There are numerous benefits to Fractional Share Rights (FSRs), the most important of which we highlight below:
Never leave money 'out' of the market
Equal opportunity to Investors
Potential to reach your goals faster
As trading on a securities exchange can only happen in whole securities, many investment platforms only allow trade in whole securites. But this is not an entirely efficient way to do things.
For example, imagine you have decided to add R50 of your savings to your Satrix Indi ETF investment, but this is not enough to buy a whole security which is priced at R70.
With a platform that only offers whole securities, you cannot use your R50 to invest in Satrix Indi ETF because you are R20 short of being able to buy a whole Satrix Indi ETF.
Under these conditions, that R50 will remain un-invested until you're able to add an additional R20 to buy that whole ETF (provided of course the price of the ETF has remained the same).
As available funds rise and fall in your account over time, there will most likely always be some pesky amount of un-invested funds just sitting there. Without those available funds being invested, you the investor potentially lose out on investment returns as well as the effect of compounding over time.
With Fractional Share Rights this won't happen.
You can’t buy or sell fractional share rights (FSRs) on a securities exchange. However, as a SatrixNOW customer your ownership in a fraction of a security can be down to 1/1,000th - putting every Rand and Cent to work. This gives the investor the chance to invest in a variety of different ETFs he / she may not have had access to if required to purchase whole ETFs.
This brings diversification to the portfolio which can provide higher growth and less risk than any individual investment within the portfolio.
Offering investors on our platform the ability to purchase Fractional Share Rights also means that our service gives equal opportunity to all investors. It means an investor with a portfolio of R2 500 receives the same diversification benefits as one with a R250 000 portfolio (and we don’t require a minimum deposit or investment).
If you try to ensure that any available funds in your account are always invested, your money can work harder for you as it potentially benefits from investment returns and the effect of compounding (described above).
And the longer the investment, the bigger the potential growth allowing you to reach your goals faster.