Access high-value US stocks: Buy fractional shares on a budget

Have you ever looked at Amazon's $3,000+ stock price or Google's $2,000+ per share and thought, "I'll never be able to invest in these companies"?

You're not alone. Many investors feel prevented from owning shares in America's most successful companies due to their high stock prices. But the good news is that fractional shares have completely changed the game.

Think of fractional shares like splitting a pizza - instead of buying the whole pie, you can purchase just the slice you can afford. This means you can start investing in top US stocks with as little as $1, regardless of the actual stock price.

Whether you're new to stock investing or looking to diversify your investment plans, fractional shares open up exciting possibilities for building a premium portfolio on any budget.

Let's explore how you can get started with fractional investing and own pieces of your favourite US companies today.

Understanding fractional share investing in US stocks

Let's dive deeper into how fractional shares actually work in the US stock market. While this concept has existed since 1999, it only became widely accessible in 2019 when online brokers significantly reduced their fees.

What are fractional shares, and how do they work?

When we invest in fractional shares, we buy a portion of a stock based on a dollar amount rather than the number of shares. The brokerage holds the full share in its system while recording us as owners of the fractional part. For instance, if we invest $100 in a $1,000 stock, we'd own 0.1 shares of that company.

Benefits for budget-conscious investors

Here's what makes fractional shares particularly attractive for us:

• Start investing with as little as $1
• Receive proportional dividends (if you own 0.1 shares, you get 10% of the dividend)
• Create a diverse portfolio even with limited funds
• Invest regular amounts through dollar-cost averaging

Key differences from traditional stock investing

Unlike traditional investing, where we need to purchase whole shares, fractional investing lets us specify a dollar amount rather than share quantities. This approach makes premium stocks accessible - instead of needing $3,000+ for one Amazon share, we can invest any amount we're comfortable with. Plus, we still get all the benefits of stock ownership, including proportional voting rights and dividends, just scaled to our ownership percentage.

Getting started with fractional trading

Starting our fractional investing journey requires careful planning and the right tools. Let's walk through the essential steps to begin our investment journey.

Choosing the right trading platform

We need to select a platform that aligns with our investment goals. Popular brokers like Fidelity, Charles Schwab, and Interactive Brokers offer distinct advantages:

• Fidelity allows investments starting at $1 with access to over 7,000 stocks and ETFs
• Charles Schwab offers "Stock Slices" with a $5 minimum investment for S&P 500 stocks
• Interactive Brokers provides both free (Lite) and premium (Pro) account options
• With Winvesta, you can invest as little as $1 in your favourite stocks and start building a diversified portfolio.

Setting up your investment account

The account setup process is straightforward but requires attention to detail. We'll need to:

1. Complete the online verification process with our chosen broker
2. Keep essential documents ready (like PAN Card)
3. Wait for account verification (typically 1-2 business days)

Making your first fractional purchase with Winvesta

Once our account is ready, we can start investing. We simply need to:

1. Placing an order involves funding our account through an electronic transfer. Any amount can be invested through fractional shares.
2. Select our desired stock
3. While selecting your desired stock, you can also place quantity-based orders.
4. Enter our investment amount or the number of shares
5. Limit orders- Execute an order at your desired prices.
6. Stop orders-Execute an order once its price goes above a specified price
7. Order history is available, which also helps you check out all the executed orders till now

For example, if we want to invest $100 in Amazon, we don't need to worry about the full share price - we can invest exactly that amount and own a corresponding fraction of the share. Remember that settlement times for funds may vary by broker, so we might need to wait briefly before making our first purchase.

Building a high-value portfolio on a budget

Building a valuable investment portfolio doesn't require enormous capital anymore. With fractional shares, we can create a robust investment strategy that includes premium stocks while staying within our budget.

Identifying premium US Stocks worth investing in

Through platforms like Fidelity, we can start investing in high-value stocks with as little as $1. For example, if we want to invest in multiple premium stocks, we could split $50 between companies like Amazon, Apple, and Netflix, which have shown impressive returns over recent years.

Creating a balanced investment strategy

A well-diversified portfolio helps protect our investments. Here's how we can achieve this through fractional investing:

• Spread investments across different sectors and company sizes
• Include a mix of growth and dividend stocks
• Consider adding ETFs for broader market exposure
• Start with as little as $5 in S&P 500 companies

Dollar-Cost Averaging with fractional shares

Implementing dollar-cost averaging (DCA) can make our budget work smarter. This strategy involves investing fixed amounts regularly, regardless of market conditions. For instance, we might invest $50 bi-weekly across selected stocks. With fractional shares, we don't need to wait until we have enough for whole shares—our money starts working immediately.

By combining these approaches, we can build a portfolio that includes premium US stocks while managing risk through diversification. The key is consistency and strategic planning, not the size of our initial investment.

Managing risks and maximising returns

While fractional shares make investing more accessible, we need to understand how to manage risks and optimise returns effectively. Let's explore the key aspects of responsible fractional investing.

Understanding associated risks

We can reduce our investment risks through smart diversification. We protect ourselves from market fluctuations by spreading our capital across different companies. Here are the main risks we should consider:

• Limited stock selection based on broker offerings
• Potential restrictions on voting rights
• Transfer limitations between brokers
• Possible liquidity challenges

Monitoring and rebalancing your portfolio

We should check our investments at least once annually. During these reviews, we need to evaluate:

• Our asset allocation alignment
• Individual investment performance
• Changes in personal circumstances

When our portfolio drifts more than 5% from our target allocation, it's time to rebalance. This involves selling overweight assets and buying underweight ones to maintain our desired investment mix.

Tax implications and considerations

Understanding tax implications is crucial for our investment strategy. For fractional shares, we receive proportional dividends based on our ownership percentage. Long-term capital gains are typically taxed at 20% after indexation, while short-term gains fall under our regular tax bracket.

When transferring fractional shares between brokers, we might first need to convert them to cash, which could trigger tax events. To optimise our tax efficiency, we can consider holding investments longer term and utilising tax-advantaged accounts where available.

Fractional shares have transformed our ability to invest in premium US stocks. Small budgets no longer limit our access to companies like Amazon, Google, or Apple. We can now build diverse portfolios with minimal initial investment while enjoying the proportional benefits of stock ownership.

Smart investment strategies through fractional shares require careful planning, regular portfolio monitoring, and an understanding of associated risks and tax implications. Our success depends on maintaining a balanced approach, whether investing $1 or $1,000.

Building wealth through stock market investments is a journey, not a race. Consistent investment, proper diversification, and strategic rebalancing can grow our portfolios steadily over time, regardless of our starting budget.

Disclaimer: This article provides general information on fractional share investing and is not financial advice. Investing involves risks, including potential loss of principal. Past performance does not guarantee future results. Consult a qualified financial advisor before making investment decisions.

Contributed by Denila Lobo

Denila is a content writer at Winvesta. She crafts clear, concise content on international payments, helping freelancers and businesses easily navigate global financial solutions.