Transcript

Welcome back to our series that covers the differences between the US stock market and the India stock market. Last time we talked about the difference between the Custodian model in the US versus the Depository model in India.

Today we are going to be talking about fractional shares.

One of the major differences between investing in India and investing in the US is the ability to buy slices of shares or fractional shares.

These fractional shares allow you to invest in less than one share. For example, if you look at the share price of Amazon today it’s around $3,300. Now with fractional investing, you can start investing in Amazon with as little as $1.

Certain brokers allow you to invest up to 8 decimals of fractional shares! And what’s even cooler is that you get fractional dividends as well as fractional voting rights!

The advantages of having fractional investing is basically that you can start small, so you can create your portfolio over time and you can create your portfolio as per the exact allocations based on your strategy.

How does fractional investing work:

Now how does fractional investing work?

There are multiple ways in which brokers can offer fractional investing. One way is that the broker buys the whole share and stores it in their inventory. And then whenever it receives an order it fills that order from its inventory.

Lastly, the US brokers are able to offer fractional investing because the regulator SEC has allowed sub-divisions of securities, whereas in India, brokers are unable to offer this because the SEBI has not allowed any such subdivision.

So, that was all on fractional investing. Stay tuned for IPO investing for retail investors as the next part of the series.

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Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.