Stake Academy - Fractional Shares | Stake

Stake Academy: Fractional Shares

For decades shares could only be traded in full lots. A portfolio of US$500 was locked out of owning stocks like Amazon or Netflix. With Stake, owning as little as US$10 of any share is made possible through fractional share ownership.

How does it work?

When you submit an order for less than a whole share, our broker-dealer, DriveWealth, will purchase the full share and assign you the holder of the fraction. The remainder of the share remains on their balance sheet to be divided amongst other fractional buyers.

Yes, this means that if you buy a fraction of US$400,000 Berkshire Hathaway Class A, our broker may have to buy the full share.

Does this mean you still own the share?

It certainly does. Although our broker-dealer has to buy the remaining fraction, yours is still registered and held under your name via the traditional custodian model in the US.

Benefits of fractional shares

Accessibility
Fractional trading has made big-name shares like Amazon more accessible to retail investors. Trading at over US$3,300 per share, those with $30, $300, or even $3000 in their portfolio would have no way to directly own the world’s biggest retailer without fractional ownership.

Diversification
Building off the first point, being able to buy small dollar amounts of any stock increases your ability to diversity. A $5000 portfolio can easily be split into 20 stocks without the need to disclude any stocks.

Dividends
You are still eligible to receive dividends on your fractional shares! They are paid on a pro-rata basis. If you own 10.4 shares of $MVK paying a $10 dividend, you will receive $104.

Voting Rights
You are eligible to submit a vote on the fractional balance of your shares. How that fractional vote is valued can not be guaranteed. It varies from company to company and is not decided or influenced by Stake or our broker. Some companies may discard votes on fractionals while others give them an adjusted value.

Considerations

Order Types
Only market and stop orders can be placed on fractional share balances. Limit buys or sells can not be placed.

For more information on orders types, read this Stake Academy article here.

Voting Rights
As mentioned, not all fractional shares will carry voting rights.