Investing in the stock market is one of the most effective ways to build wealth over time, but it can get expensive quickly.
A well-diversified portfolio should contain at least 25 different stocks, and when some stocks cost hundreds or even thousands of dollars per share, you could easily spend several thousand dollars getting started.
Fortunately, there is a cheaper way to invest. With this strategy, you can buy expensive stocks like Amazon (NASDAQ:AMZN) for as little as $1.
Invest on a budget
Amazon is currently priced at just over $3,200 per share. If you’re new to investing or just don’t have that much cash to spend on a single stock, that price can be a deciding factor. However, with fractional shares, you can invest in high-quality stocks for just a dollar or two.
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With fractional shares, you are investing in a small portion of a share rather than an entire share. So, for example, instead of buying an entire share of Amazon for $3,200, you could buy a tenth of a share for a tenth of the price, or $320.
Fractional shares can make it easier to invest on a budget. If you only have $5 to invest, you can invest in a small portion of stock for $5. Or if you have a substantial amount of money to invest but don’t want to spend it all on one stock, you can spread it across multiple stocks through fractional shares. .
Why fractional shares can be a smart strategy
In addition to being a cheaper way to invest, there are other benefits to buying fractional shares. On the one hand, it is easier to build a diversified portfolio. Instead of spending thousands of dollars buying dozens of whole shares, you can invest in 30 different shares for as little as $30.
Of course, the smaller the stake you have in a company, the lower your profits. But once you’ve built a basic stock portfolio through fractional stocks, you can start investing more in each stock little by little.
Also, fractional shares could make investing less intimidating. If you like the idea of investing but aren’t sure about investing thousands of dollars at a time in the stock market, fractional stocks can help you do it gradually.
Some things to consider before you start
While fractional shares can be a fantastic way to invest affordably, there are a couple of factors to consider before you dive in.
It’s still important to do your research before you buy, even if you’re not spending a lot of money. It can be tempting to buy risky stocks Simply because they are more affordable with fractional shares, but a bad investment is still a bad investment regardless of how much you paid for it.
Also, it’s wise to keep a long-term perspective with fractional shares. When you’re not investing that much money, you won’t see monumental returns right away. While that can be daunting, remember that it takes time for your investments to grow. By continuing to invest consistently, you can see substantial returns over time.
Whether you’re on a tight budget or just don’t want to spend a lot of money in the stock market, fractional shares can be a fantastic option for investing in even the most expensive stocks like Amazon. If you start now and invest what you can afford, you’ll be well on your way to building wealth in the stock market.
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