3 Unique Benefits of Fractional Trading

3 Unique Benefits of Fractional Trading

When it comes to investing in the stock market, there is no shortage of ways in which you can do so.

One such example is fractional trading, a method that allows someone to buy a fraction of a stock and use that investment as if it was buying an entire share. Fractional trading has a variety of benefits, many of which haven't even been fully considered by some people.

What is Fractional Trading?

Fractional trading allows you to purchase a portion of a share, otherwise known as fractional shares.

This is essentially the same as making any other purchase, and you can use these shares just like they are any other share in the stock market, buying and selling them as per your investment goals.

As noted by the financial experts at SoFi, "Instead of purchasing one share of stock at the value for which the stock is currently trading, it is possible to purchase a fraction of one share of stock. And an investor can do so using whatever dollar amount they have available."

Three Unique Benefits

Fractional trading comes with three unique benefits that are often overlooked in the marketplace. These include:

     Making the stock market more accessible for less wealthy investors: Some stocks are simply unaffordable for more casual investors or those who want to enter the stock market but don't have the money to do so. This is particularly the case for more valuable, well-established stocks.

However, with fractional shares, the share price of a stock can be reduced to something far more affordable. This, in turn, can make it easier for anyone to invest their wealth in the market - even if they don't have a lot of money to begin with.

     Increased control: With lower prices comes increased control and precision over where investors put their money. Without these types of shares, investors are limited to stocks that they can afford to purchase in full.

With fractional shares, users can spend exactly the amount of money they want on a stock of their choosing - even if that means purchasing part of a stock, and not all of it. This ensures that an investor is limited only by their own resources, not the price of a stock.

     Increased diversification: Related to the above, purchasing a fractional share can enable someone to have a greater degree of diversification on their portfolio.

This is because the purchase of a fractional share can free up money that can be used for other stock purchases, thus enabling someone to make additional purchases of stocks that can further and better diversify their overall portfolio.

At the end of the day, fractional purchasing may not be for everyone, as many are able to achieve the three goals above without needing to engage in fractional trading. However, many individuals find that the benefits of fractional trading far outweigh the disadvantages, and you may find that this style of investing is perfect for you.

 

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