You don't have to be as rich as Mark Zuckerberg to invest in the stock market. Traditional brokerage accounts, however, tend to make the practice of purchasing a low number or partial shares of stock cost-prohibitive, due to relatively high trading commissions. Even with a discount brokerage, buying partial shares is an expensive proposition. There are several ways to go about purchasing fractional shares of stock in just about any company.
Open an online brokerage account that specializes in allowing customers to purchase partial shares of stock using regular automatic investments. As of November 2010, Sharebuilder is the main player in this game. You follow the same general process to open a Sharebuilder account as you do a standard brokerage account.
Set up an automatic investment plan with Sharebuilder or a similar firm. Purchase specific dollar amounts of stocks on a weekly, bi-weekly, tri-weekly, monthly basis or whenever you have enough cash in your account. For instance, you could commit to buying $50 worth of Apple stock each month, which, as of Apple's closing price of $318.62 on November 8, 2010, would net you about 0.16 shares of Apple stock.
Buy stock through a Dividend Reinvestment Plan (DRIP) or Direct Stock Plan (DSP). As the U.S. Securities and Exchange Commission explains, these options allow you to purchase small incremental amounts of a company's stock each month. With a DRIP, you'll need to own one share in a company before enrolling in its DRIP, if it offers one. There are firms that facilitate this process for you, for a fee. Some companies allow you cut out the middle man and buy stock, including the first share, directly from them (See Resources). As with Sharebuilder, you typically set up automatic periodic investments in both DRIPs and DSPs.
- Hypothetically, you could buy partial shares of stock from discount or traditional brokerages. The problem, however, is that you'll pay a commission that ranges between $5 and $100 per trade. With DRIPs, DSPs and accounts such as the one Sharebuilder offers, you pay a fraction of that charge to have an account and trade.
- How to Buy Shares of Dividend-Paying Companies Without Paying Broker Fees
- How to Buy Minimum/Small Amounts of Stock
- Advantages & Disadvantages of Stocks Directly From the Company vs. a Broker
- How to Invest in an 801(k)
- How to Buy Individual Stocks
- How to Calculate Basis for Stocks When the Stock Splits and You Only Sell Partial Shares
- The Difference Between a Stock & a Mutual Fund
- How to Calculate Diluted Shares from Options