Yes, E*TRADE lets you buy fractional shares through their fractional share program

E*TRADE offers fractional shares — pieces of a single stock rather than whole shares — through a feature called E*TRADE Fractional Shares. This means you can buy $50 worth of a stock that costs $300 per share, instead of having to save up for a full share. You place the order the same way you would for whole shares, but you specify a dollar amount instead of a number of shares.

Fractional shares trade during regular market hours (9:30 a.m. to 4 p.m. Eastern Time, Monday through Friday). They settle in the same way whole shares do — typically two business days after you place the order. You own the fractional share outright; it appears in your account and you receive dividends on it, though dividends on fractional shares are also fractional.

Key Takeaways

  • E*TRADE fractional shares let you invest a specific dollar amount instead of buying whole shares, which is useful for stocks with high per-share prices.
  • You can buy fractional shares during regular market hours by entering a dollar amount rather than a share count when you place your order.
  • Fractional shares settle in two business days and you receive dividends on them, though the dividend amount is proportional to your fractional ownership.
  • There is no separate fee for buying fractional shares on E*TRADE, though the bid-ask spread (the difference between buy and sell prices) still applies.

How to place a fractional share order on E*TRADE

Log into your E*TRADE account and search for the stock you want to buy. When you reach the order screen, you will see options to enter either a number of shares or a dollar amount. Select the dollar amount option and type in the amount you want to invest — for example, $100 or $250.

Review the order details. E*TRADE will show you how many fractional shares that dollar amount will buy at the current market price. Once you confirm, the order goes to the market during regular trading hours. You do not need to do anything else; the fractional shares will settle into your account two business days later.

If you are using E*TRADE's mobile app, the process is the same. Navigate to the stock, tap to trade, and select the dollar amount option instead of the share count option.

Which stocks can you buy as fractional shares

E*TRADE allows fractional shares on most stocks listed on U.S. exchanges, including stocks in the S&P 500 and other major indices. However, not every stock is available for fractional purchase. Penny stocks (stocks trading below $5), some thinly traded stocks, and stocks in bankruptcy or delisting proceedings are typically excluded.

If you search for a stock and the fractional share option does not appear, that stock is not available for fractional purchase on E*TRADE. You can still buy whole shares of that stock if you want to own it.

Fractional shares and dividends

When a company pays a dividend, you receive a payment proportional to your fractional ownership. If you own 0.5 shares of a stock and the company pays a $2 dividend per share, you receive $1. The dividend is deposited into your account just as it would be for whole shares.

Dividend reinvestment plans (DRIPs) work with fractional shares too. If you have set up a DRIP on a stock, your dividend will automatically buy more fractional shares of that same stock at the dividend payment date.

Costs and fees for fractional shares

E*TRADE does not charge a separate commission or fee for buying fractional shares. However, you still pay the bid-ask spread — the difference between what buyers are willing to pay and what sellers are asking. This spread exists on all stock trades, whether you are buying whole or fractional shares.

The spread varies depending on the stock. Highly traded stocks like Apple or Microsoft typically have very tight spreads (a few cents), while less popular stocks may have wider spreads. When you place a fractional share order, E*TRADE shows you the estimated price before you confirm, so you can see the spread before you commit.

Selling fractional shares

You can sell fractional shares the same way you sell whole shares. Log into your account, find the stock, and enter the number of fractional shares you want to sell (or the dollar amount, depending on how E*TRADE displays the option). The order executes during market hours and settles two business days later.

When you sell, you may have a gain or a loss depending on what you paid for the fractional shares versus what they are worth when you sell. E*TRADE tracks your cost basis automatically, so you will know your gain or loss when you place the sell order.

Fractional shares and tax reporting

Fractional shares are treated the same as whole shares for tax purposes. If you sell a fractional share at a profit, you owe capital gains tax on that profit. If you sell at a loss, you can deduct the loss (subject to wash-sale rules and other limitations). E*TRADE provides tax documents at year-end that include all your fractional share transactions.

Keep records of when you bought and sold fractional shares, as well as the price you paid. This information is important for calculating your gains and losses when you file your taxes.

Frequently Asked Questions

Can I set up automatic investments in fractional shares?

E*TRADE does not offer automatic fractional share purchases through a recurring investment plan. You can set up automatic whole share purchases through their automatic investment feature, but fractional shares must be purchased manually each time you want to invest.

What happens to fractional shares if E*TRADE goes out of business?

Your fractional shares are held in your brokerage account and are protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account. This protection applies whether you own whole shares or fractional shares. Your shares are yours; they do not belong to E*TRADE.

Can I buy fractional shares of ETFs or mutual funds?

E*TRADE fractional shares are for stocks only. You cannot buy fractional shares of ETFs or mutual funds through this feature. However, many ETFs and mutual funds have low minimum purchase amounts, so you may not need fractional shares to invest in them.

Do fractional shares have voting rights?

Yes, fractional shares carry voting rights proportional to your ownership. If you own 0.5 shares, you have 0.5 votes on shareholder matters. However, in practice, most individual investors do not exercise voting rights on fractional shares.

What is the minimum dollar amount I can invest in fractional shares?

E*TRADE does not publish a stated minimum for fractional share purchases. In practice, you can invest as little as $1 on most stocks, though some very high-priced stocks may have a slightly higher practical minimum. Check the order screen for the specific stock you want to buy.