Should You Buy Fractional Shares of Amazon?

If Amazon‘s (NASDAQ: AMZN) high-flying share price has put you off of investing until now, the good news is that you can still invest in pricey companies like this based on the amount of capital you currently have. In this segment of Backstage Pass, recorded on Nov. 1, Fool contributor Rachel Warren, Toby Bordelon, and Connor Allen discuss fractional investing in Amazon and the benefits of buying partial shares of a stock.

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Rachel Warren: A few comments from Vihaan. Rachel, what percentage of your portfolio is Amazon? It’s expensive. Yes, it is expensive. [laughs] Did you get full shares or partial shares when the stock was already at its peak? That’s a great question.

Amazon was actually, Toby will remember this for my first ever Backstage show. Amazon was one of the first stocks I ever bought as a newer investor.

Personally, what I did was I bought fractional shares. I think that fractional investing, it can be used to your advantage for so many things. Fractional investing can be great like in this instance, to invest in a stock that hasn’t really steep price tag and maybe you just don’t want to put a few thousand dollars down for a single share of a company.

But it can also be a really great way to maybe invest in a company that perhaps have a little more volatility risks to it and maybe not have that be too large a part of your portfolio.

In terms of what percentage of my portfolio, I’m invested in all stocks sort of equally. I’d say it comprises right now, I have 10 holdings, so it comprises I would say about 10% of my portfolio. Are either of you invested in Amazon?

Connor Allen: I’m not. I used to be. [laughs]

Toby Bordelon: Yeah, I still am.

Allen: I have a couple reasons besides the fact that I just wanted to be invested in some other stuff. [laughs] I’ll probably regret it later. I mean, I already kind of do. [laughs]

Warren: I love it.

Bordelon: I am. One of my wife’s RAs, one of my kids had it too in their account. That’s the thing, I think you’d have to use fractional shares for something like this. When you think about it, if the current price–

Say you’re someone who makes $50,000 a year, which is not a bad salary, or say I’m going to invest 10% of my income in a stock market every year, that’s $5,000. More than half of that will be Amazon if you buy one share.

I think if you’re going to diversify, its a tool you should definitely use. Because these are great companies. Amazon’s a good company.

You don’t want to ignore it because of the high price tags or fractional shares, I think, gives you that option to get a little bit of exposure there. Use it if you can. Most of them do now, most brokers offer this now.

Warren: I agree, it’s a great way to diversify for sure.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Connor Allen has no position in any of the stocks mentioned. Rachel Warren owns shares of Amazon. Toby Bordelon owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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