Whether you're a fan of Starbucks (NASDAQ: SBUX) or not, the coffee giant has had a pretty good year. Its stock price is up almost 49% over the past year, and as of this writing, it's sitting at about $115 a share.
Now to be clear, you can buy shares of Starbucks for a lot less money than many other companies out there. But what if you don't have $115 on hand to invest right now? What if you only have a very small amount of money that you're able to transfer into your brokerage account?
The good news is that it's possible to invest in stocks with very little money. Here's how you can own a piece of Starbucks, even if you can't afford much more than the price of one of its lattes.
Welcome to fractional investing
These days, more brokerage accounts are letting investors put money into fractional shares. When you buy a fractional share of a stock, you get to own a portion of a share — not a full share. Think of it as buying one slice of a pizza pie if you're not hungry enough to need an entire pie to yourself.
If you don't have $115 to sink into a share of Starbucks right now, but you do have about $57, you can purchase half a share. And then, if the value of Starbucks goes up, you'll profit on a proportionate basis.
The upside of fractional investing
The great thing about buying fractional shares is that money doesn't have to get in the way of you owning the companies you want. And that could, in turn, help you assemble a more diverse portfolio.
A diverse portfolio could be your ticket to growing a lot of wealth over time. It could also protect you in the event of a stock market crash.
One thing you should know is that not all brokerage accounts offer the option to purchase fractional shares, but many of them do. If your current brokerage doesn't allow you to purchase partial shares, you may want to consider moving your money elsewhere.
Another thing you should know is that if you're going to buy fractional shares of any given company, it's important that you do the same research as you'd do if you were buying a full share. Or, to put it another way, don't just invest in Starbucks because you're a fan of its coffee. Rather, take a look at its financials.
Is Starbucks managing its cash flow well? And what plans does it have to adapt in an age when some customers may not be eager to gather in coffeeshops due to the pandemic? These are important questions to answer before you invest your money — even a small amount of it.
Starbucks may be a great fit for your investment portfolio. And the good news is that you can buy it even if your budget is limited to the cost of an iced tea and muffin. Just make sure to do your research so you can buy Starbucks with confidence — even if you're only scooping up a piece of a single share.
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Maurie Backman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends the following options: short October 2021 $120 calls on Starbucks. The Motley Fool has a disclosure policy.