Taiwan Fractional Share Investment Guide: Master the Selling Timing and Transaction Costs, Five Key Points Every Small Investor Must Know

Why Are Fractional Shares Becoming the New Favorite for Small Investors?

In recent years, fractional share trading has sparked an investment craze in the Taiwanese market, especially attracting young investors with limited funds. Fractional shares refer to stock holdings of less than 1,000 shares (one standard lot). When investors place buy or sell orders that are not fully executed, or during stock dividends and distributions, leftover shares—called fractional shares—are created. The minimum trading unit for fractional shares is 1 share. Compared to traditional full-lot trading, this significantly lowers the entry barrier.

Fractional shares typically appear when there is a price deviation between the order price and the market price, leading to fewer shares being traded than expected; or during stock dividend distributions, when the number of shares held cannot be evenly divided, resulting in small leftover amounts. In simple terms, fractional share trading involves buying and selling these less-than-one-lot stocks, with each order limited to 999 shares or fewer.

Different Rules for Intraday and After-Hours Fractional Share Trading

Since October 26, 2020, the Taiwan Stock Exchange has allowed intraday fractional share trading, removing the restriction to after-hours trading. Understanding the trading rules for different periods is crucial for selling fractional shares:

Intraday trading hours align with full-lot trading hours, allowing investors to submit fractional share orders starting at 9:00 AM. Note that unfilled orders during intraday trading are not automatically carried over to after-hours; they must be re-submitted. Unfilled after-hours orders expire the next day and are not automatically rolled over to the following trading day.

Practical Strategies for Selling Fractional Shares: How to Make Them Easier to Sell

For less popular stocks with relatively low trading volume, liquidity for fractional shares is indeed poorer. Investors often face difficulties in executing sales. Here are some practical tips to improve the chances of successful transactions:

Strategy 1: Convert Fractions into Whole Shares to Speed Up Sales

If you hold 700 shares of an obscure stock, and the intraday fractional market shows many sell orders but no matches, consider “converting fractions into whole shares.” First, buy an additional 300 shares to make a total of 1,000 shares (one lot), then sell through the full-lot market. Since full-lot trading volume is much larger than fractional trading, the transaction is usually faster.

Strategy 2: Use After-Hours Auction to Set Limit Prices at Limit Up or Limit Down

Because after-hours trading involves only one auction at 14:30, to ensure a sale, you can set a limit order at the limit-down price; to buy, set at the limit-up price. Under the “maximum trading volume” matching principle, extreme prices often receive the highest priority for execution.

Strategy 3: Split Orders to Increase Matching Probability

If you cannot sell all fractional shares during the day, you can re-submit partial orders after hours. Alternatively, on the next trading day, you can place new orders, avoiding the risk of placing a single large order that no one takes over.

Complete Analysis of Transaction Fees for Fractional Shares

The transaction fee for buying and selling fractional shares is the same as for full-lot trading, calculated at 0.1425% of the transaction amount. However, because the transaction amounts are smaller, the relative fee burden is actually higher.

For example, purchasing 200 shares of TSMC (assuming a unit price of NT$1,065):

200 shares × NT$1,065 × 0.1425% = NT$303.53

If the broker offers a 50% discount, the actual fee is: NT$303.53 × 50% = NT$151.77

Major Broker Comparison of Fractional Share Fees:

Investors are advised to keep individual fractional share transactions above NT$10,000 to effectively reduce the proportion of fees in total trading costs.

Advantages and Risks of Fractional Share Trading

Advantages:

Fractional share trading lowers the capital threshold from several thousand NT dollars to below NT$1,000, enabling investors with limited funds to participate in the stock market. It is suitable for small investors employing dollar-cost averaging strategies, allowing them to “test the waters” and stay flexible with liquidity for daily needs. Additionally, fractional shareholders enjoy dividend and distribution rights just like full shareholders.

Risks:

Liquidity for fractional shares is significantly lower, and matching times tend to be longer, especially for less popular stocks. The minimum fee threshold means small transactions can have a disproportionate impact on profitability. Trading restrictions include: fractional shares can only be sold, not bought; they must be sold in one go; and converting fractional shares into full shares involves time limits.

Rational Advice for Investing in Fractional Shares

Fractional share trading is suitable for investors with a long-term investment mindset. Before buying or selling, assess your risk tolerance and choose stocks aligned with your financial goals. Learning basic investment analysis methods helps avoid impulsive or herd-driven decisions, enabling steady gains in the fractional share market.

For investors concerned about liquidity and costs, carefully evaluate other small-scale trading tools, but always consider the associated risks. Regardless of the method chosen, rational decision-making and risk management are the foundations of successful investing.