Can You Buy Merrill Edge Fractional Shares?

LAST UPDATED: April 8, 2023 | By Conrad Golly
merrill edge fractional shares

Some brokerage firms are notable for permitting the purchase of fractional shares directly. However, some other brokers only allow customers to reinvest their dividends into fractional shares. Merrill Edge belongs to the latter.

Merrill Edge fractional shares: Merrill Edge permits customers to reinvest their dividends from stocks, ETFs, and mutual funds into fractional shares. However, it does not permit the express purchase of fractional shares on its site. Customers can only buy fractions of shares by reinvesting their dividends, but not directly.

Having a hard time finding your Merrill Edge account number? Read this article.

How Can I Buy Fractional Shares on Merrill Edge?

merrill edge fractional shares
merrill edge fractional shares

Customers cannot directly buy fractions of shares on Merrill Edge. This broker only allows investors to reinvest their dividends into fractional shares.

Let’s see how it works.

To reinvest in fractional shares, customers can only buy the stocks that made the payout. This is unlike buying fractional shares directly, where you buy based on the amount of cash you have. 

Customers should simply select whether they want each security in their portfolio to reinvest with a selection online. If you change your mind, you can just as easily change your choice.

Merrill Edge allows customers to reinvest all dividends from either stock, mutual funds, or ETFs. 

How Much Does It Cost To Buy Fractional Shares On Merrill Edge?

The entirety of the process of reinvesting your dividends attracts no commission from this broker. It is completely free, but the only thing it may cost you is your time, which is, of course, insignificant.

What Are The Benefits Of Buying Fractional Shares On Merrill Edge?

Rather than cashing out the dividends paid to you (which is a very valid choice anyway), customers may choose to reinvest in it in stocks. Here are the reasons why.

  • Seamless: Reinvesting in dividends is very easy on Merrill Edge. Matter of fact, reinvestments become automatic when you set up the whole process.
  • Affordable: This process is inexpensive because there is no commission involved. Customers are also not required to pay any brokerage fees.
  • Reliable: Because the process is automatic, you can rest assured that you will have acquired more shares anytime a dividend is paid to you, all thanks to dollar-cost averaging (DCA).
  • Compounding interest: Reinvesting dividends can help you increase your long-term profits. When you purchase more shares with your dividend, it further increases your dividends the next time, which lets you buy more and more shares.

What Are Advantages Of Buying Fractional Shares?

  • Diversification of your portfolio: With fractional shares, investors can purchase several different stocks to increase the strength of their portfolios. This is because fractions of shares can be sold at $1 to $5 and this allows you to purchase a variety of stocks. This way, investors are at less risk of a huge financial burden if one stock crashes.  
  • Good for beginners: For people who are just starting their investment journey, fractional shares can be good leverage. If you do not have enough money to buy whole shares, investing your dividends can be a great way to grow your portfolio. This way, you may purchase shares that you would otherwise not be able to do. You may also begin reaping the benefits of compounding interests earlier.
  • Dollar-cost averaging: Dollar-cost averaging, allows investors to invest a particular sum of money regularly. With time, this feature may allow you to pay a lower amount for a unit share than you would have been able to if you purchased all your shares at once. This is because dollar-cost averaging works with a regular dollar amount and not a regular share. It’s more advantageous when you can invest the full amount. The other not-so-wonderful alternative is that your cash sits in your account until you have enough money to purchase a whole share.

What Are The Disadvantages Of Fractional Shares?

  • Reduced dividends: When you invest in a fraction of a share, you would get only a fraction of the stock’s dividends. For example, if the dividend is worth $4 for a share, you would get only $2 if you purchased half of a unit of the share.
  • Limited Liquidity: Fractional shares often do not trade as promptly as whole shares. Therefore, investors may not get quick liquidity with their fractional shares, unlike whole shares. This happens because some fractional shares are not in high demand, so it may take your broker a while to sell them off. Also, some brokers wait until they have enough fractional share orders to enable them to purchase whole shares, which may cause a decline in the speed of processing your order.
  • Restriction on transfers: Customers may not be allowed to transfer fractional shares to other brokers, unlike whole shares. Rather, they sell off your fractional shares and give you cash in return. This may attract unwanted expenses by way of tax if the fractional shares have appreciated since you purchased them. All in all, it may be merely a small hitch, if you can quickly purchase a stock with the cash you have in your new broker’s account.
  • Limited Stocks: Not every stock can be purchased as a fraction. The implication of this is that you may not be able to buy some stocks you want to buy and your portfolio may not be as diversified.  
  • No shareholder rights: Some brokers do not allow investors who own less than a share to vote in company affairs. On the other hand, some brokers sum up fractional shares into whole shares and report votes to companies.

Verdict: Merrill Edge fractional shares

Fractional shares can only be obtained on Merrill Edge through dividend reinvestments. However, the whole process is easy to perform and automatic. Customers are also not charged any money when they buy fractional shares.

New investors may tap into this minefield of fractional investing to boost their portfolio and purchase several stocks they would otherwise have been unable to purchase. On the flip side, not every stock can be bought with fractional share reinvestments. Only stocks that made the payout can be bought. Hence, your options may be somewhat limited. 

However, fractional shares are surely a nice and easy way to compound your interest and boost your long-term returns.

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Conrad Golly

Conrad Golly

I’m Conrad, a retired first responder turned successful Tyapreneur with a passion for real estate, family, and business acquisitions. With a focus on growing online ventures, I bring a wealth of experience to the world of entrepreneurship. I write on investing, personal finance, family life, and business strategies, inspiring others to achieve their goals.

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