Investing Simple Logo
Menu
Get 1 Free Stock Worth Up To $200 From Robinhood!
Sign up with Robinhood, deposit any amount and get 1 Free Stock. It takes less than 3 minutes to sign up and claim your Free Stock Bonus.
Earn 5.00% APY with M1 High-Yield Savings Account
M1 Plus members can earn 5.00% APY on their deposits with no minimum balance required.
Webull free stock promotion
Get Up To 5 Free Stocks From Webull
Open a new Webull brokerage account today and deposit any amount of money to receive 5 free stocks. Webull offers commission free stock, ETF, option and crypto trading.
Written by Logan Robison on May 4, 2023
Category: 
FTC Disclosure: Some of the links on this site are affiliate links. Read our full disclaimer here.

Here's How Fractional Shares Work On Robinhood

"Fractional share" is not just a fancy term that indicates something misleading. It is in fact, very straightforward. A fractional share is indeed a partial share of a company. This is great because when the company does well, that fractional share will experience the same growth as a full share. However, it will also experience the downside of every drop in stock price.

Purchasing fractional shares through a brokerage account such as Robinhood is not the only way to obtain fractional shares. When a company has a reverse split of its stock, its investors often receive only fractional shares depending on their ownership. However, if this is the case while investing in Robinhood, you'll receive the cash equivalent of any fractional (non-whole) share amounts resulting from the split in lieu of shares.

Fractional shares are also granted when investors are involved in a DRIP (Dividend Reinvestment Plan). In this situation, if you have opted to reinvest a dividend received, that dividend will be used to purchase a share in proportion to the dollar amount received and the current stock price.

One of the big draws to Robinhood is that you can buy fractional shares with zero commissions. In this article, we will review how fractional shares work on Robinhood.

Don't forget to grab your free stock worth up to $200 from Robinhood today!

Best Free Stock Promotions

BrokeragePromotionLink
Robinhood LogoGet 1 Free Fractional Share Worth $5 To $200Download
Webull LogoGet Up To 12 Free Fractional SharesDownload
Moomoo LogoGet 5 Free Stocks When You Deposit $100+Download
Acorns LogoGet A $20 Bonus When You Invest $5+Download

Robinhood Fractional Shares

With Robinhood, you can buy fractions of whole shares. The amount of ownership you have of one stock will be in proportion to the amount of money you paid for the stock. For instance, if you paid 10% of the selling price, then you will own 10% of 1 share.

Because fractional shares are quite a popular feature, Robinhood has enacted some restrictions that investors should be aware of before jumping in.

Restrictions

Investors should know that with Robinhood they can purchase a fractional share as small as 1/1,000,000th of a share. That makes Berkshire Hathaway Class A shares worth a cool $492,000 accessible for as little as $1.

Robinhood has a minimum transaction of $1.

Fractional shares with Robinhood are also only available as good-for-day (GFD) market orders. This means that if the market is closed, the transaction will not be completed.

Not all stocks are available for fractional shares. In fact, Robinhood requires that the company have a market cap of at least $25M. This won’t be hard to do especially if the stocks you are wanting to split are expensive.

No need to do your research beforehand on this point. The app will tell you that the fractional share purchase is not possible before the purchase order is submitted.

Robinhood Free Training Shortcode (#8) (#9)

Robinhood Free Training

We put together a free 30 minute video training that walks you through the entire process, step by step. This training will help you get up and running in no time at all.

GET THE GUIDE

Dividends/Voting Rights

You might be curious about your rights as a holder of fractional shares. In terms of votes and dividends, you will still be eligible to participate, but of course, the percentages hold true. You will receive a fraction of the dividends as you only own a fraction of the stock. The same holds for voting rights.

Dividend Reinvestment

Robinhood has a feature that allows investors to automatically reinvest their earned dividends. In many instance, the dividend will not be enough to purchase a whole share. With fractional share, dividend reinvestment is possible, which allows you to maximize compound interest.

To turn on dividend reinvestment or DRIP, you will tap on the person icon in the bottom navigation menu. Then you will tap on the 3 bar icon and then select "Investing." From there, you can scroll down to "Dividend Reinvestment" to turn on the feature. You can turn off the feature with the same steps.

Transferring Fractional Shares

Transfers are trickier with fractional shares. Robinhood explicitly states that they will not transfer fractional shares. If you initiate a transfer out of Robinhood, your assets will be sold, and you will receive the resulting cash.

This only applies to a full transfer. If you only are intending to transfer a portion of your portfolio is Robinhood, then your fractional shares will remain in the same state.

Conclusion: Robinhood Fractional Share Investing

In summary, fractional shares are an amazing tool that Robinhood (and many others) offer to the investor community. When it makes sense with your goals and portfolio, you should absolutely use them to your advantage.

There are several brokerage firms that offer fractional shares so be sure to do your research before picking a platform. Just because one account offers fractional shares does not necessarily mean that is the correct platform for you.

All things considered, Robinhood is a great platform for these reasons listed above and many more. If you are interested in learning more about what else Robinhood has to offer check out our full Robinhood review here.

Article written by Logan Robison
Logan graduated with a degree in finance from Brigham Young University and currently works in merchandising for a large retailer. In his free time he loves to hike and camp with his wife and son. Logan is also heavily involved in real estate investing and owns properties in Utah and Arkansas.

Read more

Power Your Investing

Choosing the right product and service is essential for your investing. Here are some of the tools and services to help your portfolio grow.
Robinhood
Robinhood provides an easy-to-use free trading platform for beginner investors. Robinhood has $0 account minimums. Get a free stock when you open an account below.
Try Robinhood
M1 Finance
M1 Finance offers a free investing platform where users can build portfolios of stocks and ETFs. Users can also choose from a variety of pre-built portfolios offered for free.
Try M1 Finance
Fundrise
Passively invest in private real estate deals with as little as $10. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee.
Try Fundrise
Copyright © 2018 – 2023 Investing Simple LLC. All Rights Reserved.
Investing Simple is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. Investing Simple has advertising relationships with some of the offers listed on this website. The information on Investing Simple could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.
Website managed by Stallion Cognitive™
magnifiermenuchevron-downcross-circlechevron-down-circle

Get 1 Free Stock Worth Up To $200 From Robinhood!

Don't Miss This Opportunity!

Investing Simple readers can claim a free stock from Robinhood worth up to $200 when they open a brokerage account and deposit any amount.

For US Residents only. Investing Simple is affiliated with Robinhood, and we may earn a commission when you sign up for Robinhood.

18749
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram