Breaking Down Fractional Shares: Fidelity Investments Simplified

Investment has evolved, making it easier to let those with even the most varied financial backgrounds participate in the stock market. What would one do if the price of a share in a high-performing company seems too expensive, though? Step forward fractional shares- a concept that lets you own a piece of stock without buying a whole share. It's owning a slice of pizza instead of the whole pie. Fidelity Investments, one of the most reputable brokerage firms, offers a straightforward way to engage in fractional investing. This guide simplifies how to buy fractional shares on Fidelity Investments, whether you’re starting small or adding diversification to your portfolio.

What are Fractional Shares, and Why Do They Matter?

Fractional shares are just what the word says: fractions of one share. No longer must one purchase a full stock; rather, they can buy only what they are able to based on the amount of money available for investment. For example, for people who wish to own a small piece of a giant company like Tesla, Amazon, or Apple, it no longer takes thousands of dollars upfront to do so. Fidelity Investments supports fractional investing through its innovative service called Stocks by the Slice. This option makes investing affordable while diversifying the portfolio across multiple industries or companies without overextending your budget.

How to Set Up a Fidelity Account for Fractional Investing?

Before you can start buying fractional shares, you need an account with Fidelity. Here’s a step-by-step guide:

First, go to Fidelity's website or download their app. Choose the type of account that suits your needs, such as an individual brokerage account. After creating your account, verify your identity and set up funding sources like linking your bank account, and you're ready to go.

Once your account is active, familiarize yourself with the Stocks by the Slice feature. This feature allows you to invest in increments as low as $1, giving you incredible flexibility. It can be accessed through Fidelity's mobile app and desktop platform.

A Step-by-Step Guide to Buying Fractional Shares on Fidelity

Log Into Your Fidelity Account: Open the app or website and log in. From the dashboard, navigate to the “Trade” section.

Search for the Stock You Want to Buy: Use the search bar to find the company you’re interested in. Fidelity makes this easy with clear stock pages displaying relevant details like performance and price.

Select the ‘Dollar-Based’ Investment Option: Instead of buying by the number of shares, opt to invest a specific dollar amount. This is key to purchasing fractional shares.

Input Your Desired Investment Amount: Whether it’s $5, $20, or $500, Fidelity allows you to decide how much you want to allocate.

Confirm Your Purchase: Review the transaction details, including fees (if any), then confirm the trade. Congratulations! You’ve just purchased your first fractional share.

The best part? Fidelity tracks fractional shares like full shares, so you’ll still receive dividends if the company pays them proportional to the fraction you own.

The Benefits and Risks of Buying Fractional Shares on Fidelity Investments

Benefits:

Fractional shares offer a revolutionary way to make investing more accessible, especially for those who might be hesitant to enter the stock market due to high share prices. Affordability is one of the standout advantages. With Fidelity’s Stocks by the Slice feature, you can invest as little as $1 in expensive stocks, making it possible for individuals with smaller budgets to participate in the growth of high-value companies.

Another key benefit is diversification. Instead of concentrating your investment on a single stock, fractional shares allow you to spread your funds across multiple companies and industries, reducing overall risk. This flexibility ensures that your portfolio is better positioned to withstand market volatility. Fidelity's intuitive platform enhances this experience by offering tools to manage and adjust your investments easily, even in small increments.

Moreover, fractional investing provides access to big-name companies that would otherwise require significant capital to own. Now, you can start building a portfolio that includes leading players like Apple or Tesla without saving for months to buy a full share. This opens doors for individuals to align their investments with personal values or interests, whether in renewable energy, tech innovation, or consumer goods.

Risks:

While the benefits of fractional investing are compelling, it’s essential to understand the risks. Like all stock market investments, the value of fractional shares can fluctuate, meaning your portfolio is subject to market volatility. Although fractional shares let you start with smaller amounts, building substantial wealth with them may take longer compared to owning full shares.

Another potential drawback is liquidity. Fractional shares are unique to the brokerage offering them, so transferring them to another platform could be restricted. This means you might face challenges if you decide to switch brokers. However, Fidelity’s reputation for reliability and customer service helps alleviate concerns about these limitations.

Investors can make informed decisions about fractional investing by weighing the advantages of affordability, diversification, and accessibility against the inherent risks of market volatility and liquidity. With Fidelity's robust platform, you have the tools to balance these factors and create a portfolio that aligns with your goals.

Conclusion: Start Small, Dream Big

Fractional shares have made investing more accessible than ever, allowing people from all financial backgrounds to participate in the stock market. Fidelity Investments simplifies the process through its Stocks by the Slice feature, making it easy to own portions of your favorite companies. Whether you’re a beginner testing the waters or an experienced investor seeking more diversification, fractional investing is a game-changer. The journey to financial growth doesn’t require huge sums of money upfront. With Fidelity’s tools, you can start small, dream big, and watch your investments grow one slice at a time.