Yes, Charles Schwab offers fractional shares on most stocks and ETFs

Charles Schwab allows you to buy fractional shares through its standard brokerage account. You can purchase any dollar amount of a stock or ETF — say $50 or $127 — rather than being forced to buy whole shares at their full price. This feature is built into Schwab's trading platform and costs nothing extra.

Fractional shares let you invest smaller amounts and own pieces of expensive stocks. If a stock trades at $300 per share and you have $100 to invest, you can buy 0.33 shares instead of waiting to save $300. The fractional share appears in your account and earns dividends just like a whole share would.

Schwab rolled out fractional share trading in 2020 and has kept it available across its platforms — the web interface, the mobile app, and StreetSmart Edge. There are no minimum account balances or special requirements to use this feature.

Key Takeaways

  • You can buy any dollar amount of a stock or ETF at Schwab, and fractional shares cost nothing extra to purchase or hold.
  • Fractional shares work with dividend reinvestment, so you accumulate more shares over time even if you own less than one whole share.
  • Schwab does not allow fractional shares in certain retirement accounts like IRAs, though you can use them in taxable brokerage accounts.
  • Selling fractional shares works the same way as selling whole shares — you enter the number of shares you want to sell, and Schwab executes the order at market price.

How to buy fractional shares on Schwab's platform

Open your Schwab account and search for the stock or ETF you want to buy. When you reach the order screen, enter a dollar amount instead of a share quantity. For example, type "$75" in the amount field rather than "0.25 shares." Schwab will calculate how many fractional shares that buys at the current market price.

Place the order as you normally would — choose market or limit order, review the details, and submit. The fractional shares settle in your account within the standard two business days, just like whole shares do. You can see your fractional holdings in your positions list, displayed as decimals (like 2.47 shares).

If you prefer to think in shares rather than dollars, you can also enter a fractional share quantity directly — Schwab accepts orders like "0.5 shares" or "3.25 shares." Either method works; use whichever feels more natural to you.

Which account types support fractional shares

Fractional shares are available in Schwab's taxable brokerage accounts, which is where most individual investors hold stocks. They also work in Schwab's custodial accounts for minors and in some other account types.

However, fractional shares are not available in Individual Retirement Accounts (IRAs), whether traditional or Roth. If you hold an IRA at Schwab, you must buy whole shares only. The same restriction applies to SEP IRAs and SIMPLE IRAs. This is a limitation set by the IRS, not by Schwab itself.

If you have both a taxable account and an IRA at Schwab, you can use fractional shares in the taxable account but will need to buy whole shares in the retirement account. This does not affect your ability to invest smaller amounts — you simply need to save until you have enough for a whole share in the IRA.

Dividends and fractional shares

When you own fractional shares, you receive dividends on the fractional amount you own. If you own 0.5 shares of a stock that pays a $2 dividend per share, you receive $1. Schwab deposits the dividend into your cash balance, and you can reinvest it or use it for other purchases.

Many investors set up dividend reinvestment (DRIP) on their fractional shares, which automatically buys more shares with the dividend money. This compounds your holdings over time. Schwab allows DRIP on fractional shares in taxable accounts, making it easy to grow your position without adding new money.

Selling fractional shares and tax implications

Selling fractional shares works exactly like selling whole shares. Enter the number of shares you want to sell (including the decimal), choose market or limit order, and submit. Schwab executes the order at the current market price, and the cash settles in your account within two business days.

When you sell fractional shares in a taxable account, you owe capital gains tax on any profit. Schwab reports the sale on your tax documents (Form 1099-B) with the cost basis and sale price, so your tax software can calculate the gain or loss. Keep records of when you bought the shares and at what price, especially if you bought them over time or reinvested dividends.

In a retirement account like a Roth IRA, you cannot buy fractional shares in the first place, so this does not apply. In a taxable account, fractional shares are treated the same as whole shares for tax purposes.

Stocks and ETFs that support fractional shares

Schwab allows fractional shares on most stocks and ETFs, including all stocks listed on major U.S. exchanges and most ETFs. However, some securities are excluded: penny stocks, certain over-the-counter (OTC) stocks, and a small number of ETFs do not support fractional trading.

When you search for a security on Schwab's platform, the order screen will tell you whether fractional shares are available. If you try to place a fractional order on an unsupported security, Schwab will reject it and ask you to enter a whole share quantity instead. This is rare for stocks and ETFs you are likely to buy, but it is worth checking before you place an order.

Comparing Schwab's fractional shares to other brokers

Most major brokers now offer fractional shares at no cost, including Fidelity, E-Trade, and Robinhood. Schwab's offering is competitive — no fees, no minimums, and availability across most stocks and ETFs. The main difference between brokers is which account types support fractional shares and how the feature is presented in the interface.

If fractional shares are important to your investing strategy, Schwab is a solid choice. The feature is straightforward to use, and Schwab's customer service can walk you through the process if you get stuck. If you are comparing brokers for other reasons (fees, research tools, customer service), fractional shares are unlikely to be the deciding factor.

Frequently Asked Questions

Can I set up automatic investments in fractional shares?

Yes. Schwab's Automatic Investment Plan (AIP) lets you invest a fixed dollar amount in a stock or ETF on a schedule you choose — weekly, monthly, or any interval you prefer. The system buys fractional shares with whatever amount you specify, so you can invest $50 per month without waiting to save for a whole share.

What happens to my fractional shares if I transfer my account to another broker?

When you transfer a brokerage account from Schwab to another broker, fractional shares are typically converted to cash. The broker receiving the transfer may not support fractional shares, so Schwab sells your fractional holdings at market price and transfers the cash instead. You will owe capital gains tax on any profit from the sale.

Do fractional shares have the same voting rights as whole shares?

No. If a company holds a shareholder vote, you can only vote with whole shares. If you own 2.5 shares, you can vote with 2 shares but not the 0.5. This is a minor limitation for most investors, since shareholder votes are rare and the outcome is usually decided by large institutional holders.

Can I buy fractional shares during after-hours trading?

No. Fractional share orders are only available during regular market hours (9:30 a.m. to 4 p.m. Eastern Time on weekdays). If you try to place a fractional order after hours, Schwab will reject it. You can place a whole-share order after hours, but fractional orders must wait until the market opens.