Using stock slices as a beginner investor is a great way to start investing with little money while lowering your risk.
When it comes to investing as a beginner, often the price of the stock and the fear of losing your hard earned money in the stock market, stops you from making your first purchase.
You can now invest with very little money. Brokers like Charles Schwab have introduced the ability to buy stock slices.
Stock slices give more people access to the stock market than ever before.
Stock slices are a good investment when you are a new investor.
Stock slices allow you to become a partial owner of a company by buying a partial share.
If you have wanted to begin dividend investing or start investing for your children then stock slices are a good option for you.
The price of a stock no longer has to be a barrier to you beginning to invest.
What are stock slices?
A stock slice is the same as a fractional share. Charles Schwab calls fractional shares stock slices on their platform.
Fractional shares allow you to purchase part of a stock and enjoy a lot of the same benefits as the owner of a full share.
You get the benefits of stock ownership without having to come up with a large amount of cash to spend.
If there is a company that you want to buy stock in but the share costs more than you would like to spend, you may be able to purchase a stock slice.
A stock slice is a part of a share you can buy. Think of it as a whole share broken up into smaller pieces.
Stock slices are a result of various corporate actions like reverse stock splits, mergers, and dividend reinvestment plans.
Let’s say the stock you want to buy is $100 a share and offers slices.
If you don’t have or want to spend $100 to buy the full share you buy a slice.
All investing involves risks but buying stock slices helps to lower the risk because you are purchasing slices of a share for less than the price of a full share.
How little money can you start investing with?
If you have just $5 to spend you can become an investor.
Slices can be purchased for as little as $5. So if you have $20 to spend, you can buy 4 slices of that stock.
You now own ¼. It’s a fraction.
Take the time to research the stock you want to purchase and then purchase the stock that you want at a fraction of the total price.
How to buy stock slices
You can buy slices of up to 10 stocks. This is great for people who are beginner investors or those who want to invest with little money.
Charles Schwab released this feature in early June.
They give you a choice of 505 companies to choose from and you can spend from $5 to $10,000 a slice
Check this video out to see how easy it is to book a stock slice through Charles Schwab
There are a lot of stockbrokers that now offer the service of allowing you to buy fractional shares.
Some of the newer apps like M1 Finance and Sofi allow you to do that.
Additionally, some of the longer standing brokers have started to introduce fractional shares or as they like to call them, stock slices.
Fidelity came out earlier this year in Jan 2020 with their program and Charles Schwab came out with them this month of June.
If you want to see our review of Charles Schwab vs Vanguard check out our Vanguard love-hate video.
Just as a little side note to that video, Vanguard does not allow you to buy fractional shares – so there is another point to Charles Schwab.
Be careful when you are choosing a broker to use when buying fractional shares.
If that broker charges a trading fee for buying fractional shares or stock slices, don’t use that broker or app.
What’s the point of choosing to buy a stock slice for $1 or $5 and then having to pay a fee that eats up the most of what you want to invest?
There are plenty of platforms that will not charge.
Charles Schwab doesn’t charge a stock slice fee for buying fractional shares.
A lot of the platforms where you can invest in fractional shares make it super easy to start, and they also allow you to automate the process so you can benefit from dollar cost averaging.
Are Stock Slices Worth It?
Now although these are only part of shares, it doesn’t mean they aren’t worth buying.
Actually, we think they are great and we believe there are 5 big reasons why stock slices are a great DIY way to start investing as a beginner.
You can buy stock slices of individual stocks or ETF stock slices for very little money.
For instance, Charles Schwab allows you to purchase fractional shares for as little as $5.
Now you may be saying – are stock slices worth it if I’m just spending $5? How much can investing $5 in the stock market do for me?
The answer is YES! Fractional shares are worth investing in!
Stock slices allow anyone to buy stocks in companies that are high priced and doing well in the stock market.
You no longer have to be priced out if you have little money and wish to invest.
One of the worse things you can do when it comes to investing is to sit out of the stock market.
When you are not investing in the stock market, you are losing the power of compound interest.
You may just be able to invest a small amount of money here and there, but over time these small purchases add up and turn into a full share faster than you know it.
Later on, when you look at your portfolio and see how it has grown with very little money and effort on your part you will be happy that you started.
You can even give stock slices as a gift to your children or grandchildren which will help them in the future.
Being able to purchase stock slices has leveled the field when it comes to investing.
Teenagers can use the money they earn from their part-time jobs to begin purchasing stock.
This is how wealth can be built from a young age.
Do stock slices pay dividends?
If you want to earn passive income from the stock market, the only way to do that is through dividend investing.
If you want to start earning dividends but do not have enough to purchase a full share, you are no longer out of the market.
You can now purchase a stock slice and begin earning dividends.
Your dividends will be paid based on the percentage of the share that you own.
This is great especially if you want to start bringing in passive income when you have little money to invest.
You can purchase a slice or slices of a dividend stock and then be paid a dividend based on the amount you own.
Stock slices are also a way for beginners to try their hand at dividend growth stock portfolio.
Dividend growth investing is when you buy growth stocks that pay a small dividend.
The hope is that these companies will continue to grow their earnings and as a consequence, their dividend and their price will appreciate in the stock market.
It is a bet on the upside potential of a company.
If a beginner wants to try, but doesn’t have enough money or feel they want to take it slowly, they can use stock slices to create a diversified portfolio.
There is no need to invest much money to practice the strategy to see if that’s the one they would like to stick with.
If you would like to know more about dividend growth strategy and dividend investing in general.
Take a look at our Dividend investing for passive income video.
If you have already started dividend investing, you may already own fractional shares and may not know.
If you choose to reinvest your dividends when you buy a stock, then the dividends that you have chosen to reinvest are used to buy fractional shares instead of being paid to you.
This is called a DRIP. which is short for dividend reinvestment plan.
Your dividend payment is reinvested into the company and used to purchase more shares.
Depending on how many shares you currently own and the price of the share, your dividends will either buy a fraction of a share or a whole share.
Can you sell stock slices?
Now that you know how to buy stock slices, what about selling your stock slices?
Some brokers allow you to sell your stock slice by bundling it with others who want to sell the stock.
The trade is done at the market price and the proceeds are paid a percentage of that price based on the fraction of the share you owned.
If you want to familiarize yourself with market price and trade order types check out this video here.
However, there are some brokers that will not allow you to sell your fractional shares unless you sell your whole position in a stock.
This applies more to people who received fractional shares from a corporate action and not by purchasing them.
One of the things we believe in most is helping others increase their wealth and lessen the effects of income inequality in this country.
With more brokers allowing for the buying of fractional shares by individual investors, investing is more accessible than ever.
If you want to build wealth then you have to start investing. Getting started in the stock market is easier than ever and we can help you along the way.
More Articles you may like:
Invest with Little Money and Lower Risk With Stock Slices
Nadia is a Financial Independence Coach from New York City. She holds a B.A from Columbia University and worked 13+ years in Investment Banking and Financial Services. She is an entrepreneur, investor, and partner at Wealth Twins LLC. She reached Financial Independence in her 30’s and is passionate about showing others how to achieve the same.