If you already have a Vanguard brokerage account and want to buy fractional shares or you’re planning on opening one and this is an important factor for you, you might be wondering, does Vanguard offer fractional shares?
Vanguard does not offer fractional shares. However, fractional shares may appear in your Vanguard account after stock splits or when participating in Vanguard’s Dividend Reinvestment Plan (DRIP).
For being here, you clearly understand the value of fractional shares…
Being able to invest the exact amount of money you want in your favorite ETFs and stocks is, after all, a game-changer for a dollar-cost averaging strategy. But it’s also great for those who can’t afford the usual “buy-ins” of highly-priced securities.
Unfortunately, Vanguard does not offer fractional shares right now. But there may be a good reason for them not to…
Fractional shares are a relatively new concept as it’s also the technology that supports the buying and selling of them. That’s because fractional share trading relies on algorithms and the tracking of ownership.
When you order to buy a fractional share, your broker will probably have to buy a whole share for you and set you as the owner of the share’s fraction. Or they may have to use an algorithm and leave your order pending until more buy orders come in to constitute a whole share and then buy it.
As you can imagine, either scenario involves a service and, therefore, a cost on the broker’s part.
While nothing is definite and Vanguard may offer this service some time in the future, it can make sense that this is currently not their top priority.
With that being said, there are ways that fractional shares can naturally occur while investing with Vanguard…
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If you hold stock of a company that initiates a stock split, then you “technically” end up with fractional shares of the previous shares outstanding.
In the same way, if you’re looking to buy stock in a company that splits it, then you could end up affording the new price per share if you previously couldn’t.
DRIP stands for Dividend ReInvestment Plan (I know, that’s a weirdly structured acronym) and it is supposed to give a shareholder the ability to reinvest their dividends back in the stock regardless of whether whole or fractional shares can be bought with them.
More specifically, if the company you invest in has such a plan in place, you will be able to buy and keep buying fractional shares directly from them with the dividends you receive.
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Buying Mutual Funds with Vanguard
Most of the time, investors who are interested in buying fractional shares cannot afford the high prices per share that some large-cap companies have.
But there are also many who have enough cash but are simply interested in diversifying as much as possible.
If you belong in the second group of people and are interested in a more passive investment style than picking stocks on your own, you may want to consider investing in a mutual fund.
With a mutual fund, you are basically able to spread your money in many stocks ranging from dozens to hundreds, doing exactly what you could do if you were to buy many stocks through fractional shares.
Better yet, if you are interested in investing in the market or a specific section of it, you can cut down your costs by buying a Vanguard index fund.
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Though you can’t buy fractional shares through a Vanguard brokerage account, there are some other alternative brokers who offer them and are as trustworthy as Vanguard.
Let’s take a look at 3 of them…
M1 Finance is a US-based brokerage firm that’s ideal for you if you want to trade fractional shares without paying commissions.
M1 Finance is also for those who:
- require a user-friendly platform to easily build and manage their portfolios
- are looking for a platform with great support when it comes to robo-directed investing
- appreciate a broker who is transparent about how they make money and doesn’t have any hidden fees
All in all, M1 Finance has proved that they are a respectable, trustworthy, broker who is determined to keep growing and providing value to their customers. If you trust them as your personal broker, it’s certain that you will be getting much more than access to fractional shares.
If you want to learn more, you can check out this review I have written about them.
If you are ready to open an account, you can do so by visiting their website.
Charles Schwab is an excellent broker for buying fractional shares and they have been around for a very long time, making themselves one of the most established brokerage houses in the US.
Besides that they give you the ability to buy fractions of a share, their superb platform also makes the process very easy even if you’re a first-time user.
Charles Schwab is also great for:
- Commission-free ETF trading
- Options trading with no transaction-based commission ($0.65 per contract)
- Retirement accounts
You can visit this page to open an account.
Fractional Shares are also available with Fidelity Investments, a broker with plenty of high-quality research tools and a great pricing structure for the lay investor.
Here are some of the benefits of opening an account with them that make them stand out from the rest:
- Outstanding customer support that includes live chat
- Great balance of tools for both investors and traders
- Expert wealth management advisors
If you want to go with Fidelity, you can open an account here.
There is no doubt that Vanguard is a great broker for anyone who is looking to get into investing in mutual funds and ETFs. They’re also great for active stock traders, but they fall short when it comes to offering fractional shares.
But this, of course, doesn’t mean that they won’t offer them some time in the future.
With that being said, there are other brokers out there, as good as Vanguard, who do offer access to fractional shares. That’s why I decided to make a short list of the 3 most reputable ones.
I hope you found my work useful and I would appreciate it if you shared it with others!
Also, let me know if you still got any questions by leaving a comment below.
Thank you for reading and I’ll talk to you the next time!
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