DIKSIA.COM - Investing in the stock market can be a rewarding way to grow your wealth and achieve your financial goals. However, many people think that they need a lot of money to start investing, or that they have to buy whole shares of expensive stocks like Amazon or Tesla. This is not true. Thanks to a feature called fractional shares, you can invest in stocks and ETFs with as little as $25 and no commissions.
In this article, we will explain what fractional shares are, how they work, and why you might want to use them. We will also compare etrade fractional shares with other brokers that offer this feature, and highlight some of the pros and cons of investing with fractional shares.
What are fractional shares?
Fractional shares are pieces of a whole share of a stock or an ETF. For example, if a stock costs $100 per share, you can buy a fraction of it, such as 0.1 share for $10, or 0.5 share for $50. This way, you can invest in any stock or ETF that you want, regardless of the price per share. You can also diversify your portfolio by buying fractions of multiple stocks or ETFs with a small amount of money.
Fractional shares are not a new concept. They have been around for a long time as part of dividend reinvestment plans (DRIPs), which allow investors to automatically reinvest their dividends to buy more shares of the same stock, including fractional shares. However, in recent years, some online brokers have started to offer fractional shares as a standalone feature, allowing investors to buy and sell fractions of any stock or ETF that they offer.
How do etrade fractional shares work?
Etrade is one of the online brokers that offer fractional shares, but only within their DRIP. This means that you can only buy fractional shares of the stocks or ETFs that pay dividends, and only when you reinvest your dividends. You cannot buy or sell fractional shares of any other stock or ETF, or with any other source of funds.
To use etrade fractional shares, you need to enroll in their DRIP, which is free and easy to do. You can enroll in the DRIP for individual stocks or ETFs, or for your entire portfolio. Once you are enrolled, you will receive your dividends in cash, and then etrade will use that cash to buy more shares of the same stock or ETF, including fractional shares. You will see the fractional shares in your account, and you will receive dividends on them as well.