Must-Read for Small Investors | Complete Guide to Fractional Share Trading: Time, Costs, and Tips Fully Explained

For many investors with limited funds, buying popular stocks often requires a large amount of capital. However, with the improvement of fractional share trading mechanisms, now you can start investing with just 1000 yuan, which is undoubtedly good news for monthly salary earners and savers. But fractional share trading involves multiple steps such as fee calculation and trading session selection. Mastering the correct operation methods is essential to avoid losses.

What are fractional shares? Why do they occur?

The minimum unit of stock trading is one lot, representing 1,000 shares. When investors hold less than 1,000 shares, these are called fractional shares, with the minimum trading unit being 1 share.

How do fractional shares usually occur? Mainly due to incomplete execution of buy and sell orders. For example, when stock prices fluctuate rapidly or trading volume does not meet expectations, only part of the order may be filled, leaving the rest as fractional shares. Additionally, during stock issuance and dividend distribution, fractional shares are often generated.

Fractional share trading schedule: seize the best trading opportunities

Since October 26, 2020, Taiwanese investors can trade fractional shares during market hours, greatly enhancing trading flexibility. The complete schedule is as follows:

Advantages of intraday trading: Investors can submit orders starting at 9 AM, with trading hours overlapping with regular stock trading, increasing participation. Note that intraday orders can only be placed electronically (via broker trading platforms), and unfilled orders will not be automatically carried over to after-hours.

Features of after-hours trading: Orders can be submitted from 1:40 PM to 2:30 PM, but only one matching occurs at 2:30 PM. Unfilled orders are automatically canceled and will not carry over to the next day.

Comparison and calculation of fractional share transaction fees

The fee calculation for buying and selling fractional shares is the same as for full shares, charged at 0.1425% of the transaction amount. However, brokers set minimum fee standards and offer discounts for electronic orders.

Fee calculation example: Buying 200 shares of TSMC (closing price 1065 yuan):

• Basic fee = 200 × 1065 × 0.1425% = 303.53 yuan
• With a 50% discount = 303.53 × 50% = 151.77 yuan

Major broker fractional share fee comparison:

Key to reducing fees: Since the minimum fee is usually 20 yuan, the transaction amount should be above 10,000 yuan; otherwise, the fee proportion becomes high, increasing overall costs.

How to sell fractional shares effectively? Three practical tips

Less popular stocks have lower liquidity, and a single order may not be fully executed. The following three methods can significantly improve the chances of successful transactions:

Tip 1: Convert fractional to whole shares strategy

If during market hours the sell orders for a stock are stacked and difficult to execute, consider buying the missing shares to make a whole lot, then sell the whole lot via regular trading. For example, if holding 700 shares of Xinjin, buy 300 more to reach 1000 shares (1 lot), then sell via full share trading, which often results in faster execution.

Tip 2: Buy at the limit-up price, sell at the limit-down price

Since after-hours only involves one call auction matching, following the maximum transaction principle. To ensure buying, place a limit order at the limit-up price; to sell quickly, place at the limit-down price, greatly increasing the probability of execution.

Tip 3: Choose the right time period

Intraday trading matches every minute; if not executed on the same day, you can re-enter after hours. If still not executed the next day, resubmit. Select the most suitable time slot based on the stock’s liquidity for better results.

Pros and cons of fractional share trading

Main advantages:

• Low entry barrier: You can participate in popular stocks with around 1000 yuan, suitable for monthly salary earners practicing dollar-cost averaging.
• Controlled risk: Smaller amounts make it easier to “test the waters” and experiment with strategies.
• Full dividend rights: Fractional share holders enjoy dividends and rights issues.

Main disadvantages:

• Liquidity risk: Less popular stocks have lower trading volume, possibly requiring several days to complete a trade.
• Higher relative costs: Minimum fee restrictions make small transactions relatively expensive.
• Trading limitations: Only sell orders are allowed; buy orders are restricted. Converting fractional to full shares has time constraints.

Alternative investment options for small investors

If concerned about high fees and liquidity risks in fractional share trading, Contracts for Difference (CFDs) offer another choice. CFDs require only a small margin (usually 5%), allowing profit from price differences between buy and sell. Most brokers charge only spread costs, with no need to worry about liquidity.

For example, buying 5 shares of Google:

• Direct purchase: 400 USD × 5 = 2000 USD
• CFD trading (margin 5%): 2000 × 5% = 100 USD

Note that CFDs are more suitable for short-term traders, as they are settled daily. Holding positions overnight incurs overnight financing costs.

Summary: Master key elements to make fractional share trading more effective

Fractional share trading opens the door for small investors to participate in mainstream investments. Understanding fee comparison, choosing the right trading times, and applying effective buy-sell techniques can help reduce costs and improve success rates.

Investors should understand their risk tolerance, learn basic technical analysis, and most importantly, avoid blindly following trends. Maintaining rational decision-making, whether in fractional shares or other trading methods, and practicing long-term discipline and patience are often the keys to profitability.