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How to Buy Fractional Shares UK for Beginners

Tobi Opeyemi Amure
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How to Buy Fractional Shares UK

In a nutshell, to buy fractional shares in the UK, choose a brokerage that offers fractional investing, such as Trading 212, eToro, or Freetrade. Open and fund your account, then select the stocks you’re interested in and specify the amount of money you want to invest, rather than buying whole shares. This approach allows you to invest in high-value stocks with smaller amounts of money, making it accessible for investors with limited capital.

Have you ever dreamed of owning a piece of your favorite blue-chip company but felt priced out by the high share costs?

Well, fractional share investing finally makes this possible!

In this comprehensive guide, I’ll explain everything you need to know about fractional shares – what they are, how they work, the pros and cons, and step-by-step instructions for purchasing fractional shares with top UK brokers.

Whether you’re a novice investor or a seasoned pro, fractional shares open new doors to building a diversified portfolio without breaking the bank.

This article was reviewed by Tobi Opeyemi Amure, a trading expert and writer at InvestopediaInvesting.com, and Trading.biz.

What Are Fractional Shares & How Do They Work?

With traditional investing, you purchase full shares of a company. The number of shares determines the total cost.

Fractional shares, as the name implies, allow you to buy just a fraction of a full share. This opens the door to buying stakes in costly stocks you previously couldn’t afford.

Here’s a simple example:

  • Tesla shares cost around £770 each
  • With fractional shares, you can purchase as little as 1% of a Tesla share for around £7.70

Your broker purchases full shares on the market, splits them, and sells the fractions to investors like you. Any dividends or investment returns are divided proportionately based on the fraction you own.

Fractional shares democratise investing, making blue chips and top companies accessible to regular investors.

Here’s a good video that helps further explain fractional shares:

Benefits of Fractional Share Investing

Here are some of the biggest upsides to buying fractional shares:

  • Affordability – Get exposure to costly stocks like British Airways or Amazon.
  • Diversification – Build a broader portfolio across industries and company sizes.
  • Dividend reinvestment – Automatically roll dividends from fractional shares into new fractions.
  • Pound-cost averaging – Invest fixed periodic amounts regardless of share price.
  • Lower barriers – Open the doors to investing for those with limited capital.

Where to Buy Fractional Shares in the UK?

Which UK stock brokers make it easiest to invest in fractional shares?

Here are my top three picks:

1. Freetrade

  • £0 commission stock trading
  • Access 6,000+ stocks & ETFs
  • Beginner-friendly fractional shares

2. Trading 212

  • Easy fractional share investing
  • Commission-free trading
  • Educational resources for beginners

3. IG Group

  • Trusted broker operating since 1974
  • Low minimums to start (from £1)
  • Wide range of assets beyond stocks

How to Buy Fractional Shares in the UK – Step-by-Step Guide

Here’s a guide on how to buy fractional shares in the UK:

  1. Research Brokerages: Investigate which brokerages in the UK offer fractional share investing. Check for factors like fees, supported platforms, and customer reviews. Also, make sure they are regulated by the FCA.
  2. Open an Account: Once you’ve decided on a brokerage, open an investment account. This usually involves providing some personal details and may require identity verification.
  3. Fund Your Account: Deposit GBP into your new investment account using one of the funding methods supported by the brokerage, such as bank transfer, debit card, or e-wallet.
  4. Educate Yourself: Before making any purchases, do your due diligence on the companies you are considering for fractional share investment. Use the brokerage’s tools or third-party resources for research.
  5. Navigate to Buy: Log into your brokerage account and use the search feature to find the stock you want to invest in.
  6. Select Fractional Shares: Instead of choosing to buy whole shares, look for an option to buy fractional shares. This option is usually prominently displayed.
  7. Specify Amount: Enter the monetary amount you want to invest in the fractional shares. Some platforms may have a minimum amount required for investing in fractional shares.
  8. Review and Confirm: Before confirming the transaction, review your order carefully to ensure everything is as you intend it to be.
  9. Execute the Order: Confirm your purchase. Your fractional shares will be added to your account, and you’ll be a partial owner of the company.
  10. Monitor Your Investment: Keep an eye on your fractional shares by checking your account regularly. Some platforms even offer notifications for significant price changes.
  11. Sell or Buy More: Whenever you wish to sell your fractional shares or buy more, log back into your brokerage account and execute the necessary transactions.

By following these steps, you can start investing in fractional shares in the UK even with a small initial investment.

Pros & Cons of Fractional Share Investing

Here are some of the key pros & cons to consider before investing in fractional shares.

Pros:

  1. Affordability: Fractional shares allow you to invest in high-priced stocks like Amazon or Google with a much smaller amount of money.
  2. Diversification: With the ability to buy small portions of multiple stocks, you can diversify your portfolio more easily, even with limited funds.
  3. Accessibility: Fractional share investing makes the stock market more accessible to beginners and those with lower income.
  4. Dividend Reinvestment: Many platforms allow you to reinvest dividends into more fractional shares, enhancing the power of compound interest.
  5. Automated Investing: Some platforms offer automated investment plans that are perfect for fractional shares, letting you invest a set amount regularly without much hassle.

Cons:

  1. Limited Availability: Not all brokerage platforms offer fractional share investing, limiting your choices for where to trade.
  2. Ownership Limitation: Owning only a fraction of a share means you may also own only a fraction of the voting rights that come with full shares.
  3. Potential for Overtrading: The ease and low cost might tempt you to trade too often, which could eat into your profits over time due to trading fees or bad timing.
  4. Lack of Complete Control: Some platforms aggregate all fractional orders and execute them as a whole, meaning you might not have complete control over the exact purchase or sale timing.
  5. Not for Large Investors: For those with substantial funds to invest, the advantages of fractional shares become less significant, and traditional share investing may offer more control and options.

Considering these pros and cons can help you decide whether fractional share investing is the right strategy for your financial goals.

FAQs

How do I buy fractional shares UK?

To purchase fractional shares in the UK, you’ll first need to open a trading account with a brokerage that offers fractional share investing, such as eToro, Trading 212, or Interactive Brokers. After funding your account, you can use the platform’s search feature to find the stock you wish to invest in. Choose the “buy” option and enter the monetary amount you’d like to invest to acquire a fractional share corresponding to that amount.

What stocks can I buy as fractional shares?

Most brokers allow you to buy fractional shares of any stock available on their platform. So you can invest in slices of high-priced stocks like Tesla, Amazon, Google, Berkshire Hathaway, and more.

Can I sell my fractional shares?

Yes, you can sell your fractional stakes just like full shares. The broker combines fractions from investors to sell full shares on the market and credit your account proportionately.

Is it a good idea to buy fractional shares?

Buying fractional shares can be a good idea for investors looking to diversify their portfolios without committing to the full price of a single share, especially for high-priced stocks like Amazon or Tesla. This approach allows you to start investing with a smaller amount of capital, making it more accessible for beginners or those with limited funds. However, it’s important to note that not all brokerages offer fractional shares, and there may be limitations or fees associated with them.

Does Hargreaves Lansdown allow fractional shares?

Hargreaves Lansdown does not offer the option to purchase fractional shares. You would need to buy whole shares when using their trading platform. Always check the most current information on their website or contact customer support for the latest details.

Are fractional shares risky?

Fractional shares carry the same inherent market risks as whole shares, as they are subject to the same market fluctuations and volatility. However, investing in fractional shares allows for greater diversification, even with a smaller amount of capital, which can help mitigate some risk. It’s important to perform due diligence and possibly consult with a financial advisor to assess the risk associated with any investment.

How are dividends paid on fractional shares?

Any dividends earned are paid proportionately based on the fraction you own. So if you own 0.2 shares paying a £1/share dividend, you would receive £0.20.

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Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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