We just launched fractional shares on CCTrader, over 4,300 US Stocks & ETFs are now available to trade with rates as low as 0.50c.
More experienced investors might ask how come? If one looks back to the not so distant past, the investment community was skeptical about fractional shares. However today it has become clear that there is a market for fractional shares but more importantly that this has encouraged so many people to start investing by lowering the barriers to entry and allowing you to invest any amount, in fact you could invest just a single dollar.
Top Benefits of Fractional Shares
Removing Barriers
Previously if you wanted to buy a single stock of Amazon it would cost you $3,000,
The main advantage of buying a fractional share is that you are now able to buy part of a stock and purchase a share by value. Taking the example of Amazon it would have been too expensive or discouraging for many to start.
Starting slow and learning with real money.
In general for the average more experienced retail investor, a normal amount to invest in one a single stock or ETF is €5,000 with the mean being double that. An average portfolio size would be around €50,000.
However many people find it really hard to start investing thousands and they need to ease into it and build confidence, learn. Even if they can afford it, investing 5,000 Euros into something volatile can be intimidating for some and it would make no sense to invest all of it into a single stock if that is all you had to begin with.
Fractional shares allow people to invest even just a $1 and therefore this barrier is completely removed.
I spoke to a friend of mine last week who is investing 100 Euros in companies he really believes in and that excite him. This seems to be the strategy that is being adopted by many beginners and it makes sense.
Diversifying
It makes sense because it allows investors to diversify which is key. By investing into 10 stocks at $100 each you could reach a healthy diversification and grow it even further over time.
Education and Control
It also makes sense because fractional share investing allow you to invest the exact amount you want since you can purchase by value versus by amount of shares.
By getting started with real money people take an interest and start following the markets, whilst limiting their risk to smaller amounts as they learn.
Lets face it, demo accounts are boring and I suspect that fractional is the nail in the coffin for demo accounts because you can learn first hand in the real world with small amounts instead.
For most, this hands-on approach to learning is a more effective form of education than thinking about investment ideas or concepts in theory.
Lower Fees
Fees for fractional shares are usually priced according to value invested so the minimum fees are so negligible they are no longer a consideration.
Do Fractional Shares Pay Dividends?
If you purchase shares of dividend-paying Stocks or ETFs, then you can receive dividends just as you would if you purchased full shares, pro-rata of course.
DRIP feeding
Fractional shares allow investors to use a DRIP feeding technique efficiently. Drip feeding is a simple but effective technique of investing smaller amounts more frequently over time. This lowers risk by allowing you to buy cheaper if the prices go down and by buying more as the price goes up. Essentially you are averaging along the way rather than buying at a single point in time. Its a very useful technique.
Switch to Advanced mode!
Something really special we have done with CCTrader is to allow people to switch from simple mode to advanced mode. This allows people to start with placing a simple market order and letting the system do everything automatically to advancing to advanced order mode in the future where you can make use of order functions such as stop losses, limits, trailing stop losses, pre market, stop limits and more! Now that fractional is has been launched, CCTrader has a full lineup of more advanced features that cater for the sophisticated investor lined up.
Conclusion
Investing is an extremely important part of financial planning, the earlier you start the better, this is a hard fact. With fractional shares, you no longer have to wait for the “right time” to start. The time is now. Get started, invest wisely and thank yourself tomorrow.
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