A fractional share is a portion of an equity stock that is less than one complete share. Fractional shares have become a fantastic way of allowing more people to purchase more stocks of varied types.
As noted by the financial experts at SoFi, “Fractional shares make it possible to own part of a stock from your favorite companies without committing to a whole share.” Indeed, these types of shares offer some fantastic benefits. Here are three of them.
Fractional shares allow you to purchase a stock at, quite literally, a fraction of the price. This results in you being able to buy more stocks with a limited amount of funds. This, in turn, can help you better diversify your portfolio and put more stocks into your hands at a fraction of the price.
You still have to be careful to ensure that the stocks you buy fit your financial goals, and you must still do all of the prerequisite research into stocks to make sure that they are sound investments. However, these kinds of shares can unquestionably put more stocks into your hands.
One of the biggest problems with any expensive stock is that the stock price may put it out of the reach of many retail investors. This can be the case for some of the highest-performing stocks on the planet, like Apple. As a result, it may be difficult for less wealthy investors to make the investments that they want.
This is where these kinds of shares can be beneficial. As long as you have the right kind of investment platform, you can make a fractional purchase that can put the price of even the most expensive stocks in the world within reach.
This strategy is not without potential risks, of course, as doing so can result in a stock portfolio too reliant on one stock. However, when folded in with a broader financial plan and appropriately diversified portfolio, purchasing more expensive stocks via fractional purchases can put expensive stocks within reach.
If you are unsure whether or not a stock is truly worth an investment, you can view a fractional share as a great way to make an initial investment. This will allow you to buy a small level of a stock, limiting your potential loss but giving you a chance to see if a stock is right for you and your portfolio.
Testing a stock in this manner will give you a chance to experience actually having a stock in your portfolio while still limiting your potential losses.
There are many reasons to potentially invest in these kinds of shares, and the above three reasons are merely the starting point. However, you have to make sure that you do all of the necessary research into any stock at the end of the day, thus confirming that it is right for you and whatever your financial goals are.