Should You Buy Fractional Shares of Amazon, Apple, Tesla, and Netflix?

The terms "fractional shares" and "fractional trading" are fairly clear. Effectively, the investor is buying fractions or tiny slivers of an individual share in some company.

For example, I recorded this video on October 10, 2020, and Amazon was trading at $3,286.65 per share. So it would cost $3,286.65 then to buy one whole share of Amazon.

But, if you're using a trading platform that permits it, you might be able to buy a portion of a share, a fractional share with whatever money you happen to have.

Why Fractional Shares May Make Sense

This is important because the advent of fractional trading has had a significant impact on how folks with relatively small amounts of savings can directly invest in some of the leading stocks on the market, including companies like Amazon, Apple, Tesla, and Netflix among others.

Now in the past, if someone could not afford to buy a whole share that person might only benefit from owning some of these high-profile and high-growth businesses as part of a fund.

Now, it is possible to focus one's attention directly on these businesses with fractional shares. And for some investors, this may make sense.

To decide if that is the case for you, personally, you probably need to consult with a financial planner and/or do a bit more research.

Your Investment Mix

Owning stocks in individual businesses, whether whole shares or fractional shares, is very risky. It is among the most aggressive ways to invest your money.

Let me give you an example. Earlier this year, Nikola, a company that makes electric trucks, was soaring. In fact, on June 9, 2020, its share price was $79.73. But as I am making this video in October 2020, Nikola is trading for just $24.66, which is less than a third of that June price.

If you have bought Nikola at its peak, you would have lost more than 60 percent of your investment. Again, my point is that owning stocks in individual businesses is risky. But it can also be rewarding.

You see back on June 9, 2020 -- the same day Nikola was peaking-- you could have purchased shares of Pinterest for $27.42. As I am recording this video, Pinterest shares are worth $43.39.

You get the point.

Here I want to read you a quote from David Bach's book The Automatic Millionaire.

Bach suggests two investment principles.

1. "Your money should be invested in a combination of cash, bonds, and stocks."

2. "The nature of this combination should change over time as your life situation changes."

Stock, fractional or otherwise, should play a role in your investment strategy, but how much of your total investment assets are allocated to stocks should depend on how old you are and what your investment goals are. So here again, you at least need to do some research and you probably want to chat with a financial advisor.

So that's it. In this video, I wanted to share with you a bit about fractional trading, how it could make sense for you, and how stock investments, generally, need to be made in the context of an investment mix.

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