Learn about Fractional Shares
Buying a whole share can be pretty expensive – some single share prices can reach into the £1,000s! Fractional investing means you can buy small portions of these shares, giving you access to their increases and decreases. Find out more below.
A fractional share is exactly what it says on the tin, i.e. a fraction, or a small piece of, a whole share of stock, bond, or fund. This makes it much easier for your average investor to buy into some of the world’s biggest and most exciting investment opportunities.
How do they work?
If you don’t have a lot of money to invest but still want access to some of the bigger shares, fractional investing can make it happen for you. By investing in this way you still invest in the company, so if the share price goes up, you gain value, and if it goes down, you lose value.
As an example, if a company share costs £100 at current market prices but you only have £10, you’ll be able to purchase a tenth of a share in that company via fractional shares.
The benefits of fractional shares
If you worry that you don’t have enough money to start investing into the market, then fractional shares are a great way to get started. Say you have around £40 that you want to use for your first ever investments. Fractional investing allows you to split this money up into different stocks and shares, meaning you can test the waters before you make a bigger plunge.
Even if you start out small, you’ll still be able to earn a return on your money. The earlier you start the better, as the interest will accumulate and compound as time goes on.
Traditionally, you would have to wait until you saved up enough money to buy an expensive share. This was unappealing to most average investors, as they wouldn’t want to put their entire savings into one share in the first place. With fractional shares, you can invest as much as you want in whichever stock you want.
With fractional shares, you’ll still be a proper shareholder. It’s important to remember that investing also involves risks, and that the value of your share could go up or down. You can invest in fractional shares with Wombat’s Instant General Investment Account.
Although it's easy to forget sometimes, a share is not a lottery ticket. It's part ownership of a business.
-Peter Lynch, American Investor & Philanthropist