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Your Piece of the pie: Fractional ownership in stock markets
November 6th, 2023 News
The desire to own shares in eminent companies like MRF, Page Industries, or Nestle India is common among investors. However, the high cost of acquiring a whole stake often proves to be a significant hurdle for many aspiring investors. In India, the Securities and Exchange Board (SEBI) is contemplating a "fractional ownership" solution that promises to make stock investments accessible to a broader audience.
The concept of fractional ownership is simple but powerful. It allows investors to purchase a fraction of a share, aligning with their budget and financial capacity. For instance, envision aspiring to own a share of a company like MRF, valued at approximately Rs 1,08,500 per share. Fractional ownership makes it possible to own a portion of that share with an investment as modest as Rs 25,000, thereby democratising stock ownership.
Advantages of Fractional Ownership
Breaking Down Cost Barriers
Fractional ownership not only breaks down the barrier of high costs but also promotes diversification of investments. By owning fragments of shares from various companies, investors spread their financial resources, minimising the risk associated with concentrating all assets in a single entity. This approach mirrors the age-old wisdom of not placing all one's eggs in a single basket.
Promoting Diversification
Countries like the United States have already embraced fractional ownership through various platforms, allowing individuals to invest in substantial companies such as Apple without requiring significant capital. If India adopts this practice, it could empower investors to make informed choices and diversify their portfolios effectively.
Accessibility for Young Investors
Especially for young investors familiar with systematic investment plans (SIPs) in mutual funds, fractional ownership presents an exciting opportunity. It transforms investing in significant shares into a gradual and manageable journey. Rather than accumulating substantial savings to purchase a total share, fractional ownership permits investors to begin their investment journey with a small yet meaningful amount.
Fostering Financial Empowerment and Inclusivity
The advent of fractional ownership could attract new investors, fueling a more inclusive investment landscape. Even with limited financial resources, individuals can own esteemed companies, promoting a sense of shared achievement and communal progress.
Conclusion
In essence, fractional share ownership catalyses financial empowerment and inclusivity. The doors to stock market participation are being thrown open, inviting everyone to partake in the exciting investment journey, one fraction at a time.
(The author is Cofounder and Executive Director of Prime Wealth Finserv.)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
