Fractional Shares: Invest With Warren Buffet

Written by: Susannah Streeter | Hargreaves Lansdown

The potential inclusion of fractional shares in ISAs is a positive development and could encourage new investors into the stock market. Fractional share trading gives retail investors the opportunity to benefit from the growth of companies they might otherwise have been priced out of.  Although our clients have a strong bias to home markets, they are increasingly looking for value overseas but this often isn’t possible through individual holdings due to high share prices being carried by companies listed in the US. 

Holding slices of some tech firms, in particular, is prohibitive for retail investors given the share prices are so high. The current price point of a single share in companies such as Berkshire Hathaway is a blocker for many retail investors. Being able to buy fractions of Berkshire Hathaway could give people the opportunity to invest with Warren Buffett and not just like the Sage of Omaha.  

The opportunity to buy a fraction of a share might persuade more newcomers to dip their toe in and grow a portfolio by diversifying across a range of assets. It has to be stressed that investing in fractional shares is not right for everyone. If you want exposure to a large tech firm like Apple for example an alternative is a fund which invests in such stocks – which has the added benefit of diversification.

5 stocks more accessible with fractional shares 

  • Berkshire Hathaway Inc - $549,000
  • NVR Inc - $6,315
  • McDonalds Corp - $279
  • Tesla - $235
  • Apple Inc - $191

If fractional shares do encourage more retail investors into the market this could help the UK catch up the US in terms of retail investor equity ownership. The latest ONS data (from 2020) shows that at individuals shareholdings stood at just 12% of the UK market, although that is expected to have risen slightly during the pandemic. The UK appears to be lagging behind in terms of retail participation in equities, but they are still investing through their pensions and other funds. In Australia, the Reserve Bank estimates that Australian households own 33% of financial stocks while in the US it’s even higher at 37%, partly because individuals have more direct control over their individual pensions.

Related: Market Report: Wait and See Mood Prevails While Higher Oil Prices Loom