Fractional investments have become common for retail investors with limited capital. It offers an investment opportunity that was beyond their reach even recently. This opens up a novel avenue for investments that can act as wealth creators in the long run without affecting an individual’s risk profile.
For a long time, people chose fixed deposits and gold as safe investment options. Its returns and yields were comparatively higher and offered the scope to increase earnings within short periods. But, fractional investments brought about convenience, affordability and accessibility at the same time. As a result, retail investors are continuously attracted to these investment options.
Benefits of Fractional Investment
Fractional investments are suitable for investors with moderate to conservative risk profiles. Since their risk taking capability is limited, these investments offer excellent avenues to create a significant corpus within a few years. Let us take a look at some of the major advantages of fractional investments.
- Convenience – Fractional investments allow people to enter the market without risking too much capital. Conservative or new investors wary of bigger investments in a volatile market find this option extremely convenient. It is a great way to invest in favoured stocks without parking a lot of money in one stock. Moreover, funds can be added or withdrawn conveniently as and when the investor wants. There is no lock-in period and if an investor makes a good profit within months, he may release the fund without waiting for the completion of a fixed tenure.
- Affordable – Investments become attractive when they are affordable. If a small investor finds a lucrative destination for putting their money without the risk of investing his life savings, nothing can be better. Fractional investments, therefore, ensure affordability. It enables people to save as much as they want without a threshold limit.
- Easy Accessibility – If an investor wishes to invest in expensive items like real estate or vehicles, it can typically run into lakhs of rupees. But, with fractional investment, the entire amount is broken up into smaller chunks. This makes the investment easily accessible for people with lesser amounts of money. At the same time, it allows a person to invest in a chosen segment.
- More Traction – Despite making a small investment, fractional investments gain more traction over a period of time. These investments grow bigger over time with better business prospects. As companies continue to book profit and expand their businesses, it earns better returns for investors, offering them avenues to book considerable returns on investments.
- Assured Safety – Fractional investments are usually made in reliable companies. Chances of underperformance are therefore, minimised. It assures the safety of the invested amount and does not expose it to massive threats. Moreover, escrow accounts are also set up to safeguard investors’ capital. Users also have various digital tools to constantly monitor the performance of investments, allowing them to be cautious and fully aware of the deals offered.
- No risks involved – Since investment amounts are not huge, the risk of losses can be completely eliminated. It cushions the invested amount from market volatility and helps to distribute the risk among all stakeholders due to its fractional nature. As profits from gain are distributed among multiple investors, any risks are also similarly distributed. Therefore, it provides an excellent option for parking money without taking a lot of risks. Besides, pre-vetted investment options are used for fractional investments. The ability to generate returns doesn’t depend on uncontrollable variables. Rather, investor yields through these platforms are generated from avenues that offer the best deals. Therefore, the risk and return profile is thoroughly analysed and evaluated against set benchmarks before an investment.
- Profits – Profits earned from fractional investments may be smaller initially but, are expected to be significant gradually. Although market volatility may affect earning capacities, investors consider fractional investments to create a diversified portfolio. Therefore, instead of keeping all their eggs in the same basket, they can easily diversify their investments into debt, equity, mutual funds, shares and property. Investors nowadays are getting out of a traditional mindset of investing only in safe havens like Provident Funds and Fixed Deposits. New retail investors have an affinity for better returns and do not shy away from diversifying their investment portfolios. Fractional investments offer a great opportunity to fulfil this objective.
- Tax Payment – Tax payments on these investments are also minimal. This provides investors an opportunity to grow wealth without having to worry about hefty taxes. However, short term capital gains taxes may be levied if shares are sold before the end of the year. But, the investor is not liable to any tax if the trustee buys back the share.
- Insurance – Every business that offers fractional investment options is covered by insurance. This cushions the invested amount from any risks.
- Instant Application – Applications for fractional investment can be easily made. With the easy availability of online tools, investors have the freedom of instant applications that can be completed very quickly. After submitting few documents online, the user account is verified and it is ready for use.
Thinking about a great investment opportunity? Now is the time to check out fractional investments. With multiple benefits and so much convenience at your disposal, this is an excellent way to multiply your hard earned money. Young investors, in particular, are choosing this route due to the high yield it offers within a short period, the low risk associated with it and the transparency of the processes.