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What is Fractional Investing?

by Alan Daniel
What is Fractional Investing?

Stocks of the companies that you know and love are not as easy to buy as they once were. Name brand companies like Walmart, Amazon, Google, Berkshire Hathaway, and others will cost you a pretty penny, and then some. You’ll have to work hard to purchase a single share at the going rate, and even harder to invest with conviction. Even massive corrections may not be enough to allow you to purchase a stock, which is why fractional investing is an option that average people with small capital are investigating.

Is buying an ETF, an index fund, or a mutual fund to passively sit, and then buying small numbers of shares each month with the hope that you’ll accumulate enough to make decent interest sound like a good use of your time and resources?

Probably not.

But maybe you do want to try your hand at investing and getting above-average returns with your limited funds.

You still want to choose stocks and increase your gains by nibbling away at portions of stock.

So, what are you to do and where can you go?

Use Schwab, Square, Robinhood, or others to conduct fractional investing.

What You Need To Know about Fractional Investing

The Skinny on Fractional Investing

An investor participating in fractional investing would purchase a slice of a whole share of equity known as a fractional share.

Fractional shares aren’t new, mobile application-oriented companies like Acorns and similar have offered fractional investments for some time now. But more prominent more capitalized players are moving into the sector like Square, Schwab, and Robinhood, so fractional investing is becoming mainstream.

These companies make it to where you can invest in the best companies for just a dollar. Fractional investing means that you can learn to trade with actual money for a small price. Further, making them commission-free and real-time makes it even more accessible.

How Fractional Investing Works Behind the Scenes

Brokers buy up individual units. They then take slices of that unit and sell unadulterated slivers of that share to buyers. Entities like Robinhood may introduce fractional investing with dividend re-investment programs and even support recurring purchases. Where dividends go to buying up small fractions of the next share until you own it all.

Remember that brokers usually offer fractional shares of the most popular firms, they are hesitant to offer fractional shares of stocks with shallow volumes.

It is hard to hold slice up shares of more illiquid stocks.

How To Buy Fractional Shares

New brands are stepping into this space all of the time. They make it easy to buy and sell these shares and make a name on focusing on these types of fractional shares.

Up and coming millennial favorite applications such as Robinhood, Square Cash App, and other compelling brands like Stockpile offer this option.

Existing players like Schwab offer it too, and more brokers will likely provide it soon.

As always, do your due diligence before you invest. Use your money wisely.






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