How Does Fractional Shares Trading Work?

Not every investor can afford to spend top dollar for top stocks. Others need to be as diverse as possible. When looking for a variety of investments to trust in, you might be sold on the idea of fractional trading. SoFi is among the few brokers that can ensure that any fractional shares you own have sellers waiting to gain them from you. This is the most important point in fractional selling: your shares need to be liquid. You can then reduce your costs and risks while riding the major trends of the financial market. 

A fractional share is like any other share except for it having been divided. The division method isn’t as important as the actual reduction. A $100 stock you own two of can, for example, be put into a 4-2 spilt. This means that you get four stocks for every two you own. You must keep in mind, however, that each stock you now own is only worth $25, not $100. The now eight shares can be traded or held in expectation of an increase in value. To get your $200 back, you must sell eight stocks instead of two. 

Find out what are fractional shares by SoFi and see if they are poised to do for your portfolio. 

You can only buy fractional shares through a licensed firm like SoFi. Otherwise, there’s no way to use money directly for buying them. A majority of those with these stocks received them by owning such assets prior to their values being divided. Stocks are fractionated when mergers and acquisitions are completed. The resulting stock is reduced to account for a larger company. Stock splits, instead, are done by a stock’s parent company and give investors another way to find fractional shares.  

Diversity, lower costs, and education are the reasonable benefits of fractional shares. You improve your portfolio by having a variety of assets as opposed to a single one in it. The cost of buying in bulk is reduced if you can purchase shares at a fraction of their market value. The benefit of this is your ability to buy numerous top stocks for a bargain deal. Fractional shares are even educational. Having only a small sum at risk as you learn to trade is a smart approach to take. 

Most retailers don’t know about fractional shares, so finding interest from those who want to buy yours can be difficult. The issue is specifically called liquidity. Though it’s possible to sell your fractional assets, it might take more time than conventional stocks sell at. Additionally, there’s a small option pool to consider when searching for fractional stocks. In the end, you might not find companies worth your time. 

Whether you’re stuck with a handful of shares you didn’t ask for or like the idea of fractional shares, you can find a suitable strategy to profit from. Simply rely on reputable brokers and those with good liquidity.