Can You Buy Fractional Shares On Ally Invest?

Can You Buy Fractional Shares On Ally Invest?

Buying fractional shares is an effective way to create a well-diversified portfolio. Several broker companies allow you to purchase stocks depending on the amount you select rather than the full share price. 

Ally Invest does not provide this facility to its users yet. You won’t be able to acquire fractional shares or reinvest your dividends into them. However, Ally Invest offers a special DRIP program where the received cash dividends are automatically used for whole or fractional share purchases. 

In today’s post, we will evaluate the scope of fractional shares and Ally Invest; will the platform offer this facility in the future or not? We’ll also go through the fundamentals of fractional share buying and discuss the platforms that currently allow it. So, let’s begin!

Will Ally Invest make Fractional Shares available?

Ally Invest does not issue fractional shares since it is uncommon for large financial institutions to do so. Many traditional financial organizations do not offer fractional shares, and you’ll only find them in new, small-scale institutions.

Nevertheless, a growing number of these large financial institutions are adopting this function. As a result, we may anticipate Ally Invest doing so shortly. However, if you’re still interested in getting your hands on fractional shares through Ally Invest, then it’s worth giving their DRIP Program a try.

Ally Invest DRIP Program

The dividend reinvestment plan (DRIP) is a free program that allows you to automatically spend your dividends to buy more fractional or whole shares of your investment. It allows shareholders to accumulate stock over time without having to pay commissions.

Enrolling yourself in the Ally Invest DRIP Program is quite simple. You’ll have to go to the Ally Invest Live settings to join in the dividend reinvestment programme online. 

Then, you’ll have to select the gear symbol opposite to Home and choose All Settings from the dropdown menu. The dividend reinvestment option is present at the bottom of the screen. However, please note that you can enroll or unenroll once a day. 

Which brokerages offer Fractional Shares?

Fidelity Investments, Charles Schwab, Etrade, Robinhood, Interactive Brokers, Vanguard, Merill Edge, and TD Ameritrade are among the best brokers for fractional share investing.

With the emergence of numerous new-age brokers, users have benefited greatly from the competition among them. For example, it resulted in the creation of several intriguing features for users.

One of these features is the ability for users to purchase fractional shares. Users can utilize this tool to purchase small amounts of shares. As a result, rather than waiting to acquire the whole share, a user may buy a stock with any quantity they have.

This feature is useful for inexperienced investors who may not have the money to acquire huge guns, such as Amazon. Clients can also invest their dividends in fractional shares with some brokers. You may only invest in equities that correlate to the dividend using this investment method.

How do I buy Fractional Shares?

Different brokers use different techniques to sell fractional shares. Some brokers require you to buy a minimum of $1 worth of fractional shares. Others might demand as much as $5 in stock.

Some brokers that enable automated investing also allow fractional shares to be purchased. Your broker automatically buys the stock once you opt to invest a certain amount each month.

This particular situation is dependent on the stock’s pricing and entails the purchase of fractional shares if your funds are insufficient to acquire a whole share.

It’s worth noting that before you acquire fractional shares, you should double-check with your broker to see if fractional investing is permitted. Double-checking the number of stocks that are getting offered as fractional shares is also a good idea.

Do Fractional Shares Pay Dividends?

Yes! You will receive your share if you make a fractional investment in a stock that pays dividends to investors. For instance, if the dividend is $2 per share and you own half of the stock, you will receive a $1 dividend.

Should You Buy Fractional Shares?

Investing in fractional shares is a great idea for several reasons, such as:

Great for newbies

If you’re just getting started with investing and don’t have enough money to buy a whole stock, fractional shares are a good place to start. Investor Autonomy Investors with fractional shares have more influence over their holdings. It is because they may invest whatever amount they choose in stock, regardless of the full share price.

Portfolio diversification

Investors can buy a wide range of equities using fractional shares. It allows them to diversify their portfolio while reducing risk.

Investing in ETFs

Investors can invest in ETFs using fractional shares. Previously, you needed to own at least a certain number of shares to invest in a firm. However, now you can do it with ease.

Brokerage firm scalability

Fractional shares provide clients with varying net worths with access to investments. This is beneficial to the company since it caters to all clients, regardless of their net worth.

Increase exposure 

ETFs allow investors to have exposure to various firms at a cheap cost. You can increase your exposure by using fractional shares! It best gets accomplished through the use of passive portfolios and high-fee funds.

Is Buying Fractional Stocks Risky?

Fractional investment has certain disadvantages too. They are as follows:

  1. A limited number of stocks are accessible for fractional investing: With fractional shares, there are only a few stocks available for fractional investing. Investing in full shares, on the other hand, allows you to buy all of the shares.
  1. Voting rights: According to some brokers, investors who hold less than a share of stock may not be able to vote on business matters.
  1. Transfer restrictions: Your broker may refuse to let you transfer fractional shares from your account to another broker. Instead, they could sell the fractional share and offer you the equivalent in dollars. It may not be an issue if you can rapidly buy a stock with cash from a new broker. If the stock has risen, nevertheless, liquidating the fractional share may result in costs.
  1. Fractional dividends: You will only receive a fraction of the dividend because a fractional share is a part of a total share.
  1. Liquidity: Compared to whole shares, converting fractional shares to cash might take a long time. It is because fractional shares move slower than whole shares. Furthermore, brokers frequently allow enough fractional orders to accumulate to acquire whole shares.

Hopefully, we have resolved all of your questions and concerns about fractional shares. Please let us know if you have any suggestions in the comments section below!


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Latest posts by Marvin Allen (see all)

Leave a Reply