Fractional Share Investments: Are They Lower Risk?


Have you ever considered investing in fractional shares? There are many different benefits associated with investing in fractional shares, and this may make it a valuable opportunity to consider for your own investment needs. However, one common question that many people ask when it comes to investing in fractional shares is whether or not these investments come with a lower risk attached. 

As such, today, we’ll be taking a look at whether fractional share investments come with a lower risk level – and, if so, how you can make the most of fractional shares overall.

Are Fractional Share Investments Lower Risk

Are fractional share investments a lower-risk opportunity to consider for your own investment needs? As with any investment, there’s never any guarantee that you will make money, and even fractional shares can still leave you making a loss if you get unlucky or make poor choices with your investment goals. However, with this in mind, there are two main ways by which investing in fractional shares could lower the risk of your investments overall:

  • When purchasing fractional shares, you can invest a smaller sum of money than might otherwise be needed (e.g., buying half a share at £1000 rather than a whole share at £2000), thereby cutting the total amount staked and reducing the potential for losses.
  • If you purchase numerous fractional shares (e.g., 10 fractional shares at £100 rather than one share at £1000), you will spread the risk. As such, if you lost all of your money on one investment, you’d lose £100 rather than losing the full £1000 if you had staked your entire fund on that business.

It’s worth considering the two points expressed above when deciding whether fractional share investments could be a lucrative opportunity for your own investing needs. Nevertheless, there’s no risk-free investment opportunity; as such, even when investing in fractional shares, you could stand to lose some or all of your money at the end of the investment period.

The Benefits of Fractional Shares

There are many benefits of fractional shares alongside their ability to potentially reduce the risk associated with investing. Some of the key benefits of fractional shares include the following points.

#1 You Can Invest in Companies You May Not Have Been Able To Otherwise

One of the first benefits of fractional share investments is that they offer investors the chance to trade with companies they may otherwise have been unable to afford. Indeed, many big-name brands have incredibly high share prices, with Amazon’s shares recently reaching around £2200 per share. However, by investing in a fraction of a share, you can cut the cost and make such investments more affordable on a lower budget.

#2 Fractional Shares Continue to Pay Dividends

A key source of revenue for many investors comes from dividends; fortunately, fractional shares continue to offer these. The dividends paid out for fractional shares are directly proportional to the value of the share you have purchased. As such, if you purchased a third of a share, and the full share dividend was £3, you would receive one-third, or £1, as a dividend. Plus, you can continue to purchase fractional shares with time to potentially increase the total dividend value, if you so wanted.

#3 Fractional Shares are Now Available From A Wide Range of Brokers

As a further benefit, the opportunities for investing in fractional shares have become more wide-scale than ever before. Indeed, with a growing number of brokerages now offering fractional share trading, there is plenty of potential for investing in this field, something that could be worth considering for your trading efforts overall. 

After all, there are few things more frustrating than being limited to the number of trading platforms available to you. Luckily, with fractional share investments becoming more commonplace, there’s now more opportunity than ever to find the best fractional share investment platform through which to purchase shares. 

Are Fractional Shares the Right Option for You? 

At this point, we’ve considered some of the reasons why you might want to consider investing in Fractional shares. However, there’s still a crucial question to ask: is this actually the right option for you? 

Unfortunately, answering this question might not be quite as straightforwards as it might seem. Indeed, while fractional shares can offer a huge amount of potential, that’s not to say they’re an ideal solution in every scenario. 

Critically, you still need to consider your own personal situation to decide whether or not fractional shares are a valuable investment opportunity overall. Indeed, while fractional shares are potentially lucrative, there is no guarantee that you will profit from them. As such, we highly recommend that you only ever invest money that you can afford to lose; never invest finances you desperately need to pay for necessities such as living expenses, food, and heating.

Of course, not all fractional shares platforms are necessarily created equally, either. With this in mind, it’s worth thinking about whether your chosen fractional shares platform is genuinely offering a good-value investment opportunity. There’s no rush, so don’t just jump in immediately; make the right choice instead with help from a professional local investment team. 

Final Thoughts 

If you have been considering investing in shares, fractional shares could potentially offer a valuable opportunity overall. And, while there’s never any guarantee that you will make money – or even break even – when investing in shares, fractional shares may help spread risk. As such, this may be a valuable opportunity to consider if you have been otherwise considering investing in shares, and so, they could be worth considering for your own investment needs overall.