What are fractional shares?
A fractional share is equity in a security that is less than one full share. Instead of purchasing whole shares, fractional investing allows you to buy a portion of a share based on a dollar amount you wish to invest.
At M1, we split every share into 1/100,000th of a share, giving you precise control over your investments. This allows you to trade exact amounts of each security based on the targets set in your portfolio, regardless of the share price.
How fractional shares work at M1
M1's platform enables you to:
Invest specific dollar amounts into any available security on M1
Maintain precise portfolio percentages with automatic rebalancing
Purchase high-priced stocks without needing the full share amount
Execute trades down to 1/100,000th of a share
Automatically reinvest all available cash according to your portfolio targets
When you deposit funds or receive dividends, M1 automatically calculates how many shares (including fractional portions) to purchase based on your portfolio's allocation targets and current security prices.
Pricing and execution of fractional orders
M1's trade execution process for fractional shares works as follows:
All buy and sell orders are collected and executed during the AM and PM trading windows
Fractional shares are priced at the same execution price as whole shares during that window
M1 aggregates all client orders and executes them as a single order, then allocates the appropriate fractions to individual accounts
Benefits of fractional investing
Fractional shares offer several key advantages:
Precision investing: Maintain exact percentage allocations in your portfolio
Accessibility: Invest in high-priced securities with any amount
Full cash utilization: Put every dollar to work rather than having uninvested cash sitting idle
Dollar-cost averaging: Consistently invest fixed dollar amounts regardless of share prices
Limitations of fractional investing
While fractional shares offer many benefits, they do have some limitations:
Transferability: If you choose to transfer your account to another broker-dealer, only the full shares are guaranteed to transfer. Fractional shares will be liquidated and transferred as cash following the outgoing transfer.
Voting rights: Voting rights may be proportional to your ownership or may require a minimum of one full share (depending on the company's policies)
Examples of fractional shares in action
Example 1: High-priced stock
Stock ABC trades at $3,500 per share
You want to invest $500
With fractional shares, you can buy 0.143 shares ($500 ÷ $3,500 = 0.143)
Without fractional shares, you'd need to wait until you saved $3,500 or choose a different investment
Example 2: Portfolio allocation
You have $1,000 to invest across 10 stocks at 10% each
Each position should receive $100 regardless of the share price
With fractional shares, you can maintain perfect 10% allocations
Example calculation for a $250/share stock: $100 ÷ $250 = 0.4 shares
Dividend handling with fractional shares
When you own fractional shares, you receive proportional dividends based on your ownership percentage:
If you own 0.5 shares of a company paying a $2 dividend per share, you'll receive $1
Dividends from fractional shares are treated the same as dividends from whole shares
At M1, dividends can be automatically reinvested according to your portfolio targets once they reach the minimum cash threshold
Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.
All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.
Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.
SAIF-08202025-ebjmewbt