What Are Fractional Shares?

The stock market can be an intimidating machine if you’re just getting into it. If you’re looking to buy a share in a successful company like Apple or Google, it might be disheartening when you see that just one stock of Google costs over $1,000 (as of December 2017). Fractional shares are here to help.

For quite a while, the only way to start investing in the stock market was by investing in whole stocks, which can get very expensive to someone recently out of college. This isn’t ideal, because this leaves money on the table for millions of people who want to build wealth through investing. This is the reason fractional shares were introduced and are now made widely popular with apps like Stockpile.

What Are Fractional Shares?

Fractional shares are a pretty simple concept! Let’s say that you wanted to invest in a share of Apple, which costs $174.88 as of December 21st, 2017. You might be a college student or a recent grad, and investing in a whole share might be outside of your budget.fractional shares

With fractional investing, you’re able to invest any amount in Apple and get a fraction of a share. So you may not be able to invest in a whole share, but you could afford to purchase 1/4 of Apple’s stock, which is worth $43.50. Fractional shares allow anyone to invest in a fraction of any stock on the stock market.

What are the Benefits of Fractional Shares?

Lower Barrier To Entry

The biggest benefit is that the barrier to entry to get into stock market investing is practically zero. Before technology enabled the existence of fractional shares, some brokerages charged north of $2,000 to simply open up an account, let alone start investing in stocks. Now, all someone needs is a few bucks and access to the internet or a smartphone, and anyone is able to start investing in the stock market

Gives You Experience Trading In A Real Environment

With fractional shares, anyone on a limited budget is able to get the true experience of trading on the stock market.

What are some of the standard concepts of investing in the stock market? Diversify. Don’t react with emotions. Play the long game.

Investing in fractional shares give you an opportunity to learn and practice getting better at these concepts. For example, diversification is harder when you can only afford two stocks from two companies. It’s much more attainable with fractional shares, as you could have a diverse portfolio full of different portions of shares. This gives you real experience practicing what a real stock trader goes through on Wall Street.

Once you start building your wealth over time and you’re able to invest in full stocks, you’ll already be a pro and know the rules of the stock market.

How Do I Start Investing In Fractional Shares?

Luckily, Stockpile is the perfect platform to invest in fractional shares. Once you make an account, you’re able to see all the stocks on the stock market that you can invest in. Let’s look at a company with more expensive shares, like Tesla.

At this second, a share of Tesla is worth $328.85. You may have always dreamed of owning a Tesla Model X, but until you can afford that, you want to purchase some Tesla stock. Unfortunately, even $300+ is a little out of your budget. On Stockpile, this is no problem! Simply put in the dollar amount that you’re comfortable investing, and Stockpile will calculate the fractional share that you’re buying.

Let’s say you want to buy $30 worth of Tesla, which would give you 0.09123 of a stock, as you can see in the picture above. Simply purchase it and you officially own a piece of Tesla—and it didn’t cost you $300 to get it.

At the end of the say, fractional shares are a great way for anyone to learn what it’s like to invest without needing to dedicate their whole savings account to one share. Besides, if you pick the right one, maybe you’ll get lucky. Happy investing!

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/meghan Gardler