Commissions largely don’t exist anymore at most do-it-yourself brokerages such as Charles Schwab and TD Ameritrade Holding Corp., AMTD +0.85% eliminating that concern. Still, most institutional investors continue to prefer blocks of shares since the price often quoted on an exchange is for a round lot, Mr. Mackintosh said.
That means investors are left with three options: paying up for high-price stocks; buying shares that trade for less; or purchasing a fraction of a share, an alternative recently offered by some retail brokerages.
But fractional shares come with a caveat. Investors don’t own the actual share. Instead, the brokerage does, and investors have a right to whatever portion they agree to buy.
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