What is fractional investing?

In the early days at Whaley, we realised how important global access to markets is to everyday people. We validated that normal people really wanted to invest in brands and companies that they’re familiar with, rather than just the usual ‘big four’ banks and BHB Billiton. ‘Mum & Dad’ investors, students, young professionals and even more ‘savvy’ investors just wanted to own stocks branded with Tesla, Apple and Facebook.

However, in providing a platform that allowed investment into global markets, we exposed a huge flaw in the retail wealth space.

That flaw is unit pricing.

A unit price is essentially a shares perceived value when traded on an exchange. Some shares can be fractions of a cent and some can be thousands of dollars. For example, Tesla Motors trades at around $300 a share or ‘unit’.

The problem with unit prices is that normal people have no way of knowing why a stock has a price of $50 and another had a price of $500. As a result, this locks 99% of people out of investing because owning stocks such as Google (which trades at over $1000) is just far too costly and risky. 

We spent months talking to investors, both savvy and non-savvy, pro-risk and conservative, day-traders and long-term holders. The goal of this research was: how do we provide an experience that can allow the societal majority overcome unit pricing as a medium dictating value.

Overnight, we ditched unit pricing within Whaley and tried something left-field. We decided to just let people determine the amount as a dollar figure that they would like to invest. We removed confusing unit pricing, giving people the power to invest on their terms, not the markets.

In traditional financial services this is commonly referred to as ‘fractional investing’. It means investors can buy a fraction of a share rather than buying a whole amount. For example, If I invest $150 into Tesla, I would own 50% of a Tesla share. 

Some existing brokerage companies have attempted to provide a fractional investment experience. Due to the tax regulation involved when buying fractional shares it typically adds a layer of complexity to an already convoluted experience. 

At Whaley however, we have found a way to provide this same experience without sacrificing simplicity and low-cost pricing. We call it a ‘contact-for-investment’ or ‘CFI’. You can read more on how it actually works here.

What makes our CFI is so incredible is that while remaining cost-effective, we’re able to give our users the ability to trade what have historically been extremely expensive stocks.

We’re even giving our users the opportunity to fractionally invest in non-US listed equities which is what existing broker platforms are restricted to. 

For the same price as a pair of shoes, Whaley users can create a healthy, diversified portfolio. To put it into perspective if you were to attempt to create a diversified portfolio through Commsec, you’d need to have roughly $2,500 and pay about $50 in brokerage fees (assuming you only invest in 5 different assets, all of them Australian-listed).

We believe that our CFI will begin a new revolution in how we own shares. In the same way that Uber proved that taxi-cabs could be everyday cars driven by everyday people, we’re going to show the world that everyday people can be investors with Whaley.

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