Original subtitles

Something that's a little newer in investing is fractional shares, and this is fractional shares are

great, you know, fractional shares can be a great way to invest in companies that were really not

available before to regular investors because the cost of buying one of the share of stock was like

over $3000 or something for some of these companies.

But a fractional shares now allow you to invest in them as far as you know, buying a fraction of that

share, basically.

Now there are some pitfalls to watch out for, and we're going to go through the pros and cons at the

very end here.

So you'll decide you know how you want to use fractional shares if you want to at all.

So all that is coming up as far as what we're going to learn.

So the big idea here is sometimes to buy one share stock.

It can be very pricey, so fractional shares simply mean what they say.

It's a first time finance industry.

One of the rare times when it's actually self-explanatory, you're buying a small portion or a fraction

of your share of a share.

You're not buying thirty four hundred dollars worth of Amazon one share, you're buying maybe 10 percent

of that share or three hundred and forty dollars, and you own only a tenth of Amazon, not one full

share of Amazon.

So this is where I believe we live in a golden age in terms of financial technology or fintech.

You know where they give us some using technology to give us some options here.

Right.

So here we look in this example, a single share of Amazon, you know, might cost $3000, but you don't

have a thousand dollars to invest.

Well, you can take, you know, these 11 stocks that you see here, like Netflix, McDonald's and Procter

& Gamble.

All these Nike and including Amazon, and you can invest just a small portion in each one of your thousand

dollars.

And you can the small portion of Amazon.

So if you look at that Amazon the left, that that whole circle is one share.

You're just buying a tiny part of it, right?

If we look an example of that, how does that actually work in practice?

This is from like Robinhood, actually.

And you can choose and not every broker offers this, but many are offering it more than ever now.

So just be aware not everyone offset at this point.

But you can choose to buy in this case in dollars or again, whatever your currency is.

And you could invest a little, said one dollar to vest.

Or you could buy or choose the buying shares and just enter a less than full share amount, right?

So we look at the image on the right.

If you wanted to buy like a S&P 500 ETF, spy is the name of it.

You can start at a dollar, right?

I could buy one dollar on this particular brokerage site, Robinhood, or I could buy shares, and I

could buy zero point zero zero zero zero zero one if I got that right.

You know, so you could buy the small, tiny part of the share without having to buy an entire share.

So we look at an example.

Let's say that stock ABC I made up sells for five hundred dollars U.S. per share.

Right.

You could buy one share at $500.

Right.

Makes sense.

If I wanted to buy half a share, well, it's half the price I'll pay would be 250.

And I have basically a half a share.

I don't have a full share.

I have a half a share 250 or 0.25 B one twenty five point one would be 50.

Or I can go as little as, you know, 0.01 and go down to five dollars and buy a point or one.

You know of that share of that stock, excuse me, could go as low as $1 on this site.

So as you can see, it allows you to buy these fractional shares at a smaller amount and then have a

variety of shares, just smaller amounts of them.

Now you might be thinking, Well, what?

What about dividends?

What if I own a share of a stock of a company that pays a dividend and I get one dividend per share

of stock?

What happens there?

Well, it's the same thing where you're getting a fractional dividend payout.

So if I own one share that equals to one dividend payout, let's say on the algo basis, or let's say,

the dividend going to pay me two dollars or two units, right?

So if I own one, share my dividends too, right?

If I own a half a share, I'm not going to get two.

I'm going to get half of that and I'm going to get one right because I own point five of a share.

So whatever your your your getting in terms of your stock, in terms of what you would have for one

share, you would get a lesser amount if you have a fractional share in this example, 50 percent or

point five.

So it's a great way again to be able to invest in higher cost, higher priced stocks and get some diversification

by, you know, looking at different, different types of companies.

So let's look at those pros and cons.

There are some definite pros and cons So as we mentioned, you get access to more stocks, basically

higher price stocks, you can now access them and it's very low cost and diversify.

Right.

I I if I have, you know, a stock that sells for one thousand and all I have is a thousand, I would

only get one share where now I could get 10 different companies for 100 each, right one-tenth.

So you can get some low cost diversification.

You have less money in cash, so you're more fully invested, which is a good thing if you're more fully

invested because I'm not waiting to build up my cash for that one time.

Once I build up enough to now finally make that stock purchase of one share, I can be more fully invested

with a lot of different stocks with fractional shares.

And it works well for automated investing, too.

Well, let's say every month.

I spend a certain amount to my broker, and I've decided I wanted to be have an equal amount bought

between these 10 different companies.

They'll just automatically do it.

I can make that all automated and in fractional shares work with that as well.

So a lot of good pros there.

Let's talk about some cons now of fractional shares.

One.

Fractional shares converge more active trading, right?

I mean, that could be a good thing.

It could be a bad thing.

It all depends on you.

You know, if you're getting more fees and things, especially around, if you're getting charged per

trade, you know, more active trading can incur more feeds, which can encourage overall profitability.

So something to watch for with that.

Also, a lot of times are fractional shares.

You have a very limited selection of assets, maybe only certain stocks, maybe only large company stocks

or certain ETFs or exchange traded funds or certain types of cryptocurrency, but not all of them.

As an example, maybe no crypto, you know, so you might find that there's a limited selection of different

types of assets or securities that you can invest in.

We can reduce your liquidity in terms of how fractional shares, trade shares trade in units of one

and more commonly in units of what are called run lots of 100.

That's typically how they trade.

So if you have a fractional share, they have to.

When the brokers is matching up, you know, buyers and sellers, they've got to kind of pull these

different fractional shares together, you know, to start making it into one full share and maybe up

into 100 shares to start doing some of these transactions.

So what that means is you're fractional.

Shares may not trade as fast or as quickly or reduce liquidity is what all that means.

It may not.

They may not trade as fast as something that is more of full shares.

They'll trade slower than full shares.

And again, as we mentioned, not every broker offers fractional shares, so you can enjoy the pros,

let alone the cons, because they don't offer it.

But it's something to watch for.

More and more brokers are offering this because this is something that's being really driven by customer

demand because a lot of customers of theirs want this and they'll leave for other brokers if they don't

provide it.

So you're seeing a lot more low costs on trading.

You're seeing a lot more free type trading and you're also seeing a lot more fractional shares plus

better support, plus better tools being offered by the brokers sites as they all compete with each

other.

So there are some pros and cons in terms of fractional shares.

And just be aware of that.

If you're already with a broker, go check it out, see if they offer it.

If not, this sounds interesting to you.

Keep going with the chorus, but you might want to start exploring companies that might offer fractional

shares.

Brokers I'm now for fractional shares because that might be a great way for you to start getting in

to some of these companies and some of these stocks with less money.