Can I buy expensive stocks like MRF cheaply?

partial stock: Remember, most of us wish our parents or grandparents had invested at least Rs. 10,000 (Rs. 1,19,747) in MRF? If that were the case, we would have avoided the employment crisis and become rich by now, and our lives would have been comfortable.

Currently, there are other expensive stocks in India such as Page Industries (Rs. 37,352), Honeywell Automation India (Rs. 36,000), Shree Cement (Rs. 28,701), Abbott India (Rs. 22,899), but most of the stocks we buy from these stocks. I do not have a portfolio large enough to hold .

Even if your portfolio size is around Rs. 5 lakhs, owning any of these 3 stocks or any other expensive stocks will definitely hamper an investor’s portfolio.

So how can you buy these expensive stocks without draining your bank account?

The answer is fractional shares. This may soon be possible thanks to the Securities and Exchange Board of India (SEBI), which is working to introduce the concept of fractional shares.

What is a fractional share?

A fractional share refers to a portion of a company’s total stock, which is an expensive or highly valuable stock that allows you to own a portion of the company without paying a huge price.

These portions often result from corporate actions such as stock splits, bonus shares, mergers, acquisitions or reinvestment of dividends.

Currently, these fractional shares are not available for trading on the market. This means that investors cannot buy or sell those stocks.

Still confused? Let’s take a look at an example of an MRF!

Suppose you want shares of MRF Company where the price of each stock is Rs. 100,000. This is a huge amount for the average investor!

Without fractional ownership, she can only purchase one share of stock, even after spending a significant portion of her stock portfolio. However, if the same stock is offered in 100 fractions and each unit represents 1% ownership of the underlying stock, you can choose to own 10 fractional units at Rs 10,000.

This way, you can spread the rest of your money across a variety of stocks to ensure proper diversification.

What advantages do fractional shares offer investors?

I. Promotes diversification: Spread your investments across a variety of stocks and make portfolio diversification easier.

II. Risk Management: Owning fractional shares allows you to spread risk across multiple investments, reducing the impact of a particular stock’s poor performance on your overall portfolio.

III. Improved Access: Allows smaller investors access to high-priced stocks that they may not be able to afford in whole units, and expands access to high-value stocks for retail investors.

IV. Cost-effective: By investing in small-cap stocks, you can allocate your funds efficiently to increase capital utilization.

What is the situation in India now?

The concept of fractional ownership has already been accepted in the US market, and many Indian investors have purchased fractional stakes in large companies such as Apple, Meta, Tesla, Netflix, Microsoft, Alphabet, etc. But in India there is a problem!

Companies law requires subscribers to agree to acquire at least one whole share and prohibits them from buying, selling or trading fractional shares.

However, SEBI is working with the Ministry of Corporate Affairs (MCA) to change this law. If successful, individual investors in India could soon own a portion of their favorite Indian companies.

The proposal to allow penny stocks was proposed last year and came as a result of the 1.42 billion increase in retail stock market investors during the pandemic.

However, the concept of fractional ownership already exists in some other asset classes, including real estate, and some startups offer platforms for investors to engage in fractional investments in physical assets.

So what do you think about this? Do you think SEBI will face difficulties in introducing fractional shares in India?

Written by Shivani Singh

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