Have you ever wanted to invest in a property, artwork, or other high-value asset but didn’t have the capital to do so? Fractional investment might be the solution for you.
In this blog post, we’ll cover everything you need to know about fractional investment, from its definition to its benefits and drawbacks.
FRACTIONAL INVESTMENT - THE WHOLE STORY.
Definition and Examples:
First, let’s define what fractional investment is. Essentially, it’s a way for investors to own a portion of an asset, rather than the entire thing. This can include real estate, artwork, collectibles, or even stocks and bonds. For example, instead of buying an entire rental property, you can invest in a fraction of it and receive a proportional share of the rental income.
Drawbacks of Fractional Investment
Before we go to the benefits let us see the drawbacks to the fractional investment. One is that it can be difficult to sell your fractional shares if you need to liquidate your assets quickly. Additionally, fractional investment platforms may charge fees that eat into your returns. Finally, there is always the risk that the value of your fractional shares will decrease over time.
How to Get Started with Fractional Investment
How to Get Started with Fractional Investment
If you’re interested in trying out fractional investment, there are a few steps you can take. First, research different platforms and assets to find ones that align with your investment goals and risk tolerance. Then, create an account on the platform and fund it with the amount you want to invest. Finally, choose which fractions of assets you want to invest in and monitor your returns over time.
Conclusion
Overall, fractional investment can be a useful tool for investors who want to diversify their portfolio and gain exposure to high-value assets. However, it’s important to carefully consider the benefits and drawbacks before investing and to choose a platform and assets that align with your goals. With these factors in mind, fractional investment can be a valuable addition to any investor’s toolkit.
In depth Analysis:
Let’s split and understand the word – ‘FRACTIONAL INVESTMENT’.
FRACTION is a portion of a quantity. The best example to understand the division of fractions is a Pizza.
We all have shared a pizza atleast once in life. The oval bread comes cut helping us to divide the pieces between ourselves easier.
So here one full pizza is divided into 6 pieces. Now we can say each divided piece is a fraction of the quantity – Pizza, as the case is here. Each piece of the pizza is a Fraction. Now this concept of sharing a pizza between you and your 5 friends can also be brought into the investment.
When you and your friends together invest in an investment, dividing and sharing among yourselves, it’s known as Fractional Investment.
In fractional investment, you need not invest equally or a big amount. There are investments as small as hundreds of rupees to Crores.
Fractional Investment in action-
Fractional investment has been practiced in various industries and is fully legal. Some of the examples is Uber. Swiggy, Reliance Mart.
Benefits of Fractional Investment
One of the main benefits of fractional investment is that it allows investors to diversify their portfolios without having to spend a lot of money upfront. By investing in fractions of multiple assets, you can spread your risk and potentially earn higher returns. Additionally, fractional investment platforms often provide access to assets that would otherwise be difficult for individual investors to acquire.
Benefits of Fractional Investment –
- All your eggs are not in one basket.
- Diversification of investment.
- Option to invest in High-profile investments which otherwise would be out of reach.
- More options to choose.
- More income generated.
- Risk reduced.
- Even if one industry does not do well, the other can.
- Investment with what you have.
- No need to ‘Save’ for savings.
- Area and location to invest widened.
- Domestic & International markets open.
- Almost all industries have Fractional investment now.
- More secure.
- Can partner with strangers.
- Maintenance free.
- Some Fractional investments even have a ‘No Loss-Only Profit sharing’ policy.
- Co-Own Properties.
- No need of the day-to-day activities’ involvement.
- No need for a direct visit to the business site.
- More transparency of day-to-day accounting through apps in real time.
Risk Factors of Fractional Investment
However, there are also some drawbacks to fractional investment. One is that it can be difficult to sell your fractional shares if you need to liquidate your assets quickly. Additionally, fractional investment platforms may charge fees that eat into your returns. Finally, there is always the risk that the value of your fractional shares will decrease over time.
RISK IN FRACTIONAL INVESTMENT
As in every investment, it’s not all roses, there are thorns too. The main risk in Fractional Investment is:
- Fractional investment being a new concept, may find it hard to resell the product.
- Returns may not be as predicted unless it’s a guaranteed amount.
- Like any other business, loss may occur.
- You don’t have full control over the product.
- Maintenance is at the mercy of a 2nd party and you may not be able to maintain it as you prefer.
- Footfalls depend on the ads and interest of the company, therefore if the company doesn’t invest in ads, your share of revenue may decline.
- Exit may not be as easy as it sounds.
- Any controversy may lead to the share rates falling.
- Special offers, amenities, etc may remain in print only.
- Sales person may add some lies to sell which might be not known to the company.
- Construction delays may cause heavy losses.
- The assured amount in words and agreement may differ.
How to Get Started with Fractional Investment
If you’re interested in trying out fractional investment, there are a few steps you can take –
- Research different platforms and assets.
- Find ones that align with your investment goals and risk tolerance.
- Create an account and fund it with the amount you want to invest.
- Finally, choose which fractions of assets you want to invest in. Example – Real Estate, Hospitality, Tourism, Jewellery, Start ups etc.
- Monitor your returns over time.
Summary
Even though there are negatives, it’s just like any other business – there will be risks. It’s up to you to notify and recheck all the claims of the company and certify the agreement with an advocate and move ahead.
Fractional Investment still remains a high-value opportunity with low risk compared to other high-value investments, if going ahead with a good company and delivering its commitments.
Finally, fractional investment can be a useful tool for investors who want to diversify their portfolio and gain exposure to high-value assets. However, it’s important to carefully consider the benefits and drawbacks before investing and to choose a platform and assets that align with your goals. With these factors in mind, fractional investment can be a valuable addition to any investor’s toolkit.
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