Fractional stock trading is a relatively recent phenomenon that picked up popularity in the 2010s. It has made it much easier for retail traders to invest in any stock that they like.
Before fractional trading, investors had to buy at least a whole share of their favorite company to add it to a portfolio or invest in a fund holding the stock. If their favorite stock cost $500, they needed $500 to buy a share, for example.
Many brokers now allow you to buy partial shares of stocks. In the simplest terms, if you have only $100, you can still buy a fractional share of a company that is worth $1,000 per share. If you invest the whole $100, you’d receive 0.1 share. You could gradually add on to this position over time with more fractional and whole shares.
This post originally appeared at U.S. News & World Report.