Investment
Ever wanted to invest in the stock market but didn't know where to start? Fractional stock investing may be the answer for you! By buying a fraction of a share, you can invest in companies with stock prices that were once out of reach.
Not only would this provide you with more access to the stock market, but it would also allow you to diversify your portfolio.
In this article, we will explore fractional stock investing, how it works, and the benefits and potential risks it brings. Let's dive right in!
What is fractional stock investing?
Unlike traditional investing, which involves buying and selling whole shares, fractional stock investing is a way to buy a portion of a share.
Fractional stock investing allows you to invest in companies with high stock prices, even if you don't have the funds to buy a whole share. For example, let's say you want to invest in Apple, but the stock price is over $200 per share. With fractional stock investing, you can invest as little as $5 and own a fraction of a share of Apple.
If you're new to investing, this is a great way to dip your toes into the stock market, as it allows you to do so with smaller amounts of money.
How does fractional stock investing work?
Fractional stock investing works by breaking down a share of stock into smaller parts. For example, if a share of stock is worth $100 and you want to invest $25, you would own 0.25 shares of stock. You would still receive dividends paid by the company, and the value of your investment would fluctuate with the stock price.
What are the benefits of fractional stock investing?
One of the biggest benefits of fractional stock investing is that it allows you to diversify your portfolio with smaller amounts of money. Instead of investing all your money in one or two stocks, you can spread your investments across several companies. This can help reduce the risk of losing money if one company performs poorly.
Fractional stock investing also provides you with more access to the stock market. High-priced stocks that were once out of reach, aren’t anymore! This allows you to invest in companies you believe in, even if you don't have much money to begin with.
Another benefit of fractional stock investing is that it allows you to reinvest dividends. Dividends are the portion of a company's profits distributed to its shareholders. A shareholder's dividend payment is proportional to the number of shares they own. When a company pays dividends, investors can use that money to buy more shares. With fractional stock investing, you can reinvest even small amounts of money, increasing your returns over time.
Are there any risks involved with fractional stock investing?
While fractional stock investing has advantages, it's important to remember that fractional stocks, like whole shares, are subject to market volatility. So, the value of your fractional shares can go up or down based on market conditions.
Another thing to remember, not necessarily a risk but an important point, is that fractional shares may not have voting rights. When investors own whole shares of stock, they usually have voting rights in a company. With fractional shares, investors may not have the same voting rights.
What to do before you start fractional stock investing?
It's important to research the companies you want to invest in. This involves studying their financials (which can be found in public documents like annual reports), the management team, and the industry they operate in.
Before you start fractional stock investing, also consider diversification. Diversification means spreading your investments across multiple companies and industries. This can help reduce the risk of losing money if one company or industry does not perform as well as you thought it would.
How to start investing in fractional stocks?
Whether you’re a seasoned investor or just starting your investment journey, our app provides a secure platform to invest in a range of stocks. You can buy whole shares or fractions. The choice is yours! Start building your wealth with just a few simple steps. Open a trading account now and start buying and selling stocks straight from your phone with as little as one dollar. Follow these steps.
What fees are associated with buying and selling stocks, and how are they calculated?
Each time you buy or sell stocks, a 0.5% fee is applied, with a minimum of $0.50 and a maximum of $30 per order. Some sell orders may also include a PTP tax for certain companies. You’ll see all fees and taxes before you place your order and in your transaction history.
We hope you found this article helpful. If you want to learn about other types of investments, why not read “A guide to investing in gold”?
