Fidelity Makes It Easier for Small Investors to Buy Big Stocks, ETFs

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If you don’t have much money to invest — or simply want to grab a tiny piece of a very big and expensive stock — Fidelity Investments just made your life easier.

Today the brokerage firm unveiled real-time fractional-share trading of stocks and exchange tradeded funds (ETFs). This allows customers to buy as little as one one-thousandth (0.001) of a share when they use the Fidelity mobile app.

In essence, the new service makes it easier to get your sliver of an enormous pie.

For example, if you can’t afford a share of Amazon stock — currently trading at more than $1,800 — you can buy a smaller stake in the company and (hopefully) enjoy the benefits of future gains.

You may have to wait to use the new service, though. Fidelity says fractional-share trading is being rolled out to its customers over the next several weeks.

Fidelity says the ability to trade fractional shares can help small investors enjoy the benefits of the stock market.

It cites the following example of how this type of trading might be helpful:

“A customer saves $500 to begin investing in several high-priced companies they have been following for their diversified portfolio. With this new capability the price of a single share is not a concern, and the investor buys $100 worth of shares in five different companies, potentially helping with diversification.”

Fidelity also notes that fractional-share trading can help investors buy into various stocks and ETFs using dollar-cost averaging. With this approach, an investor makes a series of small purchases over a long period.

As Fidelity says:

“A customer could set up an automatic deposit from their paycheck or bank account into a Fidelity brokerage account and easily make multiple purchases of a stock or ETF over time, e.g. $50 each month, and pay nothing in commissions.”

The company further notes that it will execute all fractional trades in real time when the market is open. Fidelity says this differs from some other companies that offer fractional trading at the end of the day.

Being able to make trades in real time allows investors to purchase a fractional share of stock at a precise share price, rather than being forced to purchase the stock at the market-close price.

The new service is available to all Fidelity customers who have eligible retail accounts, including:

  • Brokerage accounts
  • Health savings accounts (HSAs)
  • Individual retirement accounts (IRAs)
  • Self-directed brokerage accounts via a workplace retirement plan

Need help dipping your toe into the ocean of investing? Check out “8 Basics That Beginning Investors Must Know.”

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