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What is fractional share investing?

Fractional share investing is a way to buy tiny portions of a company’s stock, instead of needing to buy whole shares. Imagine a slice of pizza: instead of buying the entire pizza (one whole share), you can just buy a slice (a fractional share).

In South Africa companies like Easy Equities are masters of the fractional share.

Here’s how it works:

Traditionally, stocks are sold in whole units. For example, if a share of Apple is currently trading at R200, you’d need R200 to buy one share.
Fractional share investing lets you buy a portion of a share. So, you could invest R20 and own 1/10th of an Apple share, or R100 for 1/2 a share.
This opens up the stock market to a wider range of people, as you don’t need a large amount of money to get started. You can invest with what you have, even if it’s just a few rand.

There are platforms that specialize in fractional share investing, like Easy Equities in South Africa, Stash and Robinhood in the US, and others. These platforms allow you to buy and sell fractional shares easily, often through a user-friendly app.

Benefits of fractional share investing:

  • Lower barrier to entry: Invest with any amount, no matter how small.
  • Diversification: Spread your investment across a wider range of companies with less money.
  • Experimentation: Try out different stocks without a big commitment.
  • Dollar-cost averaging: Invest regularly with smaller amounts to potentially lower your average purchase price over time.

Costs and considerations:

  • Transaction fees: Some platforms charge fees for buying and selling fractional shares.
  • Liquidity: Not all stocks have high liquidity for fractional shares, so it might be difficult to buy or sell them quickly.
  • Minimum investment: Some platforms have minimum investment requirements for fractional shares.
  • Complexity: Fractional share systems might seem complex for beginners.

Overall, fractional share investing is a powerful tool that makes the stock market more accessible to everyone. Just be aware of the potential costs and risks before you start investing.

I hope this explanation helps! Feel free to ask any further questions you might have.

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