E*TRADE lets you buy fractional shares of stocks and ETFs through its fractional share program, which means you can invest any dollar amount instead of having to buy whole shares.

E*TRADE's fractional share feature lets you purchase a portion of a stock or ETF rather than committing to the full share price. If a stock costs $500 per share and you have $100 to invest, you can buy 0.2 shares instead of waiting until you have enough for a full share. This applies to stocks, ETFs, and some other securities on the platform.

The fractional share program is available to most E*TRADE account types, though some restrictions apply depending on your account status and the type of security you want to buy. Fractional shares trade during regular market hours (9:30 a.m. to 4 p.m. ET on weekdays), and you pay the same commission as you would for whole shares — which is typically zero for stocks and ETFs.

Key Takeaways

  • E*TRADE allows fractional share purchases for stocks and ETFs, letting you invest any dollar amount rather than waiting for enough cash to buy a whole share.
  • Fractional shares trade only during regular market hours, not before or after the market closes, so your order executes at the next available price during those times.
  • You can set up automatic fractional share purchases through E*TRADE's dividend reinvestment feature, which buys partial shares when your dividends are paid.
  • Fractional shares count toward your portfolio value and voting rights, but some restrictions apply if you have a margin account or certain account types.

How to place a fractional share order on E*TRADE

To buy fractional shares, log into your E*TRADE account and search for the stock or ETF you want. Click on the security, then select "Buy" or "Trade." Instead of entering a quantity of shares, enter the dollar amount you want to invest. E*TRADE will calculate how many fractional shares that amount purchases at the current market price.

Review the order details — the number of fractional shares, the estimated price, and any applicable fees — then submit the order. Your order will execute during the next regular market hours window. If you place the order after 4 p.m. ET, it will execute the following trading day at market open or whenever the price matches your order parameters.

E*TRADE also lets you buy fractional shares through its mobile app using the same process. Search for the security, tap "Buy," enter your dollar amount, and confirm the order.

Dividend reinvestment and fractional shares

E*TRADE's dividend reinvestment plan (DRIP) automatically uses your dividend payments to buy more shares of the same security. When your dividend is paid, the system buys as many whole shares as possible with that money, then uses any remainder to purchase fractional shares. This means your dividends go to work immediately rather than sitting in cash.

You can enable or disable DRIP for individual securities in your account. Go to your holdings, select the security, and choose your dividend reinvestment preference. If DRIP is on and your dividend is $47 but the stock costs $52 per share, E*TRADE will buy 0.9 shares with that $47.

Restrictions and limitations on fractional shares

Fractional shares are not available for all securities. E*TRADE restricts fractional purchases on penny stocks, some over-the-counter (OTC) securities, and certain mutual funds. You can check whether a specific security supports fractional shares by searching for it in your account — the platform will show you the option if it's available.

If you have a margin account, there are additional rules about which fractional shares you can hold and how they affect your buying power. Fractional shares in a margin account may have different margin requirements than whole shares. Contact E*TRADE directly if you use margin and want to confirm the rules for a specific security.

Fractional shares cannot be sold short, and you cannot use them as collateral for a margin loan. If you need to sell fractional shares, you can do so at any time during market hours, and E*TRADE will execute the sale at the market price.

How fractional share pricing works

When you buy fractional shares, you pay the market price for the portion of the share you're purchasing. If a stock is trading at $100 per share and you buy 0.5 shares, you pay $50 (plus any applicable fees, though E*TRADE typically charges no commission on stock trades). The price you pay depends on when your order executes during market hours.

If you place an order during market hours, it executes at the next available price. If you place an order after hours, it waits until the market opens the next trading day. E*TRADE does not may provide a specific price for fractional share orders — the actual price depends on market conditions when your order reaches the exchange.

Selling fractional shares

You can sell fractional shares the same way you sell whole shares. Go to your holdings, select the security, and choose "Sell." Enter the number of fractional shares you want to sell (or the dollar amount), review the order, and submit it. Your fractional shares will sell at the market price during regular trading hours.

When you sell fractional shares, you may owe capital gains tax if the sale price is higher than what you paid for them. E*TRADE tracks your cost basis automatically, so you can see your gain or loss before you sell. Keep records of your fractional share purchases and sales for tax purposes.

Fractional shares and account transfers

If you transfer your E*TRADE account to another brokerage, fractional shares may be handled differently depending on where you're moving them. Some brokerages accept fractional share transfers, while others require E*TRADE to sell your fractional shares and transfer the cash proceeds instead. Before you initiate a transfer, contact the receiving brokerage to ask how they handle fractional shares.

If your fractional shares are sold during the transfer process, you'll owe capital gains tax on any profit, just as if you had sold them yourself. The transfer agent will provide you with documentation of the sale for your tax records.

Frequently Asked Questions

Can I buy fractional shares with automatic investing on E*TRADE?

Yes. E*TRADE's automatic investing feature lets you set up recurring purchases of fractional shares. You choose the security, the dollar amount, and how often you want to invest (weekly, monthly, quarterly, etc.), and E*TRADE executes those purchases automatically. This is useful for dollar-cost averaging into a position over time.

Do fractional shares have voting rights?

Yes, fractional shares carry voting rights proportional to the fraction you own. If you own 0.5 shares of a company with 1 million shares outstanding, you have voting rights equivalent to 0.5 shares. E*TRADE will send you proxy materials if you hold fractional shares in a company holding a shareholder vote.

What happens to my fractional shares if E*TRADE goes out of business?

Your fractional shares are protected by the Securities Investor Protection Corporation (SIPC), which insures brokerage accounts up to $500,000 per account type. Fractional shares count toward that limit the same way whole shares do. Your securities are held in your name, not E*TRADE's, so they would transfer to another brokerage if needed.

Can I set a limit order for fractional shares?

E*TRADE allows limit orders for fractional shares on stocks and most ETFs. You can specify the maximum price you're willing to pay when buying or the minimum price you're willing to accept when selling. The order will execute only if the market price reaches your limit during regular trading hours.

Are there fees for buying or selling fractional shares?

E*TRADE charges no commission for buying or selling fractional shares of stocks and ETFs. You pay only the bid-ask spread (the difference between the buying and selling price), which is the same whether you're trading fractional or whole shares. Some mutual funds may have transaction fees; check the fund details before you buy.