Top online brokerage firm that offers trading partial/fractional shares of high price stocks/ETFs such as Berkshire Hathaway

Investing in Fractional Shares at M1 Finance

The vast majority of brokerage firms don’t permit the buying of fractional shares of stocks, closed-end funds, and ETF’s. Some of them do provide DRIP service that will reinvest dividends as fractional shares; but it’s not possible to make purchases of fractional shares. M1 Finance is different.

The Pie Way of Investing

At M1 Finance, investors put stocks, ETF’s, and closed-end funds in groups of securities called Pies. These baskets can be purchased with whole-dollar amounts. Because a fixed amount of money can be put into these Pies, fractional shares are traded.


M1 Investing in Fractional Shares


For example, you could invest $100 (the minimum deposit at M1) into a Pie with a single stock or ETF that trades for more than that amount per share. You would have less than one share of that stock or fund in your M1 account.

Popular stocks that currently trade above $100 include Berkshire Hathaway ($308,879), Amazon ($1,982), Facebook ($203), and Apple ($208). If you don’t have the money to buy a single share, you could buy a fractional share at M1. In addition to building your own Pie, M1 Finance also has pre-built Pies that are always ready for purchase.

After an initial purchase of either type of Pie, it’s possible to dollar-cost average with additional deposits. You could invest a whole-dollar amount into a Pie every week or month. When the fixed-dollar amount goes into the Pie, fractional shares will be purchased.

It’s also possible to put more than one security in a Pie. So if you were interested in more than one stock or fund, you could put multiple assets in a single Pie and set target percentages for each one. For example, you could put the four stocks mentioned above in one Pie and set them each to 25% of the Pie. If you were more bullish on some than the others, you could increase the 25% to a higher amount, but the total must equal 100%.

Open M1 Finance Account

Invest for FREE - pay no broker commissions or fees.

Open M1 Finance Account


$0 Commission

Another major thing that sets M1 Finance apart from other firms and makes it the best broker for investing in fractional shares, is that there are no commissions to pay for investing. That's right - you pay $0 commission at M1. The broker makes money on optional services, such as lending funds and credit cards.

How M1 Finance Handles Dividends

M1 Finance doesn’t offer a traditional Dividend Reinvestment Plan. Instead, it takes dividends from all securities that pay them and deposits the cash in a separate position. Once this position reaches $10, the broker invests the cash into the Pie, using preset target percentages. Thus, fractional shares will be purchased each time the cash position reaches $10. That’s the default setup anyway.

An alternative you can choose is auto reinvest when the cash position breaches a certain level. For instance, you could set $800 as the trigger. If you deposit $900, exactly $100 will be invested in the Pie. Or you can just turn off this feature and make additional purchases whenever you’re ready. There is a $10 minimum on the M1 platform.

Substitutes

If for any reason you decide that M1’s Pie method of investing isn’t for you, there are alternatives out there. However, as we already mentioned, there aren’t many brokerage houses that permit the purchase of fractional shares of stocks, closed-end funds, or ETF’s. Stash Investments is one exception, but it only offers a small selection of stocks and ETF’s for fractional investing. At M1 Finance, all stocks and ETF’s that trade on major exchanges are eligible.

A second alternative would be to open an account with a broker that has a traditional DRIP service (such as WellsTrade or USAA), and add fractional shares whenever a dividend is paid. Adopting this approach, however, means you will have to buy at least 1 share upfront; and as we pointed out this can be quite expensive with some stocks. Plus, you will not be able to make additional purchases besides the dividends. At M1, this is possible.

Open M1 Finance Account

Invest for FREE - pay no broker commissions or fees.

Open M1 Finance Account



M1 Finance


Continue Reading