This Investing Mistake Could Stunt Your Portfolio’s Growth

There are different strategies you can adopt on the road to building an investment portfolio. But as a general rule, it’s a good idea to maintain a diverse investment mix.

A diverse portfolio could not only help you grow a lot of wealth over time, but also protect you during periods of stock market turbulence. When stock values fall but you own a wide range of companies, you may be less likely to see your portfolio value take a massive hit.

The problem with diversifying, though, is that some of the stocks you may want to own might be too expensive for your budget. And so you may be inclined to just hold off on buying them until you can afford more shares (or, in some cases, a single share). But actually, that’s a mistake you might regret.

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You have more options than you think

The longer you wait to add quality stocks to your portfolio, the more growth opportunity you lose out on. And so if you’ve held off on buying certain stocks due to their high share price, it’s time to stop that practice — and look to fractional investing instead.

These days, many brokerage accounts offer investors the option to buy fractional shares. What this means is that rather than purchase stocks as whole shares, you’re buying partial shares, which gives you far more flexibility when funds are limited or when you’re hesitant to spend a large chunk of money on one company alone.

Imagine you have $250 to invest right now, but a company you really have your eye on is trading at $750 a share. You might assume you’re out of luck until you manage to amass more money. But in reality, in most cases, you’ll have the option to purchase one-third of a share of that stock so it becomes a fixture in your portfolio. That’s the beauty of fractional shares.

Is there a downside to fractional investing?

Not really. You could argue that the option to buy pieces of stock shares instead of full shares might lead you to focus more on the quantity of stocks you buy rather than the quality. But that’s a blunder that’s easily remedied by establishing an investing strategy, narrowing down a list of stocks you think you should own based on that strategy, and sticking to it.

In fact, to some degree, fractional investing might mitigate your risks. If there’s a company trading for $750 a share and you purchase one-third of a share, you’ll see smaller losses if that share price then plummets to $550 after a bad earnings call, or after a string of negative news.

All told, fractional investing makes it possible to own stocks that would normally be out of reach. And so the next time you identify a stock you want to invest in, don’t assume that a lack of money is necessarily a barrier to purchasing it. If you pass up the opportunity to own quality companies, you may end up with less wealth down the line. And that’s a silly thing to subject yourself to.

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