Fractional shares will let small investors buy big stocks

livemint.com:

₹5 lakh, a single MRF share ( ₹108,000-plus) would amount to over 20% weight in the portfolio. You might not want that much exposure to a single company in a single industry. But you may for instance, want only 5% exposure to the rubber industry (where MRF is the market-leader) and that’s only possible if you commit a minimum of ₹20 lakh plus to your equity portfolio.

Bosch is trading at above ₹19,000 and could therefore, present similar problems. While these are good companies, holding them would skew your portfolio weight undesirably sharply into one sector. Institutional investors, often unaffected by these limitations, currently enjoy an advantage over their retail counterparts.

Typically, financial experts recommend retail investors diversify their portfolios, balancing equity and debt and ensuring exposure to a range of industries for stability through varied business cycles. If you’re young and don’t have many immediate financial commitments, the planner may suggest for instance, that you hold 80% of your financial assets in equity and 20% in debt instruments. Within equity, they would also advise exposure to let’s say 10-15 different companies spread across many industries.

That way, whatever the business cycle, something in your portfolio should be doing well. Every two or three years, you should review and rebalance allocations. If your equity portfolio has ballooned and become 95% of your assets, you need to sell some equity and put the proceeds into debt.