Fractional Investing: Is It a Boon or Bust for Novice Investors?

Did you know you can start building an investment portfolio with as little as $5? That's less than the cost of a venti white chocolate mocha. The low-dollar entry point is made possible by a practice called fractional investing.

Fractional investing involves purchasing stock or ETF shares in units of less than one. If you had only $5 to spend and you wanted to own Vanguard's S&P 500 ETF, you could use your five bucks to buy about 0.017 shares. In the old days, before fractional investing was an option, you'd have to save until you had enough to buy a whole share of VOO for about $295.

Fractional investing isn't brand new, but it has recently become more widely available. Major brokerages Schwab and Fidelity both offer fractional buys. You can also find the feature in startup investing applications like Robinhood and Betterment. Financial experts see the expansion of fractional investing as a great thing for the investment community. Novice investors can jump right in and start investing today, without having to spend thousands to build a diversified portfolio.

Source Fool.com