Fractional Shares Investing: Everything You Should Know
You may be interested in buying stock of top companies but cannot afford the high prices. Now you can buy a slice of the whole share called a fractional share. Investors can now buy fractions of shares of high-priced shares.
When you want to buy shares you decide the amount that you are ready to invest and check how many shares you can buy. The investment amount when divided by the share price gives the number of shares you can buy.
Fractional investing | Image Resource: appreciatewealth.com
For example, if the shares of a company are trading at Rs. 100 and you have Rs. 1000 to invest then you can purchase 10 whole shares. But if the same share is trading at Rs. 100.25 then you can buy just 9 whole shares. With fractional investing, you can purchase partial shares. This helps you to get more returns. If you invest for the long term, this small amount will add up to a substantial sum.
Investing in fractional shares
Usually, when you use an online trading platform you enter the number of shares you want to purchase and you are ready to pay the price. In fractional trading, you can enter the amount you want to invest instead of the number of shares.
The app will calculate how many fractional shares you will get with your amount. When the prices of the stock are in hundreds and thousands of rupees you can buy a fraction of the share. The money invested will start giving you benefits.
Instead of waiting for months and years to collect enough money and then building a diversified portfolio you now use your funds to invest in your favourite companies. It is now possible to invest based on how much money you have rather than how many shares you want to buy.
With fractional shares, most people invest in the market and this leads to more interest in the companies. Finally, it will result in better business governance.
Points to keep in mind with fractional shares
First, you will need a firm that offers fractional trading. Fractional trading is not allowed in all share markets so you will have to check. Some of the brokers also do not offer fractional trading. You will have to approach a broker who allows this type of trading.
Appreciate offers an app to invest in fractional shares online as your budget allows.