How to buy Tesla for the cost of a dime of stock
Investing in stocks can be a fantastic way to build long-term wealth, but it can quickly get expensive. You’re here (NASDAQ: TSLA), for example, is currently valued at over $ 1,200 per share, and it is recommended that you invest in at least 15-20 different stocks for a well-balanced portfolio. At this rate, it could easily cost thousands of dollars to start investing.
If you don’t have a lot of cash to shell out, it can be tempting to invest in penny stocks. Penny stocks trade for less than $ 5 a share and are one of the more affordable types of investments. However, they are also incredibly risky and there is a good chance that you will lose more than you gain.
Fortunately, there is another way to invest in reputable stocks like Tesla without breaking the bank: fractional shares. With this strategy, you can invest in some of the more expensive stocks for as little as $ 1.
What are fractions of shares?
A company’s stock price is the price it costs to buy a full stock. However, you don’t necessarily need to buy a full share to invest in a business. With fractional shares, you can buy just a small portion of a share for a fraction of the price.
The best part about fractional shares is that you choose how much you want to spend. If you wanted to invest in Tesla, for example, you could buy a whole share for its current price of around $ 1,200. Or you can buy half of a stock for around $ 600. Or you can choose to buy an even smaller slice for $ 100, $ 10, or just $ 1.
Fractions of shares make building a healthy portfolio much more affordable. If you are on a budget, it may be tempting to buy less than ideal stocks just because they are cheaper. But with fractional stocks, you can buy dozens of solid stocks for less than $ 100.
This strategy can also be smart if you are nervous about investing in the stock market. Even though you can afford to invest hundreds or thousands of dollars, it can be intimidating to invest a lot of money in stocks for the first time. With stock fractions, you can start small to get your feet in the water, and then invest gradually as you get more comfortable with the stock market.
What to know before starting
One of the most important things to remember when investing in fractional shares is that general investment principles always apply.
It is essential that you do your research before you buy anything and only invest in stocks that you think will perform well in the long run. It can be tempting to invest in risky stocks because there is less at stake when you only invest a few dollars. However, while these stocks may be more affordable with fractional stocks, they are still dangerous no matter how much you spend.
Also keep in mind that you won’t see the same gains with fractional stocks as if you invested in full stocks. If you only own, say, a tenth of a stock, you will only see a tenth of the profit compared to a full stock. This isn’t necessarily a bad thing, but it’s important to keep your expectations realistic.
Finally, check with your broker before buying. Not all brokerage firms will allow you to buy fractional shares.
Fractions of stocks can be an affordable way to invest in expensive stocks, making it easy to build a strong portfolio. With this strategy, you can go public regardless of your budget.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.