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Nothing Fancy - What is fractional investing?

Nothing Fancy - What is fractional investing?
By Proptee • Issue #18 • View online
Are you interested in buying into Warren Buffett’s Berkshire Hathaway? Well, before fractional investing, you had to put down the price of at least 1 share, more than $500,000.

What’s fractional investing?
Fractional investing lets investors buy or sell less than an entire asset at a time. It was introduced to increase access to expensive stocks and it also makes it easier for investors to invest very precise amounts in a company.
Fractional investing makes the most sense for high-value assets. This way both access and liquidity can be increased, driving more interest and capital to these asset classes.
Fun Fact: The first recorded successful crowdfunding occurred in 1997 when a British rock band funded their reunion tour through online donations from fans.
Crowdfunding, the most basic form of fractional investing started a long time ago. Crowdfunding has a few drawbacks compared to fractional share investing, but it proved itself in reducing the entry barrier for many kinds of assets:
  • Art
  • Alternative assets, like wine, cars, watches
  • Real estate
  • Businesses
  • People or human capital
Pros of fractional investing
  • Diversification: For investors who want to diversify but don’t have the ability to access certain asset classes, fractional investing levels the playing field.
  • Frequent income: Other than dividends from public stocks, passive cash-flowing investments can be difficult to find. Rent rewards on Proptee are really attractive for this exact reason.
Cons of fractional investing
  • Liquidity: Crowdfunding platforms don’t offer the same liquidity as a typical stock or bond investment.
  • Lack of leverage: Most platforms don’t offer loans using fractions as collateral, so exposure to these assets is limited.
Fractional NFTs
Fractional NFTs, or non-fungible tokens, represent a new era of asset ownership that’s decentralized and transparent.
A fractional NFT is simply a whole NFT that has been divided into smaller fractions, allowing multiple people to claim ownership of a piece of the same NFT.
The NFT is fractionalized using a smart contract that generates a set number of tokens linked to the indivisible original. These fractions can be traded or exchanged on secondary markets.
Proptee operates the same way. We create one NFT of the title deed of the property which represents the ownership of the whole property. Then we fractionalise this NFT into smaller pieces via issuing a fungible token, a fraction backed by the NFT.
This way, real estate investing can be truly accessible for anyone, regardless of where they live, what language they speak, or how much money they have. In addition, as the market is bigger, liquidity becomes higher.
Proptee weekly update
During the last 7 days:
  1. We’ve invited more people to our private beta.
  2. Introduced Staking for bHOME and paid out the 1st staking rewards of 49% APY.
  3. Listed a new property from Cleveland, USA and paid the 1st rent rewards too.
  4. In the app, now you can see the current performance of your investments via tapping on the listings.
  5. Withdrawing smaller amounts than 1 GBP or EUR is possible now.
Did you find it interesting? Let me know via replying to this email or tweeting us @PropteeApp.
See you next week!
-Ben and the Proptee team
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