Five things you need to know about fractional investing

04/01/22  by Igor Gorbatsevich

Investing, Technology, Shojin
1.     The traditional savings account is dead 

Interest rates in developed markets are at record low levels today. This is a legacy of the 2008 Global Financial Crisis, where central banks around the world battled recession by slashing base rates to historic lows. Fast-forward to the final quarter of 2021, and in essence little as changed here. The Bank of England’s base rate of interest is still a paltry 0.25%, and many high-street savings accounts barely even offer this meagre return to savers. In fact, Bankrates’ October, 2021 survey of UK saving accounts reports that the average return on a savings account is now a shocking 0.06%. In short, if you have worked hard for your savings and want to see them grow over time, a traditional savings account simply isn’t going to cut it anymore! 

2.     There are so much more attractive options out there 

The good news is, there are much, much more attractive options out there today. We are living through a golden age of financial innovation. Alongside the traditional behemoths of the financial world, from London and New York to Hong Kong and Paris, a new generation of financial service providers are changing the way banking works. Importantly, for consumers this is turbo-charging their ability to make choices to get the most out of their savings. A whole range of lucrative financial services and products which were previously the exclusive preserve of the super-rich are now for the first time ever within reach for the middle class. This has been made possible by one key piece of financial innovation – fractional ownership. 

3.     What is fractional investing? 

Fractional investing means investing your money into an asset but without needing enough capital to purchase the asset outright. In other words, rather than needing to commit the total capital required, you can simply put in a smaller amount and enjoy some exposure to the increase in value of the underlying asset. There are many situations where this simple but revolutionary method brings new and profitable investment opportunities within reach. For example, Warren Buffett’s investment expertise and his excellent track-record are well-known, and many investors would be thrilled to have their savings stewarded by Buffett’s investment company, Berkshire Hathaway. However, a single share in Berkshire Hathaway is currently trading at prices around $421,600. Needless-to-say, most investors simply cannot afford to commit this level of capital to a single investment, and that is even if they can afford to investment this amount at all. Fractional investing has transformed the investment landscape beyond all recognition by allowing large investments to be ‘split-up’ into smaller fractions, thus allowing investors to invest smaller sums but still enjoy access to great investment opportunities. 

4.     How is fractional ownership revolutionising real estate investment? 

Long-term, there are few better asset classes to entrust your savings to than real estate. This is because the historical record of real estate prices and yields in the UK and other developed markets suggests real estate can provide the magical combination of strong capital gains with healthy income flows. The problem which kept such investments out of reach for all but a privileged minority was the sheer scale of capital needed to gain access to investment options in this sector. As such, while fractional investing has had a large impact on stock markets, the impact on real estate investment is incomparably larger. Long-term and large-scale projects, such as the financing of a new block of student accommodation near an internationally prestigious university campus, or a new state-of-the-art new eco-friendly residential development in a busy commuter town, can now be accessed by investors with much smaller budgets. Fractional investing has succeeded in democratised a section of the investment world many were previously locked out of. 

5.     What is our co-investment model? 

Shojin has the necessary expertise in property investment, as well as the financial techniques required to make fractional ownership work for the average investor. By now, there are numerous options for investors willing to hunt for higher returns through fractional ownership of real estate assets. The competitive nature of this market has driven rapid innovation and put customer experience at the centre of success in this field. Here at Shojin we are very happy to stand next to our competitors and be judged on the merits of our specific investment proposition.  What really makes Shojin stand-out from the competition is the pioneering co-investment model we have developed. Under this model, which is unique to us, we always invest our own funds in every project we propose to our investors. By having ‘skin in the game’, we are not merely salesmen pitching other people’s projects to you; we are co-investors alongside you sharing every stage of the investment journey. All profits are shared at the completion of the project, with Shojin taking profits only after external investors have been paid. In the unlikely event of a project returning a loss, the loss is primarily born by Shojin, thus capping the risk faced by external investors to some degree. This is why we are confident that we are the right choice for many investors looking to explore this area, and we welcome any and all enquiries.