Splitting the concept in fractions – What should you know before buying fractional shares?

Fractional shares allow you as an investor to acquire the most expensive share even if you don’t have a lot of money to invest. Though fractional ownership is not yet in place in India, if you are one of those investors looking to diversify their portfolio, you have the option to own a slice of foreign tech giants and other companies by investing $1 (INR 75). Many investment advisory platforms allow you to buy equities and Exchange Traded funds (ETFs). Purchasing fractional shares could benefit novice investors who may not have large sums of money available to invest in certain equities or ETFs.

What are fractional shares?

As the name indicates, fractional shares are slices or portions of stocks and ETFs that are less than a whole share. You might opt for fractional shares for a variety of reasons, one of them could be that purchasing a whole share could be expensive and you might not have a hefty amount kept aside to invest.

Fractional shares are a relatively new phenomenon in investing, even in the foreign markets—it was nearly impossible to acquire less than single shares of stocks and ETFs until a few years ago. Mutual funds have historically effectively allowed fractional share investment to investors; however, you could only own fractions of shares in a few limited ways until recently.

How to buy fractional shares?

It all depends on the brokerage or the investing platforms that you use. There are a few platforms and advisors that allow Indian investors to invest in global markets, giving them the ability to buy less than one share from what they think are big-ticket stocks.

If you wish to acquire fractional shares, be sure the online brokerage or investing platform you pick enables it. Finally, check to see whether there are any additional commissions or costs for investing in fractional shares.

Benefits of fractional shares

Because a fractional share’s value is less than that of a complete share, it allows for a lesser investment. It’s worth noting that the fractional shares you possess don’t come with voting rights. You will still be able to vote in the same business for each entire share you own. Dividends, on the other hand, are paid out in accordance with the percentage of stock that you hold, rounded to the closest penny.

If you are planning to start your investment journey or are looking to make smart investment decisions under professional guidance, it is prudent to reach out to a financial advisor who can help curate bespoke plans based on your financial goals and risk appetite.

Reach out to a financial advisor today.

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About the Author: George M. Banks

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