BUYING FRACTIONAL SHARES CAN MAKE OR LOSE YOUR HARD-EARNED MONEY

 

Both major and small brokerage firms, such as Fidelity and Charles Schwab now permit the purchase of fractional shares. A fractional share purchase allows you to buy a small portion of a stock, with as little as $5.00. Meaning you can own a fraction of an expensive stock like Amazon or Tesla.  {Not recommending these stocks!}

 

 BROKERAGE FIRMS ALLOWING FRACTIONAL SHARE PURCHASES

BROKERAGE

TRADING FEES

ACCOUNT MINIMUMS and MINIMUM SIZED FRACTIONAL SHARES

Charles Schwab $0/trade $5.00 minimum fractional share
Fidelity $0/trade Increments as small as .001 shares
Robin Hood $0/Trade No minimum

 

Apps such as Robin Hood have democratized trading so ANYBODY can trade.  You can buy stocks with a lot less money and a LOT LESS SKILL.  During this COVID-19 nightmare many gamblers have turned to investing in the stock market (because sports gambling and casinos were all but dead), including day trading.  An alternative to day trading for 90% of the population is to put your money in the fireplace and light a match. Ninety percent of day traders lose their HARD-EARNED MONEY.

While Robin Hood has made it easier for anyone to trade, it also makes it easier for the naïve to lose their MONEY!

 

YOUR GOAL IS TO BUY GOOD, PREFERABLY GREAT COMPANIES, REGARDLESS OF THE STOCK PRICE

It makes ZERO difference if you buy a good company at $25 or $2,500 per share.  If you invest an equal amount in either company and both increase by 10%, your gains are equal.  You should only care that you invest in a good company that is growing earnings.

 

 

 

 

THE CONS OF FRACTIONAL SHARE BUYING

 

Buying a fractional share of a good company is a rational investment. Buying a fractional share of a company headed to bankruptcy will lose 100% of your HARD-EARNED DOLLARS. Both Hertz, Inc., and JC Penney’s Inc., declared bankruptcy in 2020, along with hundreds of other publicly traded companies.

 

TO EVALUATE IF A COMPANY’S STOCK IS WORTH YOUR HARD-EARNED MONEY YOU MUST BE ABLE TO: 

  • Access/read the stock chart,
  • Identify a stock’s resistance and supports prices,
  • See chart patterns and trends,
  • Understand the fundamentals
  • A LOT MORE!

If you do not understand above, you are simply GAMBLING YOUR HARD-EARNED MONEY.  And it SUCKS (today’s technical term) when you lose 50% or more money that took you years to save. Speaking from experience! 

 

After the 2020 March COVID-19 stock crash, we moved almost immediately into a steep recovery.  Being blunt, it has been pretty easy for dumb investors to make lots of money.  Reminds me of myself (Yes, I am calling myself DUMB) during the dot com bubble.  My cat could have made money by simply putting her paw on any stock with .com in its name. BUT, (never a good word when talking about money) in a matter of days, I and millions more lost huge portions of our Hard-Earned Money.  My takeaway, I needed to educate myself about stock investing, so I read dry technical books, attended stock investing workshops and subscribed to weekly and monthly publications.  I continue to practice trading with pretend dollars because I am still learning.

Today,  it is easier to learn about stocks, using: You-Tube; Online education sources; Education thru brokerage firms such as Fidelity, Charles Schwab, etc.  The brokerage firm’s education videos are FREE and good.  These companies  normally film real traders with decades of experience.  Plus, when I do not grasp the point, I simply play it again!

 EDUCATE YOURSELF AND UNDERSTAND THE RISK!

 

 

 

 CONCLUSION

How long did it take you to save that $100 or $10,000 that you are now trading?  Days, weeks, months?  You can lose 40% or more in a very bad week.  Are you ready for that?  I was not!  Understand your risk by understanding how much you can lose and deciding if you are really ok losing that amount.  Unfortunately, a few weeks ago, there was a young trader (in his early 20’s), who was trading options.  He logged into his account one morning and discovered he had lost over $100,000, that he did NOT have in his account.  He committed suicide.  EDUCATE YOURSELF!

 

WHAT IS IMPORTANT IS UNDERSTANDING A COMPANY’S RISK PROFILE, NOT THE NUMBER OF SHARES.

 

 

Next week’s blog will talk about the risk you should understand before buying individual stocks.

I strongly recommend those without the competency/experience and the DAYS to do the research, stick to ETF’s.

 

 

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ABOUT ME

I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger, with a NC State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.

I left a corporate career because I had a desire for making a difference as a speaker and writer, to help others. I was blessed to be coached and mentored by strong women and men in both my family and professional life.  It is my time to serve and give back.

DISCLAIMER

I started my first business at ~13 years of age (small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate and happy to share my personal finance and investment lessons learned with you.

However, I am NOT a licensed financial advisor.  Please do not construe my suggestions on this blog, as recommendations for your personal situation.  For individual finance advice please seek your own licensed CPA or fiduciary financial advisors.  

I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.

 

 

 

 

 

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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