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When a company issues stock, it divides a certain number of shares among investors. Each share represents a small ownership stake in the company. However, the price of a single share can be quite high, especially for well-known companies with a lot of value.
This can be a barrier to entry for many investors, especially younger ones with limited or no disposable income.
This is where fractional shares come in. They allow investors to buy a smaller portion of a single share rather than purchasing a whole share.
For example, suppose a share of a company’s stock is trading for Rs.70,000. In that case, an investor could buy a fractional share for Rs.500 or even Rs.100 if the company allows it. This allows investors to get exposure to a wide range of companies and industries without spending much money upfront.
Fractional shares investing is buying a piece of a whole share. The company’s stock is divided into smaller units, and the investor gets a portion of one of these units.
The value of the fractional share is based on the current price of the whole share, and the investor owns a proportionate amount of the company based on their investment.
For example, if an investor buys a fractional share worth Rs.500, and the price of a whole share is Rs.1000, they own half of a share. If the stock price goes up to Rs.150, the value of the fractional share also goes up to Rs.75. The investor owns a smaller piece of the company, but they still get the same percentage return on their investment as someone who owns a full share.
Yes, fractional shares are entitled to receive dividends just like whole shares. When a company issues dividends, they are usually paid out per share. So, an investor owns a fractional share. In that case, they will receive a proportionate dividend based on their investment.
For example, if a company issues an Rs.1 dividend per share, and an investor owns a fractional share worth Rs.50. In that case, they will receive 50 paise in dividends. This can be a great way for investors to earn passive income from their investments, even if they don’t have much money to put into the market.
Yes, fractional shares trading can be bought and sold just like full shares. They are traded on the stock market like any other security and can be bought and sold through a brokerage account. When investors sell their fractional shares, they will receive the current market price for their investment.
Whether to buy fractional shares or not is a personal decision that depends on your investment goals and financial situation. Here are a few things to consider:
Fractional shares allow investors or traders to buy a small portion of a single stock rather than purchasing a whole share. They can be a good option for those just starting out investing and who need more money to put into the market.
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