How to buy fractional shares on TD Ameritrade?

Consider a company’s share as a whole cake. Cut this cake into slices; each slice can be called a fractional share. In other words, a portion of the total equity share is addressed as a fractional share. However, fractional shares are unavailable in the stock market and can only be sold through a major brokerage. These might hold value for investors but are challenging to sell.

What leads to the creation of Fractional Shares?

Fractional shares are a product of certain significant decisions taken by the company like stock splits, mergers and acquisitions, and more. Here is what each of them means:

1. Stock Splits:

Stock Splits often result in an odd number of shares. For instance, a shareholder X owns 51 shares, and a company announces a 5-for-4 stock split. This will lead to X owning fractional shares.

2. Dividend Reinvestment Plan:

DRIP enables the shareholders to buy shares out of the dividend payout received. However, sometimes dividend payout may not be enough to buy an entire share and lead to the creation of fractional shares.

3. Mergers and Acquisitions:

With mergers and acquisitions, the companies merge and create new stocks with predetermined ratios, forming fractional shares.   

4. Fractional Trading Shares:

Fractional shares cannot be traded through a stock marketplace. They can only be sold through a major brokerage firm. Herein, the fractional shares are joined until a whole share is attained. However, if the selling stock is not in high demand in the marketplace, then selling the fractional shares might take longer. If the fractional shares end up with the shareholders for unexpected reasons such as stock splits, they might not want to hold them.

TD Ameritrade

TD Ameritrade is a solid pick for investors. Even though it hasn’t been not entirely up to its game in past years, it’s still appreciated by traders and can be taken advantage of through multiple mobile apps. New investors can derive a lot of value from its research and education section, as TD Ameritrade provides a lot of coverage on the market, stocks, and funds. Also, the broker enables you to trade almost as many securities as any of its peers. Hence, TD Ameritrade is an excellent all-around pick for everyone.

Does TD Ameritrade offer Fractional Trade?

TD Ameritrade allows you to reinvest the dividends you receive into new shares of the same company. However, it doesn’t offer partial share purchases. You can reinvest your fractional dividend and grow your payout. Charles Schwab has now acquired TD Ameritrade. However, it will still be opening new accounts until rolled into Schwab. On the other hand, Schwab enables fractional share purchase, meaning once TD is rolled into Schwab, there might be a shift in the fundamentals. 

Bottom Line

With strengths in terms of technology, research and education, and trading platform TD Ameritrade is an excellent pick if looking for a broker. However, this is not an option if you want a fractional or partial share purchase.