Here is a startling fact: 75% of Indians do not have an emergency fund, and wouldnтАЩt last a month, in case of a job loss.
This is grave news, one that will, surely, have massive repercussions for younger working professionals. Nevertheless, one can steer clear of those grave and distressing repercussions provided one actively embraces saving and investing as a lifestyle.
The catch here is that as a millennial or a Gen-Z white-collar employee, it is becoming increasingly difficult to build savings. The new working generation is battered by several financial challenges, which hardly leaves any scope for amassing savings or investments.
Theirs is not an enviable position: Inflation has been progressively mounting over the years. Rent has never been this steep in Tier-1 cities, living costs have exploded while annual increments have been largely muted.
However, there is light at the end of the investment tunnel.
New-age investment instruments such as fractional ownership of shares can help young investors тАФ slowly and steadily тАФ- create wealth in the long run, without denting their monthly budget.
What is fractional share investing?
Think of a share as your favourite pizza. The thing is you donтАЩt want the whole pizza. All you crave for is a slice.
Fractional shares are, essentially, a slice of the larger share. They permit investors to hold a тАШfractionтАЩ of the larger share, and benefit from the share price movements.
It is easier to understand fractional share investing with an example. Consider, for instance, that you want to invest in Google, also called Alphabet.
Currently, the stock is priced at $136, which comes to a little over тВ╣11,000. Instead of investing and buying just one share of Google, fractional investing breaks one Google share into many pieces, and lets you buy a slice of the share for a fraction.
This way, you can gain from the stock price movement, and simultaneously invest in other shares.
Fraction shares are the brainchild of US-based brokerages and fintech companies, who initially popularised fractional share investing into FAANG stocks, that is, Facebook (now Meta), Amazon, Apple, Netflix and Google (now Alphabet).
This ingenious and novel method of investing in shares was devised in the aftermath of the pandemic, and became a raging success in the US before it arrived on Indian shores.
For Indian investors, fractional share investing became a reality after the International Financial Services Centre Authority (IFSCA) greenlit the trading of fractional shares. This, effectively, paved the way for Indian retail investors to buy and sell US stocks, and gain from the ups and downs of the US stock market.
Is fractional share investing for you?
There are several reasons why you shouldnтАЩt give fractional shares investing a miss.
Even with the smallest quantum of capital, one can now invest in globally recognised stocks. Fractional share investing helps investors hit the two birds of flexibility and diversification with one stone.
Young working professionals can rely on fractional shares to scale up their investments and create wealth without dramatically cutting back on living expenses.
Is it safe?
Brokerage houses that offer this investment route smartly deploy the block-chain technology, which is used in maintaining a separate ledger for every investor owning fractional shares.
The technology, which goes by the name of Distributed ledger technology, keeps track of all the developments related to the stock such as dividend distribution, voting rights, stock split or issuance of bonus shares, and accordingly makes changes to the ledger of the investor.
The technology enables brokers to report accurate, micro-level figures ensuring complete transparency and clarity. It also minimises operational cost and increases efficiency without compromising on security.
The final word
The world of investing and finance is evolving by the day. One can generate wealth and prosperity by following the norms of safe and smart investing. Fractional shares can not only help an investor gain from the volatility in the US stocks, it can also help counter-balance concentration of Indian stocks.┬а
In your US stocks investment journey, you should only rely on a brokerage firm that can guide you with the right tools and research. With the Appreciate app, you can conduct your own deep-dives into the finances of US and Indian companies, and trade easily in US stocks from the comfort of your own home.
