Introduction to Fractional Shares;

In recent years, fractional shares have become an increasingly popular way for retail investors to gain exposure to expensive stocks and assets. A fractional share is a partial ownership stake in an asset, typically a stock or bond. For example, if you wanted to buy a share of Apple stock but didn’t have the $200 to do so, you could purchase a fractional share for $20 instead.

Fractional shares have been around for a while. Still, they’ve only recently gained popularity thanks to the advent of online brokerages and mobile apps that make buying and selling them easier than ever. Robinhood, Stash, and M1 Finance are all popular platforms that offer fractional shares.

There are several benefits of investing in fractional shares. For one, it allows retail investors to get exposure to high-priced stocks and assets they might not otherwise be able to afford. It also makes it possible to diversify your portfolio without committing a large amount of money upfront. And finally, because you’re only buying a partial stake in an asset, you’re less exposed to risk if the price falls.

If you’re interested in getting started with fractional shares, you should keep a few things in mind. First, understand that when you purchase a fractional share, you own a piece of the underlying asset—but not the whole thing.

What are the Benefits of Investing in Fractional Shares?

Many retail investors are intrigued by the thought of investing in fractional shares. After all, who wouldn’t want to own a piece of their favorite company? But what are the benefits of investing in fractional shares, and is it right for you?

Here are some key benefits of investing in fractional shares:

• You can start investing with less money: When you invest in fractional shares, you can buy as little as one share of a stock. This means that you can start investing with less money than if you were to buy whole shares.
• You can diversify your portfolio: By buying fractional shares, you can spread your investment dollars across multiple companies and sectors. This will help to reduce your overall risk and give you a better chance at achieving your financial goals.
• You have more control over your investments: You can buy and sell stocks quickly and easily with fractional shares. This allows you to take advantage of market opportunities without waiting for someone else to buy or sell their shares first.

How Do Fractional Shares Work?

When it comes to investing, there has always been a bit of a playing field between the "haves" and the "have-nots." The "haves" are typically institutional investors with large sums of money to invest. They have always had an advantage over retail investors, who are individuals investing their money.

What are fractional shares? They're simply more minor pieces of ownership in a company. For example, let's say you want to buy shares of Apple (AAPL), but you can't afford to buy one whole share, which currently costs around $300. You can buy a piece of that share with fractional shares—say, 1/10th of a claim- for $30.

Fractional shares are made possible by the rise of online brokerages like Robinhood and Stash, which allow retail investors to buy and sell stocks and other securities without going through a traditional brokerage firm. And because these online brokerages don't have the exact high overhead costs as traditional firms, they can offer fractional shares at much lower prices.

This is good news for retail investors because it allows them to get in on investment opportunities that were previously out of reach. It levels the playing field between retail and institutional investors. Of course, there are some drawbacks to fractional shares as well. For one thing, they can be harder to sell

What Companies Offer Fractional Shares?

Several companies now offer fractional shares, which allow retail investors to purchase a partial stake in a company. This is a significant development, as retail investors can now invest in companies previously only accessible to institutional or wealthy investors.

• Fractional shares are popular with retail investors because they provide a way to diversify one's portfolio without having to commit a large amount of capital to a single investment. For example, an investor could purchase one share of Apple stock for $120 or five fractional shares of Apple stock for $24 each.
• Several companies offer fractional shares, including Robinhood, Stash, and M1 Finance. Each of these companies has unique offerings and fee structures, so it's essential to research before deciding which platform is right for you.

In general, fractional shares are an excellent way for retail investors to level the playing field and access investments that were previously out of reach. With careful research and planning, fractional shares can be used to build a well-diversified portfolio strategically.

Risks Involved with Investing in Fractional Shares;

Potential investors should be aware of a few risks associated with fractional share investing. 

• Firstly, because fractional shares allow investors to buy a piece of a high-priced stock, they also come with the inherent risk that the stock could lose value and the investor could end up losing money.
• Another potential risk is that some brokerages or platforms that offer fractional shares may not be as well-regulated as traditional stock exchanges. This could lead to increased opportunities for fraud or other illegal activity.

It's important to remember that even though an investor may own a fraction of a stock, they still only have one vote when it comes to corporate decisions made by the company. An investor's influence over the company's direction is limited.

Alternatives to Investing in Fractional Shares;

Many people are intimidated by the stock market and feel they need help to compete with professional investors. However, fractional shares are leveling the playing field and allowing retail investors to invest in various companies without putting down a lot of money. There are a few alternatives to investing in fractional shares. 

• One is to buy shares of a company you're interested in simply. This gives you full ownership of that company's stock but also requires more money upfront.
• Another alternative is to invest in mutual funds or exchange-traded funds (ETFs). These investment vehicles allow you to pool your money with other investors and spread your risk out over different stocks or other assets.
• You could also consider investing in bonds. Bonds are essentially loans that you make to a company or government entity. They typically offer stability and income but have a different growth potential than stocks.

Conclusion;

                   Fractional shares are an excellent way for retail investors to access the stock market in previously unavailable ways. Allowing individuals to buy fractional shares helps level the playing field and gives more people access to financial opportunities that were once only available through significant investments. We believe this democratization of investing has helped many new investors get into markets they wouldn't have otherwise been able to access.

We look forward to seeing what further innovations will help empower retail investors even more.