When investing with a limited amount of capital, fractional shares can be a great asset. They allow you to buy companies that might be too expensive for you, considering your capital limitations. It’s also a plus from a diversification perspective. Instead of buying a few shares of one or two companies, you can buy fractional shares from various companies.
So, even if you have just $500 to invest, you can choose to buy fractions of the most expensive stocks on the TSX and leverage their growth potential.
A tech stock
When it comes to rapid growth, tech stocks are a favourite among Canadian investors. However, few tech stocks in Canada have offered consistent growth, and foremost among them is Constellation Software (TSX:CSU). The stock has grown over 10,000% in fewer than 15 years, and even if we look beyond its glory days and early growth, the capital-appreciation potential is formidable.
The stock rose by about 250% in the last five years, and if we add in the dividends, the overall returns for investors exceed 300%.
The problem is that this level of growth also made Constellation the most expensive stock currently trading on the TSX, with just one share going for over $3,287 right now. That’s over six times the total capital we are working with, so the only viable option is fractional shares.
They may significantly undermine the dividend-based returns from Constellation, but you can still capitalize on its growth potential.
A consumer discretionary stock
Dollarama (TSX:DOL) is one of the largest retail chains in Canada that has experienced amazing organic growth, which is reflected in the growth of its stock. From a single store opened in 1992, the chain has grown to over 1,000 stores all across Canada.
As for the stock, the last decade has been great for its growth, and the stock has risen over 600%. Annualized, that’s 60% growth in a single year, more than how much the TSX index grew in the last decade.
Dollarama owes most of its success to the healthy, underlying business. Since it focuses on affordable and mostly necessary items, the business (and its finances) are also resilient against weak market and economic conditions. The company also pays dividends, but this may not be a considerable factor because of the yield (0.29%) and the limited capital we have to work with.
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Foolish takeaway
Collectively, the two stocks have grown by over 1,000% in the last 10 years. So, even if they underperform and return half of this number in the coming decade, you can still increase your $500 in capital to a substantial sum. There is no reason to suspect that the current bull market phase of the two stocks will hit a roadblock in the near future.
