Must-Read for Small Capital Investors | Complete Guide to Fractional Share Trading: From Understanding to Practical Tips on How to Sell Stocks

What are fractional shares? Why should you understand fractional trading?

Many novice investors have encountered this dilemma: they like a high-performing stock but the share price is too high, and with limited funds, they cannot buy a full lot (1000 shares), leaving them only to sigh at their inability to participate. The emergence of fractional trading is precisely to solve this kind of problem.

The minimum unit for trading whole shares is “1 lot,” which is 1000 shares, but sometimes investors hold less than 1000 shares due to incomplete orders, rapid stock price fluctuations, dividends, or stock splits. These stocks under 1000 shares are collectively called fractional shares, with a minimum trading unit of 1 share. Buying and selling fractional shares refers to a specialized trading method for these small holdings, with each order limited to 999 shares or less.

In simple terms, fractional shares are “stock leftovers,” allowing small investors to participate in stock investing with lower capital thresholds, without needing to accumulate 1000 shares to get started.

Timing and rules for fractional trading

In the past, fractional shares could only be traded after market hours, with restrictions on trading hours and volume, which was inconvenient for many small investors. Since October 26, 2020, the Taiwan Stock Exchange has opened up more flexible trading hours for fractional shares.

During Market Hours (9:00-13:30)

Investors can submit fractional share orders through their broker’s trading platform starting at 9:00 AM. Note that during market hours, only electronic orders are accepted; phone manual orders are not. The system will perform the first matching at 9:10, then every minute, a batch auction matching will occur based on price priority and time priority.

If an order is not fully executed during market hours, or only partially filled, it will not automatically carry over to after-hours trading. Investors must submit a new order.

After-Hours Trading (13:40-14:30)

During this period, investors can place orders via electronic orders or by calling broker customer service. The exchange will conduct a single batch auction at 2:30 PM, following the maximum trading volume principle. Unfilled orders will be automatically canceled and will not carry over to the next trading day.

Key Regulations for Fractional Shares

Holders of fractional shares have full shareholder rights:

• Eligible for dividends and stock splits: fractional shareholders are entitled to dividends, though the amounts are smaller
• Dividends in cash: any fractional part less than 1 share can be converted into cash or sold centrally by the exchange and distributed accordingly
• Free to buy and sell: fractional shares can be bought and sold; Taiwan Stock Exchange fully recognizes fractional trading

Cost structure of fractional share trading: How are commissions calculated?

Commission calculation method

The commission for buying and selling fractional shares is exactly the same as for whole shares, both at 0.1425% of the transaction amount. However, brokers set a “minimum commission fee” (usually 1 NT dollar) for fractional trades and often offer discounts for electronic orders to encourage online trading.

For example, purchasing 200 shares of TSMC (2330.TW, with a closing price of 1065 NT dollars):

200 shares × 1065 NT dollars × 0.1425% = 303.53 NT dollars

If the broker offers a 50% discount for electronic orders, the actual fee becomes:

303.53 NT dollars × 50% = 151.77 NT dollars

Major broker fee comparisons

Different brokers vary significantly in minimum fees and electronic order discounts. Fubon Securities offers a 1.8% discount with a minimum fee of 1 NT dollar; E.SUN Securities offers a 2% discount; KGI Securities offers a 60% discount (but requires proof of financial strength to open an account); Shin Kong Securities provides a 10% fee (i.e., 1 NT dollar minimum), but with other conditions; and Uni-President Securities charges 1.68%. When choosing, consider all factors comprehensively.

For account opening, most brokers require only a national ID card, secondary ID, and bank account. KGI Securities additionally requires proof of financial status.

How to sell stocks? Practical tips for fractional trading

Common selling dilemmas

Although the exchange continues to optimize the convenience of fractional trading, trading volume for less popular stocks remains low. If an investor wants to sell 700 shares of Xinjin (1582.TW), a less common stock, it might not be possible to complete the transaction smoothly during the day. In such cases, more strategic approaches are needed.

“Convert fractional to whole” tactic

If market conditions during the day show that the sell orders are stuck due to lack of liquidity, investors can reverse the process: first buy enough shares to round up their holdings to a full lot (1000 shares), then sell the entire lot through the more liquid whole-share market. For example, an investor could buy 300 shares to reach 1000 shares, then sell the full lot, greatly increasing the speed and success rate of the transaction.

Extreme price strategies

For after-hours fractional trading, since only one batch auction occurs following the maximum volume principle, investors can adopt a “buy at the limit-up price” strategy to increase the chance of execution. Similarly, if they need to quickly sell their fractional shares, placing a “sell at the limit-down price” order can effectively increase the likelihood of a trade.

These two extreme price strategies leverage the exchange’s maximum volume principle, significantly boosting the chances of execution in a single matching.

Pros and cons of fractional investing

Advantages

Lower entry barriers

The main advantage of fractional trading is the significant reduction in capital requirements. Investors do not need to buy a full lot of 1000 shares; they can participate with as little as 1000 NT dollars or even less. This is especially beneficial for investors with limited funds, allowing them to join the stock market while maintaining sufficient liquidity for daily expenses and diversified investments.

Suitable for dollar-cost averaging

Fractional trading is ideal as a “trial” tool, enabling beginners to get a feel for the stock market with less capital and effort. Investors can also set up monthly small investments for dollar-cost averaging without needing to invest large sums at once.

Disadvantages

1) Significantly lower liquidity compared to whole shares

The trading volume for fractional shares is much lower than for whole shares, leading to longer matching times and higher difficulty in executing trades. This is especially true for less popular stocks, which may require several days to complete a transaction.

2) Heavy transaction costs

Although the commission rate is the same, fractional shares have a minimum fee. For small purchase amounts, the fee percentage becomes disproportionately high. For example, buying 1000 NT dollars worth of fractional shares might incur a minimum fee of 20 NT dollars, which is a 2% fee—much higher than for whole shares. Frequent small trades can accumulate substantial fees, eroding profits or even resulting in “fee losses.”

3) Hidden restrictions in trading process

There are several limitations in fractional trading. Investors can only place sell orders; buy orders for fractional shares must be matched through the market. When selling fractional shares, the entire holding must be sold at once; partial sales are not allowed. Additionally, if converting fractional shares into whole shares (to reach 1000 shares), there are time limits, and the order becomes invalid if not completed in time.

Since fractional shares are inherently uncertain and broker inventories may be insufficient, investors sometimes cannot buy the desired amount, constrained by availability.

Alternative investment options for small investors: CFDs

If concerned about high fees and low liquidity in fractional shares, investors can consider Contracts for Difference (CFD) as an alternative.

CFD trading involves speculating on the price difference of an asset without owning the actual stock. This mode typically requires only a margin deposit (usually 5% of the total trade value), with very low thresholds, and most brokers charge no commission—only the spread. Costs are transparent, and there’s no concern about liquidity issues.

For example, buying 5 shares of Google:

• Actual purchase: $400/share × 5 = $2000
• CFD: Margin requirement at 5% = $100

However, CFDs are more suitable for short-term trading, settled daily, with overnight interest charges for holding positions overnight. They are less suitable for long-term investing, whereas fractional shares are better for long-term holdings.

Conclusion

With technological advances and policy improvements by exchanges, fractional trading has become one of the most popular investment methods among small investors in Taiwan. Compared to traditional whole-share trading, fractional trading allows buying small amounts based on individual funds, perfectly meeting small-scale investment needs, with multiple convenient trading channels.

However, to succeed in the fractional market, investors need not only master how to sell stocks but also understand their own risk tolerance and choose appropriate strategies. Learning basic investment analysis, maintaining rational decision-making, and avoiding impulsive or herd behaviors are key to steady returns. Regardless of whether choosing fractional shares or other investment tools, knowledge and mental resilience are the keys to long-term success.