Warren Buffett is perhaps the world's most celebrated stock investor, but shares for his company are phenomenally expensive.
The price for Berkshire Hathaway Inc (NYSE: BRK.A), Buffett's publicly listed investment vehicle, has risen so much over the decades that as of August 14 it sits at an astounding US$318,114 (AU$444,660).
This isn't exactly an accessible price for mum-and-dad investors.
But there is a neat trick, not available to Australian companies, that can be used to get yourself to the "Buffett" table.
It's called fractional shares.
"Fractional shares are portions of whole shares of a stock or ETF," Stake chief operations officer Dan Silver told The Motley Fool Australia.
"This means that you can trade a dollar amount of a stock irrespective of the share price — you have the flexibility to invest what you want."
So for Berkshire Hathaway, you could buy 0.003 of one share to pay just US$1,000 for a piece of Warren.
Amazon.com Inc (NASDAQ: AMZN) shares, at more than AU$4,000 each, is another example where it might make sense to buy a fraction.
Silver said fractional shareholders have the same rights as full-stock owners.
"Fractional shares are held in your name with our broker and custodian, so you have full beneficial interest," he said.
"For example, this means that you receive dividends and any other corporate actions on a pro-rata basis."
Why are fractional shares not available in Australia?
Cultural and systemic differences mean fractional investing is not available for companies listed in Australia.
Silver said in the US, brokerage fees have tended to be on a per-share basis, meaning transaction costs are reduced as the share price climbs.
But in Australia brokerage fees tend to be pegged to the trade value.
"[Australian] share prices are rarely above a couple of hundred dollars. There is more incentive for companies to maintain share prices at a level that does not prevent retail ownership."
US shares are owned by a custodian (usually an institution) on behalf of the benefiting customer, rather than held directly by the shareholder like in Australia.
This ownership model makes fractional shares easier to implement.
In the US, stock splits and dividend reinvestment plans can also result in part-shares floating around. In Australia, leftover dividends are often held as a credit to be used at the next opportunity.
Fractional shares can be harder to sell
Although fractional stocks are becoming more prevalent, only certain brokers and broking platforms deal in them – meaning they're not available to the entire market.
This could make it harder to sell later.
The selling brokerage firm would have to join your fraction with other fractions to form a whole share to trade on the open market.
But if they're popular stocks like Berkshire Hathaway and Amazon, perhaps this hurdle is nothing to worry about.
