What is Fractional Investing?
Fractional investing is a sweet hack for many people. It’s buying shares in a company but not having to buy a whole share. Instead, you are buying a fraction or a piece of that share. Let’s break that down visually for everyone to get a better idea of what it looks like.
- 1 Apple Stock = $200
- You invest $100 = You owe half of 1 Apple Stock
This is just an example of a quick look at fractional investing. This works with almost any stocks you can think of out there on the market. So you invest based on a dollar amount vs the price of a whole share.
So you invest based on a dollar amount vs the price of a whole share.
All this information is for educational purposes only. I am not advising what you invest in. So take that for what it is. This is simply what I do and my opinion.
Why Invest In Fractional Shares?
There honestly a plethora of reasons to invest in fractional shares. There is no way I could cover every single one in this post. So I am going to cover a few that stick out to me from my experiences teaching others over the years.
- It’s easy
- Great funds
- You don’t have a lot of money to start
There are many brokerage platforms that you can use for fractional investing. My favorite is M1 Finance! They make investing in fractional shares easy. My motto with investing is “Keep it Simple, Fun, and Profitable”. With a few short clicks, you can build your pie so to speak.
“Keep it Simple, Fun, and Profitable.”
As you see above they make it very user-friendly with Buy/Sell, Rebalance and Edit buttons all right in front of you. The rebalance feature is epic. No more having to rebalance the long way. Just one click and you are done for the year. Well, I guess it depends I only rebalance typically once a year. But hey the button is there if you want to do it more often.
Basically, every platform for fractional investing offers almost any fund you could possibly want. Anything from great single companies, Index funds, ETF’s and bonds as well. I was very surprised at the range and variations of funds offered to buy in fractional shares. Now I try to get as many visuals as I can into my posts on topics like this. It helps those who learn visually and it really just helps everyone to put an image in reference to the discussion.
Below is a screenshot of the funds I use with M1 Finance. They call the funds slices. These funds are parts of your total portfolio also known as your pie. I really enjoy how M1 Finance really breaks it down for the user even with their funds.
You Don’t Have A Lot Of Money To Start
Don’t have $3,000 to start investing in VTSAX with Vanguard? No worries you can start with very little money now. This is what makes fractional investing so powerful. It now lets anyone be able to be an investor and start securing their future through the stock market. As long as you have the internet you can become an investor. You can build wealth, freedom, flexibility, and leave a legacy for your family.
You can build wealth, freedom, flexibility, and leave a legacy for your family.
M1 Finance is the perfect platform to help you build wealth, freedom, flexibility, and leave a legacy for your family. Imagine being able to build generational wealth so that your kids can have more options, freedom, and choices than you did. That is the ability you have with fractional investing through these platforms as an investor.
Let me show you just how investing a small amount over time can have a huge impact.
- 25 years old
- $400 a month invested
- 8% average ROI
In 40 years at age 65, you would have over $1.2million. That is with only $400 a month. Now as you get older you will be making more money thus you can invest even more. Take a look at the graph below to see just how powerful fractional investing and time can be.
What’s The Risk?
The risk is just like any investment you could potentially lose your money. There are obvious ways to reduce this risk in my opinion. Invest in the top reputable companies. Now that might be really hard but you can always just look at the top 5-10 companies in the S&P500. Or heck you can even just invest in simple index funds or ETF’s. There is always a balance so there is nothing wrong if you want to do a little of both.
It now lets anyone be able to be an investor and start securing their future through the stock market.
So there is really no more risk in fractional investing than regular investing. I always encourage everyone to really figure out their risk tolerance and adjust from there. I have noticed that as my wealth has grown I’m ok being riskier with 5%-10% of my wealth. Personally, I’m trying to get my risky investments to a 5%-10% allocation. Right now it’s around 1%.
I think fractional investing makes investing for everyone possible. It allows you to invest in great companies even when you don’t have enough saved to buy one whole share at a time. It allows you to start an account even if you don’t have the $3,000 some accounts make you have to open them. There are a ton of different platforms out there.
Yet by far I truly believe M1 Finance to be the best. They have such unique visuals on their site like this chart that shows the value of my portfolio over time.
They show you exactly what your gains and ROI have been all in one location that is easy to read and understand. It even breaks down earned dividends.
For these features, their great fund options, an easy-to-use site, and great customer service make them the winner hands down for me, and is why I personally use them for all my fractional investing.
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