Fractional shares

Fractional shares are as the name suggests fractions of a share. Some brokers allow their account holders to trade in fractional shares. This is a big advantage for the small investor. It allows you to build a well diversified portfolio even though your total account invested may be low. It also allows account holders to sweep cash from dividends or small contributions into stock positions keeping the account fully invested. Many stock investing strategies require you to stay fully invested to reap the benefits of market gains. If you don’t stay fully invested you will dilute the performance of your portfolio. It also becomes a temptation to try to time the market if you keep a pool of cash.

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