Buying high-priced shares of Indian companies may not be feasible for all investors. MRF, Page Industries, Honeywell Automation, 3M India, and Shree Cements are some Indian companies having one share priced between Rs 25000 and Rs 1.10 lakh. Owing a fraction of the stock is not possible in India and, therefore, Indian investors cannot own a portion of highly-priced stocks by investing a smaller amount. As an Indian investor, one needs to pay the full price to own the stock.
The laws in the US stock market are different and allow investors to own a stock in fractions. The US Securities and Exchange Commission (SEC) allows for the ownership of fractions of equities through Fractional Ownership.
Fractional investment is what makes it possible for investors to own some of the most expensive global stocks.
Warren Buffett’s Berkshire Hathaway (BRK.A) stock price is around 5.5 lakh dollars which is almost Rs 4.56 crore! Similarly, to own one Apple share, you must pay more than Rs 15000. However, as fractional investing is allowed in the US, purchasing US stocks remains more economical than purchasing shares on Indian stock exchanges.
By purchasing equities through fractional ownership, you will also benefit from dollar cost averaging (DCA), similar to how a Systematic Investment Plan (SIP) works in mutual funds. DCA is a method of investing a fixed sum at regular intervals in order to buy more shares (or a larger fraction of a share) when prices are low than when prices are high.
Fractional ownership allows you to own a portion of a stock that you might not be able to afford otherwise. The term fractional investing describes stock ownership of less than one complete share. Therefore, even at a stock price of, say, $5,000, one might theoretically buy 0.1 shares for only $500.
So, you may buy a chunk of Tesla stock for Rs 5000 per month or fractions of Amazon, Microsoft, Apple, and a few others for Rs 50,000 per month. In this way, you can begin constructing a long-term portfolio of US companies within your budget.
Fractional Investing may be used to hedge the portfolio with overseas diversification if you have a limited budget and wish to diversify across US stocks. You can start an international stock portfolio with a $1,000 investment in fractional shares of leading US businesses.
