, what to invest in, and how to reach your financial goals are important, and the educational content provided by Fidelity can help you do just that. Investors can utilize the “Planning & Advice” tab on their dashboard to become a more informed investor. Investors can find articles and information for topics ranging from investing basics to long term care planning. Account users will also find it easy to access information regarding stocks, mutual funds, or ETFs in which they would like to invest, as well as other investment vehicles.
Frequently Asked Questions (FAQs)
What Is Fidelity?
Fidelity is the largest U.S. brokerage, was founded in 1943, and is headquartered in Boston. Currently, the company has $15 trillion in assets under administration and $5.8 trillion in discretionary assets. Fidelity has been able to use its economies of scale to continue to offer competitive products and services while maintaining a low-fee structure for clients.
Although it is undoubtedly a large, traditional brokerage, Fidelity has been able to remain at the forefront of the industry by embracing technology and launching new products and services including digital investment management, crypto and digital payments, Active Trader Pro, and the Fidelity Metaverse.