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6. Executing Trades > Sell Fractional Shares

Sell Fractional Shares

Selling fractional shares isn’t obvious when you place online orders. You must know how different brokerages handle fractional shares so you don’t end up paying a big commission to dump a piddling investment.

Many online brokerage firms, such as TD Waterhouse, Charles Schwab, E*TRADE, Harrisdirect, and Muriel Siebert, offer dividend reinvestment services. With these programs, all dividends paid on stocks you own are reinvested automatically into new shares. However, these dividend reinvestments almost always include some fractional shares. You must place your sell orders correctly to make sure that you sell all your shares including the fractional ones.

Generally, brokerages that offer dividend reinvestment plans reinvest dividends with no commissions or fees. Over time, the reinvestment of these dividends can help you add significantly to the stocks that you own and help you keep the dividends you receive invested in stock. Reinvesting even a small amount of dividends instead of spending the money can enhance your returns over time. According to Ibbotson Associates, large company stocks returned an average of 10.2 percent per year from 1925 to 2002, with all dividends reinvested in additional shares along the way. Without that dividend reinvestment, the return averaged just 5.7 percent a year during the same timeframe. By taking advantage of dividend reinvestment services, you obtain the....


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