- The price of a single share of stock can be expensive
- Fractional investing allows you to purchase portions, or small slices of a share
What’s a fractional share?
Fractional shares are just what they sound like — fractions, or pieces of a whole share of stock, bond, or fund.
How do fractional shares work?
The price of a single share of stock can be expensive. Many stocks on the S&P 500* can trade for over $100 a share. A single share of Google’s parent company Alphabet, will cost over $1,100**.
Fractional investing allows you to purchase portions, or small slices of a share. This can be cost-effective for investors who want to get into the market but who don’t have a lot of money to begin.
You’re still investing in the company, but you don’t need to wait until you’ve got enough money to purchase an entire share. It’s one option for getting started.
Say you want to purchase stock in a popular tech company that’s valued at $100 a share. But you only have $20. Fractional shares will allow you to purchase a fifth of a share of that company.
What’s the benefit of fractional shares?
For those who are looking to invest in the market but worry they don’t have enough to begin, fractional shares are a good way to get started. Even though you’re starting out small, you can still potentially earn a return on your money. This is especially true if you’re starting out early. Little amounts can earn interest, and that interest can compound over time.
For those who are looking to invest in the market but worry they don’t have enough to begin, fractional shares are a good way to get started.
Fractional shares allow you to invest in exciting, innovative, and interesting companies without having to pay full share price. Think of them in terms of a pizza. If the whole pie is a share, then a fractional share is a slice. Except this pizza may earn interest, dividends, and grow over time. And you get a taste of the company’s success.
Fractional shares are potentially a great way to start building your investment portfolio, on a budget that you can afford.
Remember, you’re still a bona fide shareholder. You just hold fractions of shares. It’s always important to remember that investing involves risk.