What Is Fractional Share Investing?

In recent weeks, The Juice has used the emergence of alternative investing to illustrate how, as we said last week—

…the investment playing field has never been more level. It’s far from equal, but retail investors have made great strides. We’ve come a long way from Kickstarter campaigns.

Last week alone, in The Juice, we highlighted venture capital opportunities open to small investors, how to use a major platform to access some of these opportunities and how to invest in alts such as wine, whiskey, art and other collectibles. See today’s Freshly Squeezed section for links to those stores. 

It’s all pretty incredible and part of a larger landscape that has seen investing become more accessible to larger numbers of people. 

On the more sophisticated end, you can add the many different types of ETFs now available to an alternative category within traditional investing. We plan to finish the week introducing some of these products. And we’ll talk more about them in our ongoing series on alts, which will climax in the new year when we show you — step-by-step — how to blend traditional investing with alternatives for a well-balanced, if not diversified portfolio. 

Because that’s really the goal. To build long-term wealth and to do what has worked for a while (invest in the broad market) at the same time as keeping your mind open to what’s exciting and potentially profitable in today’s (and tomorrow’s) investing world. 

On the more straightforward end of things, we can’t forget the basics. Really, commission-free trading launched us into this golden age of investing. Setting aside issues with payment for order flow (which helps facilitate zero commissions), it’s pretty freaking cool to not have to spend $7.95 (or whatever) to place an online trade. Things like speedy execution and the best possible price aren’t necessarily things that matter so much to buy-and-hold investors.

What matters is access. And fewer obstacles to start investing. For example, you have $50 and you want to put it into a stock. If you had to pay an $8 commission and your brokerage even let you buy less than one share (not always the case years ago), it made zero financial sense to do it. This encouraged some investors to buy low-priced stocks to get more shares, which, as we’ll show, isn’t always a good idea or, even worse, not invest at all.

Today, you don’t have to pay commission and you can buy (way less) than one share of any stock. That is fractional share investing, but lots of people don’t quite know about this yet, especially new or otherwise small investors with limited funds to put in the market. 

The top $100-plus per share stocks in our Trackstar database are also the top stocks investors search for across all stocks, setting price aside. 

We hope this means they’re also the ones that everyday, do-it-yourself retail investors own or have owned. Because, over the long-term, all five of these names have crushed it. Same goes, for the most part, in the near-term. 

Fractional shares. It’s not too complicated. 

You have $50. TSLA trades for $219 a share — like it did a month ago. So, with your $50, you purchase 0.228 shares of the stock. 

With TSLA trading around $328 now, your $50 investment is now worth about $75. That represents a freaking 50% increase. 

You do remember when The Juice told you to buy TSLA on the dip, don’t you? 

Let’s compare this to a low-priced stock. And we won’t even cherry pick one that hasn’t done well. 

Consider SoFi (SOFI). A month ago, it traded for roughly $10 a share. At last check, it’s around $13.75. 

At $10 per share, a $50 investment got you 5 shares. Today that investment is worth $68.75, good for a 37.5% gain. Fantastic. Even competitive with TSLA, but not as big as TSLA. And, let’s be honest with one another, we’d rather start small and build out a long-term position in TSLA than in SOFI. 

Fractional share investing lets you do this. And, again, we won’t look for the many dogs with low share prices to make our point. That’s too easy. 

All that matters is that share price should not mean a thing. Value, market leadership and near-/long-term potential is what matters. 

The Bottom Line: None of this is to say there’s no value in low-priced stocks. Obviously, there can be. But it is to say that you should focus on buying high-quality companies in any quantities you can afford, not how many shares you can accumulate based on share price. 

This all connects right back to alternative investing. 

While there was a time when you had to be a high roller to invest in the alternatives we have been discussing lately, these days you need much less cash to quality. Minimum investment requirements and other obstacles to entry are lower. Same goes for being able to execute strategies that only super experienced traders used to be able to put in place. 

A broad category of alternative investments lets you do the former and new breeds of exciting ETFs let you do the latter. We’re covering both this month and beyond in The Juice, so please forward this email to a friend and tell them to subscribe to our newsletter for free.

• Big Venture Capital Opportunities Open Now For Everyday Investors
• Diversify Your Portfolio: Beyond Stocks
• How To Invest In Private Companies on StartEngine
• How To Invest In Wine, Whiskey, Art And Collectibles Online