A fractional share is a normal share broken down into several parts. There are several reasons for and goals of such a split and one of them is to give small investors an opportunity to buy a share in the company, driving more money into the company.
Advantages of fractional shares
- They give beginners a chance to master investing with a small capital without leverage.
- Investors learn money management with minimal risks. A beginner gets the chance to compose their investment portfolios of assets from different sectors and spheres of the economy and balance out the price of the share by the volume of the position they open.
- Risks are diversified, which means you do not invest all your money in one company.
- You can invest equal sums in different instruments. You can spread equal portions of your capital over a sphere you are interested in regardless of the price of the shares; in other words, you buy parts of shares for the same sum, regardless of their market price.
- You receive dividends and rewards the same way as with normal shares. You get a proportional sum of dividends to the shares you own, and fractional shares are no exception. There are exceptions when the part of the share is smaller than the minimal currency unit (a cent or a kopeck).