The newest fad in investing is buying by the slice. We were used to buying traditional open-end mutual funds, then came exchange-traded funds, now we can buy stocks or funds by the slice, what does this mean?
If you wanted to buy $5 worth of a stock that costs $800 per share, you can make that happen by buying a slice for $5. That fraction of a share remains yours until you sell it. When you want to sell a slice you can simply enter how much of the value you want to sell. . You can invest $1,000 into one company, or $1 into a thousand companies—the choice is yours.
This seems, on the surface, to be an easy way to own stock in your favorite companies with little equity risk due to being able to spend so little money to invest. Many of the trading services that offer this option state they are commission and fee free, but how do they make money. You know that nothing is free.
Here is one example of how these firms make money. One of the most popular “stock slice” buying firms, advertised that it only two revenue sources: fees for its margin-trading service and interest collected on customer deposits. They failed to mention payment for order flow, even though the payments to high-speed traders were detailed in regulatory disclosures available elsewhere on the website.
I applauded anything that makes it easier for everyone to own a piece of the American Dream, but please, do your homework and have all of the facts at hand before buying your slice.