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What are fractional shares?

2 mins | Beginnner


Fractional shares are pieces of a share that you can buy and own - as little or as much as you want. You can buy in price value (e.g. $25 of Tesla) or by the amount of a share (e.g. 0.25 shares of Tesla).

We’ve given you heaps of information about buying shares. But what about when it comes time to sell?

There are a number of reasons to sell. For instance, you might sell for more than you paid to make a profit, invest in something else because you are worried that things are trending downwards and won't recover, or simply because you need the money. 

That being said, there are a few things you should ask yourself before selling:

  • Are you on track to achieve your goals?

If you haven’t reached your goals, but your investments are increasing in value, then selling might get in the way of you reaching them.

The same goes for if your investment is losing value, you need to ask yourself if you think it is going to continue to lose value.

  • Do you need the money?

Life has a tendency to throw curve balls. Before you sell, do your due diligence and check which shares you’ll sell and for how much. No point selling something that is doing well and on track to do so! 

  • Have you thought about locking in a loss?

Locking in a loss could prevent you from losing more money. If you buy shares for $100, and they drop to $90 so you sell, then you have locked in a $10 loss.

But, if they drop to $80, then your $10 loss was actually a better outcome. Had you waited, the $10 loss would have turned into a $20 loss!

Remember that there is nothing wrong with selling shares, just make sure you take into consideration the context when you sell - your goals and your overall Portfolio. 

Top Tip: This is also a good reason to have a well-diversified Portfolio, in order to reduce the overall impact if any one investment drops in value.

Investing involves risk. You aren't guaranteed to make money, and you might lose the money you start with.
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