Leverage Your Portfolio With Fractional Shares
- Fractional shares can allow you to start investing while staying on budget.
- Fractional shares can help build your risk tolerance during the stock market’s uncertainty.
- Most platforms allow you to purchase fractional shares for as little as $1!
Many investors have challenges that they face, like the risks that come with investing, finding the proper budget, and building a strategy to keep the momentum going. One of the ways to combat all of these things is to leverage fractional shares when it comes to building your investment portfolio.
Affluent to Affordable
The core of stock investing is purchasing shares of stock. That share or share of stock echoes ownership of a company in question. When you purchase that stock, you own shares in that publicly-traded company.
Image Credit: Natasa Adzic / Shutterstock.com
When it comes to purchasing shares of stock, many people might find that the price is out of their budget. This is where fractional shares enter the chat.
Fractional shares saw a boom during the last recession, and investment apps like Stockpile started offering it to investors. When public investors purchase a fractional share of stock, you’re simply purchasing a portion of a full share of stock.
Depending on the platform you use to purchase stock, you can buy partial shares in any increments - half a share, a fifth of a share, and so on. There are even platforms where you can specify the dollar amount of the share you want to purchase at that time.
Fractional shares allow more people to invest within their budget in those top-performing stock funds that might be out of reach. These types of shares have taken investing from being accessible to the affluent to making it affordable for all!
When it comes to investing through fractional shares, investing is affordable and helps with lessening the risk that may come to certain stocks or volatile climates.
Risk tolerance is one of the most important things to keep in mind when it comes to investing, and fractional shares allow you to lessen them while holding that fractional ownership in the company. While fractional shares aren’t just for new investors, they allow new investors to help build their strategy while learning the markets and key points of stocks.
Another thing that some investors look for in stocks is dividends. Even if you were to invest in a company via the fractional share method, you can still be paid dividends. The amount of dividends that will be owed to you will be only based upon the amount of shares you own whether that’s a fractional or full share.
Image Credit: jittawit21 / Shutterstock.com
Another perk to holding fractional shares is that you can research the company’s stock’s performance. While holding the share, you can determine if you should hold the fractional share, build towards a full share, or sell that fractional share. You can sell fractional shares the same way as you would sell full shares.
Involve The Kids
If you want to get your kids started with investing, look for platforms that allow fractional shares within custodial accounts! Using this type of share purchasing gives you the power to make investing work on your terms!
Image Credit: Africa Studio / Shutterstock.com
Your Vote Matters
A core thing to keep in mind is that you still get the same treatment as an investor that purchases a full share! So, if there is a vote for shareholders, you get to vote too!
Leveraging Your Investment Portfolio
Fractional shares aren’t just for individual stocks. You can grab ETFs (exchange-traded funds) as well! These sorts of assets also help investors on any budget build diversification within their portfolio.
Speaking of budget, fractional shares allow you to expand your paper while you invest! Talk about win/win! This method also pairs well with another popular strategy with investing, which is Dollar-Cost Averaging (DCA).
Fractional share keeps you from being restrictive while practicing DCA. Warren Buffet once said to put time in the market versus trying to time the market, and DCA aligns with this. Purchasing fractional shares by using the DCA method gives you the leverage to invest a consistent amount of money at consistent times. As a result, the average price-per-share (PPS) with this type of strategy won’t be the lowest or the highest.
Investment apps such as Robinhood, Public Invest, SoFi, M1, Stockpile, Acorns, and Stash are known for offering this. This, in return, has yielded strong user numbers. On the other hand, not all investment brokerages offer investors the fractional share stock purchase option.
As the trend continues to grow, major brokerages like Charles Schwab, TD Ameritrade, E-Trade, and Fidelity have adapted to more investors adding this to their investment strategy. In addition, some platforms allow you to purchase fractional shares for as little as $1 or $5!
Be mindful of how much and what increment of fractional share you can utilize. Fees and user experience are important to the platform you decide to use when investing in the stock market. Yet, if you want to move from your current brokerage to another one, be mindful of how the transfer process might impact your fractional shares.
Also, to get the most out of your fractional shares, make sure that you have your Dividend Reinvestment Plan (DRIP) feature turned on to help build up your shares quicker while you determine your position with that particular company.
Plan Your Position
Make a plan with your fractional share method of investing before purchasing to make sure that you are maximizing your position. Fractional shares can be the “cheat code” to building the liquidity within your portfolio!
Do you know any platforms that offer fractional shares? Comment your favorites below!