What are fractional shares and how to invest
Fractional shares enable you to invest in a company, even if you can’t afford to buy a full share. Here, we break down fractional shares to explain what they are, how they work and how to buy them.
What are fractional shares?
Fractional shares are a slice of a whole share in a company. They are popular with investors because they enable them to invest in companies even if the price for a whole share is currently out of reach.
In this way, fractional shares make even the most expensive stocks – like Tesla, Amazon, and Alphabet – more accessible. And, if you buy fractional shares regularly, you’ll benefit from pound cost averaging, giving you the company’s average market price over time and hopefully helping to smooth out the effects of short-term volatility.
How do fractional shares work?
Fractional shares work by granting you ownership of a slice of a whole company share. Your ownership stake will be consistent with how much of the share you bought. Plus, the performance of fractional shares will be the same as a whole share – you’ll just have less exposure.
As an example, if a share is currently priced at £100, but you only had £25 to invest, you could buy 0.25 fractional shares. If you did this every week for four weeks, assuming the share price stayed the same and you invested £25 each week, you would have one full share.
Fractional shares pros and cons
There are both pros and cons to investing in fractional shares. The pros of fractional shares include that they make even the most expensive stocks in the world accessible, and you can build up to a whole share over time. The cons of fractional shares include, as with all investments, they can fall in value as well as rise.
Here are more pros and cons of fractional shares so you have all the info you need before you invest.
How to buy fractional shares
You can buy fractional shares with Moneybox – just go to your Stocks & Shares ISA, Explore more investments > Stocks. We offer fractional shares for a range of the world’s largest companies including Amazon, Apple and Tesla.
And remember, investing in stocks – as with all investments – carries a certain amount of risk, and you might get back less than you invest. That’s why it’s important to invest for more than five years, to give your money time to recover from any dips along the way.