Balling on a Budget: How to Invest in Premium Stocks on Any Budget

Hey, it’s Sergio. Back in the day, when I worked on Water Street in NYC’s Financial District, I used to walk over to a pizza shop and grab a slice for a dollar.

As a single guy on a newbie trader salary ducking out for a quick lunch, it was the perfect solution. I could satisfy my craving for a little pizza without blowing my budget.

The beauty of it? I didn’t need to buy an entire pizza.

I had the flexibility to choose exactly what I needed, and that’s precisely what fractional shares do for investors in today’s market.

Ever scroll through financial news and see Tesla, Amazon, Apple, or Nvidia hitting new records and think, “I can’t even afford one share of these companies, I’m completely shut out?”

You’re not alone. For years, high-priced stocks kept everyday investors locked out while the wealthy built portfolios full of these premium stocks. When a single share runs hundreds or thousands of dollars, it feels impossible to get in the game.

But you’re not shut out at all, you have options. Fractional shares change everything. This is how small investors are getting in on elite stocks without needing elite capital.

The Game Has Changed

Fractional shares let you buy pieces of stock, instead of whole shares. Think of it like splitting a pizza — you don't need to buy the entire thing to enjoy a slice. Major platforms like Fidelity Fidelity, Charles Schwab, Robinhood, and SoFi now offer this across thousands of stocks, making premium investing accessible to anyone with a few dollars to spare.

Before You Buy: Remember Index Funds and ETFs

Index funds and ETFs already work on a similar principle to fractional shares. Instead of buying individual stocks in hundreds of companies, fund managers bundle them together into one product that tracks a market index. You can then buy whole or fractional shares of that fund, giving you instant diversification across multiple companies.

I want to reiterate advice I provided in a previous newsletter: low-fee index funds and ETFs are still the best foundation for most portfolios. When you buy an index fund or ETF, you're automatically getting fractional shares of hundreds or thousands of companies, all managed and rebalanced for you.

These index funds and ETFs consistently outperform stock pickers. In 2024, only 13.2% of actively managed funds beat the S&P 500. These funds allow you to get instant diversification, professional management, and historically strong returns without the stress of picking winners yourself.

When Individual Stocks Make Sense

That said, fractional shares of individual stocks have their place. Once you've built a solid index fund foundation, fractional shares let you invest in specific companies you believe in or want exposure to beyond what your index funds provide.

Target Specific Opportunities

Maybe you want more exposure to a particular sector than your index fund offers, or you believe strongly in a specific company's future. Fractional shares let you make those targeted bets with small amounts of capital. Many investors use an 80/20 strategy: 80% in index funds for stability, 20% in individual stocks for growth opportunities.

Build Real Diversification Without a Big Budget

When you use fractional shares to spread your money across ten different stocks instead of concentrating it in one, you’re reducing concentration risk. This means you won’t capture the full dollar impact of any single stock’s big rally, but you also won’t get hit as hard if one stock tanks.

Make Every Dollar Work Immediately

No more waiting until you save enough for a full share. With fractional investing, you can put exact dollar amounts to work right away — $25, $50, $200, whatever you have. Your dividends reinvest immediately too, compounding faster because nothing sits idle.

Cons of Fractional Investments

You Can't Take Them With You

Want to switch brokers? You'll likely need to sell your fractional shares first since most platforms won't transfer them. This could mean triggering taxes or selling at an inconvenient time.

No Seat at the Table

Fractional shareholders typically don't get voting rights at shareholder meetings. You own the stock and benefit from price increases and dividends, but you won't be casting votes on company decisions.

Broker Rules Apply

You're buying and selling through your brokerage only. There's no open market for fractional shares. This means you're dependent on your broker's pricing and policies.

Not Every Stock Is Available

While most popular stocks offer fractional investing, you might find gaps in coverage depending on your broker. Check your platform's fractional share list before building your strategy around specific investments.

Your Move

Before purchasing fractional shares, start with low-fee index funds or ETFs as your core holdings. They give you instant diversification and professional management without the guesswork.

Once that foundation is solid, fractional shares of individual stocks let you add targeted exposure to companies you believe in. Whether you're starting with $20 or $2,000, you can now build a portfolio that was once financially out of reach.

For investors on a budget who are serious about building long-term wealth, this combination of index funds and fractional shares offers the best of both worlds: stability and flexibility.