To give potential investors more information on fractional investing, we've put together this guide which covers exactly what fractional investing is and how it works. We’ll also take a good look at the pros and cons of using this option as an investment strategy so you can make an informed decision on whether or not Fractional Investing is right for you.

Fractional Investing is a process that enables potential investors to own smaller shares of a larger asset. It’s made possible by dividing an asset into more affordable pieces through the use of a Unit Trust. Each Unit within the Trust is then made available for purchase to a larger pool of investors.

Fractional Investing creates opportunity to invest in high barrier to entry asset classes like real estate and start-ups as it effectively reduces the amount of capital required to invest.

Let’s imagine a property development opportunity. We have located a great block of land with an old red brick house that’d be perfect for a duplex development. There’s an issue though - we’ve run the numbers and we simply don’t have enough capital to make it happen.

Now imagine the same opportunity, but the capital required is how ever much we’re willing to invest. Enter Fractional Investing - We purchase 20 shares in the opportunity for $250 each, along side other interested investors. For us, this comes to a total investment amount of $5,000.

The purchase finalises and construction of the duplex begins. We hold our shares through the completion of the build and the development goes to market as 2 brand new boutique dwellings, ready for purchase.

Now let’s remember that this is all hypothetical - but for the sake of illustration, the results of this example investment as a whole are as below:

Purchase Price + Stamp Duty + Settlement Cost
$1,600,000

Cost of Demolition, Build + Associated Costs
$1,100,000

Total Sale Price of Both Properties
$3,000,000

Total Return after Fees
$280,000

Going back to our imaginary investment, if we held a $5,000 share of this development project, we would have a relative share of the profit (or losses) incurred at the completion of the project ie - once the sale has finalised. In this case our performance within this investment opportunity results in $518.52 or a 10.37% return.

While this is a moderate result of how a Duplex Development in Sydney NSW might finalise, our aim here is to illustrate that with an amount that suits our personal financial situation and risk appetite for investment, Fractional Investing has made it possible for us to have the same exposure to an investment opportunity that would previously be inaccessible - This at the core is what the Biskit platform aims to achieve.

Accessible Investing

The biggest advantage of Fractional Investing is accessibility. High value assets and the associated risks and rewards are made available to potential investors at a much lower entry point, making asset classes like real estate and business equity accessible with limited capital.

Easy Diversification

Fractional Investing makes it simpler for potential investors to diversify their portfolios, especially in cases of limited capital where diversification is often out of reach.

Affordable and Flexible

Because high value assets are divided into smaller fractions, potential investors can allocate small amounts of money to their portfolio, enabling market participation to a much wider range of financial circumstances. This creates flexibility for investors as they are able invest more comfortably to suit budget and investment goals.

Proportional Benefits

Investors in Fractional Shares are exposed to the same benefits and dividends to full share holders in proportion to their investment stake.

Here at Biskit our goal is to remove the barrier to entry to high-value assets by providing a simple way for potential investors to grow a diverse portfolio of income generating assets with limited capital.

Learn more here.