Here’s how to buy fractional shares in US stocks, with minimal fees. Fractional shares allow you to do a number of things, like dollar-cost average in a true sense (be able to invest $100 instead of buying say 2 shares are varying rates, every so often) and diversify into several stocks that are just priced high.
It also allows you stakes in multiple stocks, which can sometimes be expensive to own all by itself. After all, as of this writing, Berkshire Hathaway A (BRK.A) is trading at a price of $222,855. How many of us can truly afford even one share of this? Other stocks like Priceline (PCLN) trade at $1250, Google (GOOGL) trades at $513 and so on, which is also expensive for some, especially when you’re not looking for build up a ‘full position’ at one go, and instead want to build up your positions over a period of time.
So how to buy fractional shares for cheap? Traditional discount brokerages like Scottrade don’t allow for fractional shares. Instead, you need to purchase whole number of shares only. The best way I found was through Motif Investing. You can not only buy fractional shares in one stock, you can actually buy fractional shares in up to 30 stocks, all for the price of just $9.95. If you want to use a retail brokerage like Scottrade, the same would cost you $7 X 30 = $210, and you cannot even own fractional shares!
How Does Motif Investing Work?
Motif Investing is a very interesting concept. They let you create ‘Motifs of Stocks’, which is just a collection of stocks, usually following a common theme. It is a great way to diversify, but within an idea. It is also, in some ways, like an index of stocks, although you don’t buy any index funds, just direct ownership in stocks that you’re buying.
For example, say you want to get some exposure to Cyber Security stocks, but don’t want to risk it all on one stock, and if you buy two dozen of them, you’re going to end up paying huge amounts to your brokerage firm. Enter Motif. You can create your own Motif, or pick from one of the many created by others. In this example, there is already a Motif created for Cyber Security:
Now, you can see this Motif has had a good month so far, being 22.3% up. Here is its Year to Date performance:
Now, here are the stocks that make up this Motif. There are 10 stocks, which would mean spending $70 on Scottrade to purchase. On Motif Investing though, it only costs $9.95 to buy this Motif. Remember the biggest factor is that you can purchase $100 or $1000 worth of this Motif, and you’ll buy fractional shares in all the stocks that make up the Motif. This is totally permissible in Motif Investing. In fact, fractional shares are the norm rather than the exception, since you’re looking at some percentages of the total amount invested in the Motif.
Also, remember that you don’t have to purchase the Motif as is. You can always customize it, buy adding or removing stocks outright or by changing the percentages. Motif Investing seems like one of the best and cheapest ways to buy fractional shares of stock in US listed companies. You can buy several of these stocks at one go.
Use this link to sign up for Motif Investing and you will get $100 absolutely free to start trading motifs (both of us receive this credit). With a buy and sell fees of $19.90 together, you’ll still get a profit of $80.10 even if the motif trades flat during this time, so there’s no reason not to sign up and give it a shot.
What bothered me, and has prevented me from funding an account at Motif, is the whole fractional share ownership idea. They are very cagy about answering direct questions completely. The only thing I can reason is that Motif itself takes the other portion of the shares not yet owned, since it can’t on the open market, sell a fraction of a share. And if you sell out your Motif, someone has to take the other side of the fractional shares you are selling. I did ask point blank what would happen if, say, Motif were to go bankrupt, how would I get out of my fractional positions, and how would the transfer take place. They would not answer this question directly. its a private company so far, and there is no public financial information, so do your homework before investing there.
As always an interesting read. I agree with your points as I have personally tried this & I appreciate your efforts that you have selected this topic to write an article.
By the way, It’s always pleasure to read your posts and comment.