Partial shares are a hot topic right now. They’re being touted as the best way to get into the stock market, and some even say that they’re cheaper than buying whole shares at full price. But are partial shares really worth investing in? Let’s find out!
What are partial shares?
In the world of stocks, a partial share is a share of stock in a company that has not been divided into multiple pieces. For example, if you own 100 shares of Apple stock, these 100 shares are considered to be one whole unit. However, if you own 1/100th of those same 100 shares and have no other holdings elsewhere (or if the other holdings are less than 1/100th), then you would have 1 partial share.
How do they work?
Partial shares or fractional shares are a way to invest in a company without buying the whole stock. When you buy partial shares, you’re essentially buying a portion of stock in the company, no less than 1/10 of its total value and no more than 1/2. SoFi experts recommend fractional shares as “fractional shares make it easy to customize your portfolio with pieces from a lot of different companies without having to pay a lot of dollars.”
You can buy partial shares in any company that offers them. Companies that sell partial shares usually have an online platform where you can purchase them from your computer or mobile device (or even by phone). Most companies offer different levels of investment and allow investors to start with as little as $100 (though some go up into six figures).
Some people choose not to take advantage of this opportunity because they believe it’s too risky; others don’t understand how it works. But if done properly and responsibly, partial share trading is one of the safest ways for ordinary investors to gain exposure to the stock market.
Why would I buy a partial share?
You might want to buy a partial share mainly for diversification. If you have a portfolio of full shares and want to add more, it can be expensive. Buying partial shares allows you to spread your investment dollars over a larger variety of companies at a lower cost. And if you’re looking to invest in an industry that isn’t traditionally associated with stocks, buying partial shares lets you do so without breaking the bank on the initial investment or ongoing maintenance fees.
Can I trade them?
Partial shares can be bought and sold, but they are not traded on the stock market. You can buy them through an online broker or a traditional stockbroker.
When you buy partial shares, you’re buying part ownership of a company that isn’t publicly traded yet. When the company goes public, your investment becomes whole ownership of the company again, and you can trade it like any other stock.
The good news is that neither option is riskier than buying full shares outright. This means that if you’re trying to save money or don’t have enough cash on hand for a larger order, then partial share purchases are an excellent way for small-time investors like yourself to get started investing without breaking the bank or risking too much of your capital at once.
Partial shares are an interesting investment. They can be a great way to get exposure to the stock market without taking on too much risk in your portfolio. However, there are some risks involved with partial shares that you should consider before making your decision.
