When most investors think of stock investments, they think of a whole share rather than fractional shares. They tend to step back when they set their sights on US shares, which are substantially more expensive than their Indian equivalents. This occurs mostly because investors opt not to spend their significant savings on a single firm or need more funds to diversify their portfolio.
But what if we told you there's a strategy to invest in US blue-chip firms without paying the entire share price? Sounds intriguing, doesn't it?
Fractional shares are often parts or fractions of whole shares. The goal of fractional investing is to make many expensive stocks accessible and appealing to investors. ETFs can also be purchased in fractional shares. The concept of fractional shares in India has yet to be approved, despite its popularity in the United States.
Fractional shares function in the same way as whole shares. For example, ABC stock is now selling for $100 a share. You decide to invest $10, purchasing one-tenth of a share of the stock. If ABC company announces a $1 dividend per share, you will get $0.1.
If the stock price rises by 5% to $110, your ownership will increase to $11 from $10. If the stock price falls by 5% to $90, your stake will drop to $9 from $10.
You're probably aware of the significance of diversity in your investment portfolio. Spreading your funds across tens or hundreds of firms reduces the likelihood that you will lose money overall if one investment fails.
Investing internationally can assist in boosting your earnings by exposing your domestic currency to faster-growing economies. You can discover ideal factors, such as tax breaks, progressive government leadership or even access to natural resources and regulations that enable a sector to develop faster than its domestic counterpart.
In different countries, bonds and stocks have distinct return and risk profiles. Since Indian and global stocks do not move in perfect sync, having global stocks in a stock portfolio can help reduce risk.
Although some domestic index funds provide limited exposure to overseas companies, many investors agree that these funds do not offer comprehensive diversity. Investors who want true exposure to overseas companies should invest in international indexes and funds.
Note: The Liberalised Remittance Scheme (LRS) enables Indian citizens to remit up to USD 250,000 every fiscal year for capital or current account transactions. Any remittance over this amount needs prior approval from the RBI.
You are better prepared to begin your fractional share investing voyage now that you understand what fractional shares are. Fractional share investing allows you to diversify your portfolio and start your financial journey in little increments. You have more freedom in constructing your portfolio.
Indian investors can utilise Indian platforms to engage in the US stock market, where fractional share investing is becoming more mainstream. With Fi Money, you can invest in big firms like Apple, Microsoft, Amazon and others at the best FOREX rates in the market. Moreover, Fi's curated collections and in-app explainers can help you if you're a first-time investor.
If you want to start investing with little money and have your eye on certain costly shares that you wouldn't otherwise be able to purchase, fractional shares are safe and lucrative. They're also effective instruments for swiftly diversifying your portfolio.
Fractional shares may trade less often than whole shares, and fulfilling your buy order may take longer while brokers wait for enough fractional orders to purchase full shares. Also, selling your fractional shares may take longer since some may need to be in high demand.
Fundamentally sound fractional shares can help you build wealth over time. Fractional shareholders get the same percentage of profits and losses as full shareholders and the same privileges, such as voting rights.