Investing has long been seen as a game for the wealthy. For someone just starting out, the idea of building a portfolio filled with stocks like Amazon or Tesla can seem intimidating, if not downright unattainable. But here’s the good news: fractional investing is flipping the script, making the world of investing accessible to anyone, regardless of their budget.

Whether you’re looking to dip your toes into the market or broaden your financial horizons, fractional investing is a versatile and beginner-friendly strategy you need to know about.

Here’s everything you need to know about fractional investing and why it might be the right move for you.

What is Fractional Investing?

Fractional investing allows you to buy a “fraction” of a share rather than having to pay the full share price. For example, if one share of Company X costs $500 but you only have $50 to invest, fractional investing lets you purchase a 10% slice of that share.

This concept is revolutionary because it removes one of the largest barriers to entry in investing: affordability. By eliminating the need to buy entire shares, fractional investing ensures that even with a modest amount of money, you can participate in the market.

Platforms like Robinhood, Betterment, and Public are leading the way in offering fractional investing options, giving everyday investors direct access to high-value stocks without requiring a high-value bank account.

The Benefits of Fractional Investing

Fractional investing isn’t just about affordability. It offers a range of benefits that are especially attractive for beginners.

1. Low Entry Point

This is perhaps the biggest selling point of fractional investing. Traditional investing often requires substantial capital, especially when buying shares in big-name companies. Fractional investing lowers the barrier by letting you start with as little as $1 in some cases.

For instance, imagine you’ve always wanted to invest in companies like Alphabet (Google) or Amazon, but their share prices are over $1000. Fractional investing turns that dream into reality with just a few dollars.

2. Diversification Made Easy

Diversification is a fundamental principle of investing, recommending that you spread your money across a variety of assets to reduce risk. Fractional investing makes this easier than ever before.

Instead of putting all your funds into a single low-cost stock, fractional investing allows you to have a diversified portfolio across multiple companies and sectors—even with a small budget. For instance, with $100, you could own slices of Tesla, Disney, Netflix, and Microsoft, giving you a balanced mix of industries and growth possibilities.

3. Perfect for Beginners

Taking the first step into the world of investing can be daunting, but fractional investing simplifies the process. It requires less upfront knowledge and fewer resources while providing the opportunity to learn as you go.

With fractional shares, you can experiment with different investment strategies and sectors without risking significant sums of money. Have $20 to spare? Test the waters with various stocks or ETFs (exchange-traded funds) and track how they perform.

4. Flexibility in Financial Goals

Fractional investing aligns perfectly with various investment strategies and timelines. Whether you’re saving for retirement, a vacation, or just looking to build wealth gradually, it fits seamlessly into your financial goals.

You can automate investments with platforms like Betterment or M1 Finance so that even small amounts over time grow into significant holdings. The “set it and forget it” feature of fractional investing platforms is a big plus for beginners who may not have time to actively monitor the market.

Platforms Offering Fractional Investing

If fractional investing sounds like a great fit for you, you’ll need to select a platform that offers this feature. Here are a few beginner-friendly platforms to consider.

1. Robinhood

Robinhood is a pioneer in making investing accessible, and its fractional investing feature continues that tradition. With no commission fees and the ability to invest as little as $1, Robinhood is a fantastic option for people starting from scratch. The app is user-friendly, and you can instantly purchase fractional shares of popular companies.

2. Betterment

Better known for its robo-advisory services, Betterment lets investors build diversified portfolios that include fractional shares of ETFs. The automated approach to investing means you don’t need to constantly research or rebalance your portfolio; the platform does it for you.

3. Public

Public distinguishes itself by combining fractional investing with a social component. You can see what others are investing in, follow financial influencers, and learn directly within the app. Like Robinhood, Public allows you to buy slices of stocks with just a few dollars, making investing more accessible and interactive.

4. M1 Finance

M1 Finance takes fractional investing to the next level by offering customizable “pies,” which are portfolios segmented into percentages based on your goals. For example, you could allocate 25% to technology, 25% to healthcare, and split the rest across other sectors. The platform automatically buys fractional shares in alignment with your chosen “pie.”

How to Start with Fractional Investing

Getting started with fractional investing is as straightforward as can be. Here’s a quick step-by-step guide to begin your financial journey.

Step 1: Choose Your Platform

Decide which platform aligns with your goals, budget, and trading preferences. Many offer free sign-ups and intuitive designs to help you hit the ground running.

Step 2: Set a Budget

Determine how much money you’re comfortable investing. Start small and increase contributions as you become more confident and financially stable.

Step 3: Pick Your Investments

Research companies, sectors, or ETFs that interest you. Remember, fractional investing excels when you diversify, so consider investing in a mix of asset types.

Step 4: Monitor and Learn

Follow market trends and stay informed. Most platforms provide learning tools and insights tailored to new investors, so take advantage of these to sharpen your skills.

Step 5: Automate if Possible

Automation can be a game-changer, particularly for beginners. Platforms like Betterment can automatically invest regularly based on your preset allocations, leaving no room for guesswork.

Is Fractional Investing Right for You?

The beauty of fractional investing is its accessibility. Whether you’re a student, a professional with limited disposable income, or simply new to investing, fractional shares present a low-cost, low-risk way to start building wealth.

Even seasoned investors use fractional investing to rebalance their portfolios or dip into new stocks without overcommitting.

That being said, always remember to assess your risk tolerance, financial objectives, and timeline before investing. Fractional shares are a stepping stone to building a more comprehensive portfolio but shouldn’t be your sole financial plan.