Fractional Shares

LightKnow

Hi Investors 

Has anyone taken look into fractional shares ? Or plum one of platform that does this.

is it worth it in the long run?

it seems you roughly get 25p to £1 in return if they do well ( if you invest 1 to 5 pounds a month) . 

In my e.g I was thinking if I put 25 pound into fractional shares but split it into 5 companies.

so each week I put away 1.25 for each company over couple of months. I eventually have 1 share 

I probably won’t earn anything higher than £30 after 6 to 7 months ?

Or would it be more beneficial if I did a direct debit for a fund 

Albermarle

Investing in individual shares is risky as they might not 'do well'
Better just to invest in a global index fund that has thousands of shares in it . 

In any case, the amounts involved are miniscule in investing terms, and you will find it difficult to find any mainstream provider willing to deal with less than £25 a month regular payment. Some will need more.

adindas

LightKnow said:

Hi Investors 

Has anyone taken look into fractional shares ? Or plum one of platform that does this.

is it worth it in the long run?

it seems you roughly get 25p to £1 in return if they do well ( if you invest 1 to 5 pounds a month) . 

In my e.g I was thinking if I put 25 pound into fractional shares but split it into 5 companies.

so each week I put away 1.25 for each company over couple of months. I eventually have 1 share 

I probably won’t earn anything higher than £30 after 6 to 7 months ?

Or would it be more beneficial if I did a direct debit for a fund 

A lot of apps based challenger platform are offering frational Shares. Example Trading 212, eToro, Freetrade, etc.

A stock price rise or down does not depend on whether you get a fractional share or whole share. It is the quality of the stock that you buy is matter.

The people are buying fractional shares for a stock which is too expensive to buy  as whole share, the price for one share is expensive for Instance, Example Amazon, Tesla, Alphabet, etc.

LightKnow

But is the risk not being divided more as fractional share? Over a longer period wouldn’t the quality become better than invest in standard shares?


Maybe am looking at this the wrong way. So do correct me

masonic

LightKnow said:

But is the risk not being divided more as fractional share? Over a longer period wouldn’t the quality become better than invest in standard shares?


Maybe am looking at this the wrong way. So do correct me

The risk is the same. If the share price falls 50% then your fractional share goes down 50%. The benefit is that you'd be able to spread your money around a greater number of different companies than if you had to buy whole shares - this will reduce the risk of very adverse outcomes.

LightKnow

masonic said:

LightKnow said:

But is the risk not being divided more as fractional share? Over a longer period wouldn’t the quality become better than invest in standard shares?


Maybe am looking at this the wrong way. So do correct me

The risk is the same. If the share price falls 50% then your fractional share goes down 50%. The benefit is that you'd be able to spread your money around a greater number of different companies than if you had to buy whole shares - this will reduce the risk of very adverse outcomes. 

As it stands 7.50 with 0.67 loss is 5p loss 
So and am guessing gains be just as similar.  Even if I spread them lol am guess my gains are just below average 


know am thinking it probably not worth it 

jimjames

Why not just invest in a tracker fund that invests in many companies and automatically handles the allocations?

adindas

LightKnow said:

masonic said:

LightKnow said:

But is the risk not being divided more as fractional share? Over a longer period wouldn’t the quality become better than invest in standard shares?


Maybe am looking at this the wrong way. So do correct me

The risk is the same. If the share price falls 50% then your fractional share goes down 50%. The benefit is that you'd be able to spread your money around a greater number of different companies than if you had to buy whole shares - this will reduce the risk of very adverse outcomes. 

As it stands 7.50 with 0.67 loss is 5p loss 
So and am guessing gains be just as similar.  Even if I spread them lol am guess my gains are just below average 


know am thinking it probably not worth it 

The gain will be the same for the same stock. Say you buy 1 share Amazon @US$2,303. You could buy 10 of 0.1 fractional shares of amazon @230.3 each fraction. The price you pay will be the same (ignoring fees).

When Amazon make a gain10% in on month say, You will get exactly the same result e.g gain of US$230,30.

But with fractional share you could buy say half of the money to buy 5x0.1 fractional shares Amazon. and you use half of it to buy other shares. You might get a different result but this is because you buy various different stocks not because of fractional share.

The more diversified the shares you have, the less risky they are but it will also correspond with a lower return.

george4064

adindas said:

LightKnow said:

masonic said:

LightKnow said:

But is the risk not being divided more as fractional share? Over a longer period wouldn’t the quality become better than invest in standard shares?


Maybe am looking at this the wrong way. So do correct me

The risk is the same. If the share price falls 50% then your fractional share goes down 50%. The benefit is that you'd be able to spread your money around a greater number of different companies than if you had to buy whole shares - this will reduce the risk of very adverse outcomes. 

As it stands 7.50 with 0.67 loss is 5p loss 
So and am guessing gains be just as similar.  Even if I spread them lol am guess my gains are just below average 


know am thinking it probably not worth it 

The gain will be the same for the same stock. Say you buy 1 share Amazon @US$2,303. You could buy 10 of 0.1 fractional shares of amazon @230.3 each fraction. The price you pay will be the same (ignoring fees).

When Amazon make a gain10% in on month say, You will get exactly the same result e.g gain of US$230,30.

But with fractional share you could buy say half of the money to buy 5x0.1 fractional shares Amazon. and you use half of it to buy other shares. You might get a different result but this is because you buy various different stocks not because of fractional share.

The more diversified the shares you have, the less risky they are but it will also correspond with a lower return.

I’m not sure you’ve worded that last sentence particularly well, as it implies a diversified portfolio will produce a lower return than a ‘less diversified’ portfolio. Many un-diversified portfolios (if you can call it that) are very concentrated and therefore it’s largely down to luck whether that will produce superior returns or not. 

The OP is proposing to invest in a handful of stocks, which is obviously very risky and whilst it has a higher potential of producing spectacular or terrible returns, I’d say over the medium/long-term the more diversified portfolio (global equity tracker) would be able to produce a better overall return and at a lower level of risk, due to diversification.

adindas

george4064 said:

adindas said:

LightKnow said:

masonic said:

LightKnow said:

But is the risk not being divided more as fractional share? Over a longer period wouldn’t the quality become better than invest in standard shares?


Maybe am looking at this the wrong way. So do correct me

The risk is the same. If the share price falls 50% then your fractional share goes down 50%. The benefit is that you'd be able to spread your money around a greater number of different companies than if you had to buy whole shares - this will reduce the risk of very adverse outcomes. 

As it stands 7.50 with 0.67 loss is 5p loss 
So and am guessing gains be just as similar.  Even if I spread them lol am guess my gains are just below average 


know am thinking it probably not worth it 

The gain will be the same for the same stock. Say you buy 1 share Amazon @US$2,303. You could buy 10 of 0.1 fractional shares of amazon @230.3 each fraction. The price you pay will be the same (ignoring fees).

When Amazon make a gain10% in on month say, You will get exactly the same result e.g gain of US$230,30.

But with fractional share you could buy say half of the money to buy 5x0.1 fractional shares Amazon. and you use half of it to buy other shares. You might get a different result but this is because you buy various different stocks not because of fractional share.

The more diversified the shares you have, the less risky they are but it will also correspond with a lower return.

I’m not sure you’ve worded that last sentence particularly well, as it implies a diversified portfolio will produce a lower return than a ‘less diversified’ portfolio. Many in-diversified portfolios (if you can call it that) are very concentrated and therefore it’s largely down to luck whether that will produce superior returns or not.
The OP is proposing to invest in a handful of stocks, which is obviously very risky and whilst it has a higher potential of producing spectacular or terrible returns, I’d say over the medium/long-term the more diversified portfolio (global equity tracker) would be able to produce a better overall return and at a lower level of risk, due to diversification.

Well, diversification might suit to vast majority of investors but will not necessarily produce the best result.

But it is an urban myth that diversification will produce a better result for people who know what they are doing. The people like Warren Buffet, Peter Lynch, Jim Simons and many Hedge funds are spearheading severely undervalued stocks. They have many stocks in their portfolio managements because those stocks they believe are undervalued and might produce a better return but not weighted or rebalance like the index is done. They will keep topping them up when they are selling at a heavily discounted price far below their fair value. They might stop buying or even selling them when they believe they are already overpriced.

I have posted this before

If the market is fully efficient than noone even like Warren Buffet, Peter Lynch, Jim Simons could beat the market. Not every investor knows or could observe when a stock is undervalued/overvalued. Not every investor knows when a stock float is oversold or overbought. These people along with other people beat the market by exploiting the inefficiency in the market.

LightKnow

I do currently have fund but wanted to add either one more or was considering pooling shares together.


I understand it will have it risks and I gave it a little run but am still sitting at a loss lol even though it not much and haven't really ran it long. Tbh the figures don't really tally up

There alot valid points been made by everyone. And it seems Tracker funds is step in direction but If. I continued in fractional shares :   am guessing To level out my risk I need like 5 to 10 different stocks ?

Also any recommendations on tracker funds ?