Yes, Fidelity lets you buy fractional shares through most of its investment accounts

Fidelity allows you to purchase fractional shares — pieces of a single stock — through its brokerage accounts, mutual funds, and certain automated investing services. This means you can invest a specific dollar amount rather than having to buy whole shares at their full price. For example, if a stock costs $500 per share and you have $100 to invest, you can buy 0.2 shares instead of waiting to save $500.

Fractional shares are available on most stocks and exchange-traded funds (ETFs) that trade on U.S. exchanges. However, the way you access them depends on which Fidelity service you use and what you're buying.

Key Takeaways

  • Fidelity offers fractional shares through individual brokerage accounts, allowing you to invest any dollar amount rather than buying whole shares only.
  • Fractional shares work through Fidelity's Fractional Shares program and are available for most U.S.-listed stocks and ETFs.
  • You can set up automatic fractional share purchases through Fidelity's dividend reinvestment program (DRIP) or by using dollar-based investing.
  • Fractional shares cannot be transferred to other brokerages and must be sold back to Fidelity if you want to move them.

How to buy fractional shares at Fidelity

When you place an order in your Fidelity brokerage account, you can enter a dollar amount instead of a share quantity. For instance, you can type "$250" rather than "5 shares." Fidelity will execute the order and give you the fractional amount at the current market price.

You can also set up automatic fractional share purchases through Fidelity's dividend reinvestment program (DRIP). When your stocks or funds pay dividends, Fidelity can automatically reinvest that cash into fractional shares of the same security rather than leaving the money sitting in your account.

If you use Fidelity's automated investing service (such as Fidelity Go), fractional shares are built into the system. The service invests your money across multiple funds and stocks, and fractional ownership is how it manages small account balances and regular contributions.

Which Fidelity accounts support fractional shares

Fractional shares are available in most Fidelity individual brokerage accounts, including standard taxable accounts, IRAs (Traditional, Roth, and SEP), and 401(k) rollovers. They work in both self-directed accounts where you pick your own investments and in managed accounts where Fidelity makes the choices for you.

Fidelity's robo-advisor service (Fidelity Go) uses fractional shares by default. If you have a Fidelity mutual fund account, you already own fractional shares — mutual funds have always worked that way, allowing you to own a piece of the fund rather than whole units.

Some employer-sponsored retirement plans through Fidelity may have different rules, so check your plan documents or contact Fidelity directly if you're investing through your workplace.

What you cannot do with fractional shares at Fidelity

Fractional shares cannot be transferred to another brokerage. If you want to move your investments to a different broker, Fidelity will sell your fractional shares and transfer the cash proceeds instead. This can trigger a taxable event if the shares have gained value since you bought them.

You also cannot short fractional shares or use them as collateral for a margin loan. If you need to move fractional shares to another account within Fidelity (such as from a taxable account to an IRA), you'll need to sell them first and then repurchase them in the new account.

Some stocks and ETFs may be restricted from fractional share purchases due to regulatory limits or corporate actions. Fidelity's trading platform will show you whether fractional shares are available for a specific security before you place your order.

Costs and fees for fractional shares

Fidelity does not charge a separate fee to buy or sell fractional shares. You pay the same commission structure as you would for whole shares — which for most stocks and ETFs at Fidelity is zero commission for online trades.

You will pay the bid-ask spread, which is the difference between the price someone is willing to pay and the price someone is willing to sell. This spread exists whether you're buying fractional or whole shares, and it's built into the price you see when you place your order.

How fractional shares affect your taxes

Fractional shares are treated the same as whole shares for tax purposes. When you sell them, you owe capital gains tax on any profit. When they pay dividends, you report that income on your tax return. If you reinvest dividends through DRIP, each reinvestment is a taxable event in the year it happens, even though you didn't receive the cash.

Keep records of when you bought each fractional share and at what price, because you'll need that information to calculate your gain or loss when you sell. Fidelity provides a cost basis report that tracks this for you.

Alternatives if fractional shares don't fit your needs

If you want to invest a small amount but prefer whole shares only, you can use Fidelity's mutual funds or ETFs instead. These let you invest any dollar amount and own fractional units without thinking about it. Index funds and target-date funds are popular choices for hands-off investing.

If you're concerned about transferring fractional shares to another broker in the future, you could stick to whole-share purchases now and plan to sell fractional shares before moving your account. This gives you more flexibility later, though it means waiting to invest until you have enough for a whole share.

Frequently Asked Questions

Can I buy fractional shares in my Fidelity IRA?

Yes. Fractional shares work in Traditional IRAs, Roth IRAs, SEP IRAs, and other retirement accounts at Fidelity. The same rules explore — you can invest any dollar amount, and fractional shares cannot be transferred to another broker.

What happens to my fractional shares if I transfer my account to another brokerage?

Fidelity will sell your fractional shares and transfer the cash to your new broker. This sale may trigger a capital gains tax if the shares have increased in value since you bought them. Whole shares can sometimes be transferred in-kind, but fractional shares must be liquidated.

Do fractional shares pay dividends?

Yes. If you own 0.5 shares of a stock that pays a $2 dividend per share, you receive $1. You can choose to take the dividend as cash or reinvest it into more fractional shares through Fidelity's DRIP program.

Can I set a limit order for fractional shares?

Limit orders for fractional shares vary by security and account type at Fidelity. Check the order entry screen when you're placing a trade — if limit orders aren't available for that particular stock or ETF, Fidelity will show you a message explaining why.

Are fractional shares a good idea for beginners?

Fractional shares remove the barrier of needing a large amount of money to start investing in individual stocks. They're useful if you want to own a specific company or index fund but only have a small amount to invest. However, mutual funds and ETFs may be simpler if you're new to investing.