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A friend told me, he is able to buy parts of a share. So he does not buy one or two shared but one and 1/5 of a share (1.20).

Is this a benefit from the digital age? Because in the past, when shares have been printed on paper, no one could by only a fraction, right?

How is this possible? And what does it mean for my common stock rights?

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    Your friend must have a broker that implements a system where the broker holds whole shares on behalf of a group of customers that may hold fractional parts. Public companies themselves tend not to issue fractional shares, but a broker's accounting system could deal with tracking partial ownership. If your friend wanted to transfer his account elsewhere, I'd wager his broker would only transfer his whole number of shares, and cash out any fractional parts.
    – Chris W. Rea
    Jan 16, 2017 at 22:34
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    Public companies (or perhaps their transfer agent bank) dealt with fractional shares way back in paper certificate days in DRIP plans. I was earning reinvested fractional shares as a six month old in 1976.
    – user662852
    Jan 17, 2017 at 12:58

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It's typically not directly possible, but some brokers sell certificates that are valued at fractions of a share. Obviously these certificates should be backed by some real assets, but they can be backed by call options. It's unlikely you have voting rights with such constructs.

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    One example of such a broker in the U.S. is ShareBuilder, (from Capital One). Quote: "Not everyone can afford to buy a full share of a particular stock, so ShareBuilder offers its Customers the opportunity to purchase fractional shares of a stock through dollar based investing. [...]" See ShareBuilder Fact Sheet (PDF). In Canada, a similar service is from ShareOwner Investments, who call it a "co-operative investing service". Neither issues "certificates" for fractions though; it's an account.
    – Chris W. Rea
    Jan 16, 2017 at 22:27
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This is called a fractional share. Usually it's only possible to buy fractional shares on the market when purchasing mutual funds.

How is this possible?

In the case of a mutual fund shares bought from the fund don't necessarily represent shares of a security. Instead, when you buy into a mutual fund you are essentially paying a professional to invest your money.

In the case of other investments, you can end up with a fractional share if a stock which you already own splits their shares into additional shares or merges or is acquired by another company. A fractional share behaves the same proportionally to a full share, but my take longer to sell since your brokerage will need to pair it up with other fractional shares.

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    generally if a split or merger would result in a fraction of a share, the leftover fraction is turned into cash. This feature is one reason why some reverse split are done, they want to drive out small investors.
    – mhoran_psprep
    Jan 16, 2017 at 18:16
  • @mhoran_psprep, thank you for your contribution! If you would like to add it to my answer, feel free to make the necessary edits.
    – Nosrac
    Jan 16, 2017 at 18:46
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In an app such as cash app. I can invest at minimum $1.00 into any of the companies made available. Example: Tesla is trading at around $430 per share right now. I bought $30 of a share in $5 increments ( I was new at this and added $5 more every few days until I had $30) which is roughly %0.073 of the share. Letting it grow, I've gained $2.32. Not much but over only been at this for a little over a month. I do however own whole shares of other companies. Also, I'm allowed up to 5 day trades in a weeks span. I pay nobody for my investment other than the very small percentage cash app charges for using the app. Which is I think maybe 1 cent per transaction.

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  • Welcome to Money.SE. You might consider toning down the sarcasm, and using your spell checker more.
    – JTP - Apologise to Monica ♦
    Jan 4, 2020 at 13:55

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