We can’t get enough fractional shares.
Investing has always been the purview of the wealthy, but with fractional shares, you can start investing in stocks for as little as [amount]. In fact, a few platforms will let you buy a stock for just $1! Now, we know what you’re thinking: “Why would I invest only $1? What’s this company talking about?” And we wouldn’t blame you if you thought that! But what we mean is that with fractional shares, you don’t have to buy one share of XYZ stock at $100 per share. Instead, you could buy $1 worth of XYZ stock at whatever price it’s currently trading at. So if XYZ stock is trading at $100 per share, your $1 will get you 1/100th (or 1%) of one share. If XYZ stock jumps to $200 per share, then your $1 investment will do the same!
But how do you actually go about buying fractional shares? We’ve got good news for you: there are a number of apps out there that specialize in fractional shares. They’ll make it easy for you to get started investing and monitor your portfolio on the go. Let’s take a
best apps for fractional shares
Interactive Brokers
Long known as a high-powered alternative for professional and active traders, Interactive Brokers also offers fractional shares, which is a boon to investors without those deep pockets. You can purchase fractional shares on the broker’s Pro platform (cost: $1 or at the broker’s tiered rate) or on its Lite platform, where trading is free. However, only stocks with average daily volume of $10 million or a market cap greater than $400 million are eligible for the program. Also eligible: ETFs as well as foreign stocks trading as American depositary receipts (ADRs).
Fractional purchases: Yes
Fractional dividend reinvestment: No
Securities in the program: Around 11,000 stocks, ETFs and ADRs
Robinhood
Robinhood has long been known for its commission-free trading (which extends to options, too) but it also allows you to buy the tiniest fraction of a share. Yes, you can buy as little as one-millionth of a share of your favorite stocks, and you can buy a huge variety of stocks as well. Stocks trading over $1 per share and with a market capitalization greater than $25 million are eligible for the program and ETFs are available for fractional shares, too. You can also reinvest dividends into fractional shares, but must enable the fractional feature first.
Fractional purchases: Yes
Fractional dividend reinvestment: Yes
Securities in the program: ETFs and stocks above the volume and size thresholds
TD Ameritrade
TD Ameritrade doesn’t offer fractional share purchases, but that won’t matter for much longer, since the broker has now been officially acquired by Charles Schwab. However, the broker will still be opening new accounts until it’s officially rolled into Schwab late next year or the year following. TD allows you to reinvest any dividends you receive into new shares of that company’s stock. So you’re still able to reinvest your whole dividend and grow your payout.
Fractional purchases: No
Fractional dividend reinvestment: Yes
Securities in the program: More than 5,000 stocks as well as ETFs and mutual funds
E-Trade
E-Trade is another broker that’s been acquired (by Morgan Stanley), but the broker figures to continue on under its own banner. The broker doesn’t offer fractional purchases of stock, but it does allow investors to reinvest their dividends into fractional shares. E-Trade will reinvest dividends only in a stock or ETF that is trading above $5 per share.
Fractional purchases: No
Fractional dividend reinvestment: Yes
Securities in the program: Thousands of stocks and ETFs
Merrill Edge
Merrill Edge is another broker that allows dividend reinvestment in fractional shares but does not allow clients to purchase fractional shares directly. Merrill lets investors reinvest dividends from stocks and ETFs as well as mutual funds. You can quickly set up whether you want each security in your portfolio to reinvest with an online selection, and if you change your mind, you can flip your choice later on just as easily.
Fractional purchases: No
Fractional dividend reinvestment: Yes
Securities in the program: Thousands of stocks, ETFs and mutual funds
Vanguard
Vanguard is well known for its mutual funds and ETFs, and while you can buy fractional shares when you’re placing an order of these types of securities, that’s the only kind of fractional purchase that you’ll be able to do. Vanguard does not offer fractional-share investing in stocks or ETFs, though the broker does allow you to reinvest dividends in stocks, ETFs and mutual funds. However, the broker will not reinvest in certain low-volume stocks, some U.S. stocks and all foreign stocks.
Fractional purchases: Only in mutual funds
Fractional dividend reinvestment: Yes
Securities in the program: Stocks, ETFs and mutual funds
best fractional shares to buy 2022
- Amazon (NASDAQ: AMZN)
The coronavirus pandemic is a horrible thing. More than 355 million people around the world have gotten sick, with more than 5.6 million people losing their lives. There’s no downplaying the seriousness of this illness.
However, even the darkest cloud has a silver lining.
Online retail companies have become prime beneficiaries of the crisis. For months, consumers were told to stay at home, only leaving the confines of their homes in search of absolute necessities.
While there were already growing numbers of consumers shopping online, travel restrictions and temporary lockdowns led to a tidal wave of consumers who shifted from brick-and-mortar shopping to shopping on the web. Naturally Amazon.com, one of the most successful e-commerce websites in the world, seemed likely to benefit greatly from this trend — and benefit it has.
Since June 2020, the company’s stock price has climbed from around $2,545 per share to nearly $2,800 per share, with its price peaking at over $3,700 per share in July of 2021. With this kind of growth, the e-commerce pioneer has not only become one of the largest companies in the world, but one of the strongest growth stocks on the market.
Since its high in July of last year, the gains have tapered off significantly, leading many to argue that a strong rebound is ahead.
As a result of the pullback, the stock’s valuation has been brought down to a relatively normal level. Amazon trades with a pretty high valuation, with a price-to-earnings (P/E) ratio of around 55. While that P/E may seem high, that’s right around average for the e-commerce industry, which is known for significant revenue growth that offsets the high prices paid for stocks in the sector.
Perhaps that’s why all 30 analysts covering the stock rate it a Buy according to TipRanks, which outlines an average price target of a whopping $4,150.83 per share.
All in all, with e-commerce dominance at a time when more and more people are shopping online, Amazon.com stock is one to watch closely.
- Alphabet Inc. (NASDAQ: GOOG | GOOGL)
While Alphabet isn’t necessarily a household name, its core product, Google, definitely is.
According to Statcounter, Alphabet’s Google controls nearly 92% of online search market share. If that’s not dominance, nothing is.
How does Google make money on searches? That’s where its other core product, online advertising, comes in. Most search results yield four or more paid ads along with organic results.
Google search isn’t the only place Alphabet makes money on ads. Through the Adwords network, the company shows ads on various websites across the Internet, paying a share of the revenue generated to the site owner and holding a large cut for its own profits.
According to Statista, Alphabet controls more than 31% of all online advertising by revenue and accounts for the largest online advertising network in the world.
There’s a reason Google changed its corporate name to Alphabet. At the end of the day, Google didn’t accurately depict everything the company had its hands in. The company’s core focus is search and advertising, but it owns 26 subsidiaries in industries ranging from health care to Internet service providers.
Analysts love the stock as well. According to TipRanks, all six analysts rating the stock rate it a Buy. Moreover, the average price target sits at $3,316 per share, suggesting the potential for a nearly 30% upside over the next year.
All told, Alphabet has had a stellar run over the past year. However, early 2022 declines have brought the stock to a more reasonable valuation, setting the stage for a strong rebound ahead and making GOOG one for the books.
- Apple (NASDAQ: AAPL)
Staying on the tech trend, Apple is next on the list. With a market cap of more than $2.6 trillion, the tech giant is one of the largest companies in the world, the largest company listed on the Dow Jones Industrial Average, and like the stocks mentioned above and the majority of those mentioned below, it has become a household name.
As you likely know, Apple is the creator of the iPhone, iPad, and Mac computers, with the iPhone representing the vast majority of the company’s revenue.
The stock had a strong finish to 2021, but gains tapered off throughout January, bringing the stock down to what many believe is a discount.
In big tech, there are few growth stories that are quite as strong as Apple’s, especially in the fiscal fourth quarter of 2021. Here are some key stats from the earnings report:
Revenue. The company generated $83.4 billion in revenue, up 29% on a year-over-year basis.
Net Income. Net income came in at $20.6 billion, up 47.5% year-over-year.
Earnings Per Share (EPS). Finally, EPS came in at $1.24, up from $0.73 per share in the same quarter one year ago.
While the numbers are impressive, the quarter proved to be a hard one for Apple. Sales missed expectations, which Apple said was the result of supply chain issues that many expect to work themselves out in the near future.
Nonetheless, the company’s revenue and earnings growth remain strong, and it’s these numbers that form the basis for the overwhelmingly positive analyst opinions on the stock. Out of 27 analysts covering AAPL stock, 22 rate it a Buy, four rate it a Hold, and one rates it a Sell, with an average price target of $181.40 per share, representing the potential for more than 12% gains, according to TipRanks.
Notwithstanding recent volatility, the stock is currently trading with a relatively high valuation when compared to the industry average. However, like other big tech names on this list, the high valuation associated with the stock is offset by the strong growth seen in revenue and earnings, which many believe will continue for the foreseeable future.
- Gevo (NASDAQ: GEVO)
Gevo isn’t necessarily the type of company you would expect to see on a list like this. The company isn’t a large cap stock and is anything but profitable, and the stock was still trading as a penny stock in late 2020. While it’s still in the small-cap stage, it’s a risky stock that many are willing to bet on.
Gevo experienced an exceptional rise in early 2021, reaching record highs in February 2021. Since then, it has given up around 70% of its value, leading many to argue that the stock is significantly undervalued and represents a buying opportunity..
Gevo is a clean energy company, but the company isn’t making solar panels, windmills, or batteries. Gevo is focused on the production of clean, renewable fuels, making it an interesting take on exposure to energy stocks.
Over the past several years, the company has perfected technology that allows it to turn renewable feedstock like waste wood and food scraps into clean, renewable fuels, including jet fuels that have been used to power commercial flights.
Recently, Gevo has been getting quite a bit of attention from proponents of clean energy and demand from airlines and fuel distributors around the world. That attention has been amplified over the past year or so as a result of a change in political tides.
With President Joe Biden in the White House and Democrats in control of Congress, many expect there to be major clean energy legislation in the near future. Companies that operate in the clean energy space are likely to benefit from the following:
Grants. Grants will likely be provided to clean energy companies like Gevo to fund research and to increase the supply of clean energy products.
Tax Cuts. The federal government is likely to further support clean energy companies through tax policies that benefit green energy producers, helping these companies to keep funds in house and offer more competitive pricing of clean energy to consumers.
Increasing Demand. Many expect tax credits to be provided to consumers who take advantage of clean energy products. Should this be the case, consumer demand for these products will likely increase — yet another plus for Gevo.
Expecting a rise in demand, Gevo is in the process of building its first Net Zero production facility, where it will be able to produce massive amounts of clean fuel with a net zero carbon footprint. The facility is expected to be completed and operational by the end of 2022. With the plans to build this and other facilities, the company is following a growth business model like that of Amazon.com, investing in infrastructure early to stay ahead of the curve later.
At the same time, Gevo has a strong balance sheet due to a capital raise in early 2021, and with the clean energy movement gaining steam, it has plenty of support from the retail investing community. This, combined with a recent dip in price that creates a compelling value opportunity, makes Gevo stock worth its position on your watchlist.
- The Walt Disney Company (NYSE: DIS)
The Walt Disney Company is yet another household name on the list. Even if you’ve never been to Disney World or DisneyLand, you likely grew up watching Mickey Mouse or another Disney character bouncing around on your television screen.
Moreover, if you’re like most millennials who’ve cut the cable cord and chosen to stream entertainment, you’ve at least heard about Disney+, if you’re not already one of its growing number of subscribers.
When it comes to investing in the company, there are two big reasons you may want to consider diving in:
COVID-19 Recovery. Disney felt quite a bit of pain as a result of COVID-19. Without consumers wanting to travel, its theme parks, hotels, and cruise lines have been struggling. The company’s theme parks and travel attractions are open. Around the world, however, consumers dream about going to Walt Disney theme parks, and considering the state of the COVID-19 crisis, demand is likely to boom ahead, leading to a significant rebound.
Streaming Entertainment. One of the major drivers in Disney’s recent stock growth has to do with its activities in the streaming entertainment space, which it has knocked out of the park. Launched in November 2019, Disney+ had more than 118 million subscribers as of November 2021, up from 86.8 million in December 2020 and 60.5 million in early August 2020.
Between a likely recovery in Disney’s travel-related business and incredible growth in the company’s streaming entertainment business, the company is firing on all cylinders.
Although it’s never a good idea to blindly follow analyst opinions, it is helpful to use their opinions as a source of validation for your own. When it comes to The Walt Disney Company, analysts seem to love the stock: 22 analysts currently cover it, with 15 rating it a Buy and seven rating it a Hold with an average price target of $195.35 per share, representing the potential for more than 40% growth over the next year.
All in all, Disney has struggled from time to time, but you can never count the stock out. The company has a history of pivoting and making changes that are best for its growth and its investors. That’s not likely to change. Now, with recent headwinds leading to declines, the Walt Disney Company has plenty of potential for dramatic growth ahead.
Conclusion
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