There are numerous benefits to Fractional Share Rights (FSRs), the most important of which we highlight below:
Never leave money 'out' of the market
As trading on a securities exchange can only happen in whole shares, many investment platforms only allow trade in whole shares. But this is not an entirely efficient way to do things.
For example, imagine you have decided to invest R90 of your savings in Woolworths but when you come to buying the share, you discover that Woolworths shares are priced at R100.
With a platform that only offers whole shares, you cannot use your R90 to invest in Woolworths because you are R10 short of being able to buy a whole Woolworths share.
Under these conditions, that R90 will remain un-invested until you're able to add an additional R10 to buy that whole share (provided of course the price of the share has remained the same).
As available funds rise and fall in your account over time, there will most likely always be some pesky amount of un-invested funds just sitting there. Without those available funds being invested, you the investor potentially loses out on investment returns as well as the effect of compounding (reference Investopedia ) over time.
With Fractional Share Rights this won't happen
You can’t buy or sell fractional share rights (FSRs) on a securities exchange. However, as an EasyEquities customer your ownership in a fraction of a share of a company can be down to 1/1,000th of a share—putting every Rand and Cent to work. This gives the investor the chance to invest in a variety of different shares he / she may not have had access to if required to purchase whole shares.
This brings diversification (reference Investopedia) to the portfolio which can provide higher growth and less risk than any individual investment within the portfolio.
- Equal opportunity to investors
Offering investors on our platform the ability to purchase Fractional Share Rights also means that our service gives equal opportunity to all investors. It means an investor with a portfolio of R2 500 receives the same diversification benefits as one with a R250 000 portfolio (and we don’t require a minimum deposit or investment).
- Potential to reach your goals faster
If you try to ensure that any available funds in your account are always invested, your money can work harder for you as it potentially benefits from investment returns and the effect of compounding (described above).
And the longer the investment, the bigger the potential growth allowing you to reach your goals faster.