Essential Guide for Small Investors to Invest in Fractional Shares: Master Selling Tips, Trading Hours, and Cost Management

The New Era of Fractional Share Trading: Why Are Small Investors Selling Fractional Shares?

In recent years, fractional share trading has become a new trend in Taiwan’s investment market, especially for investors with limited financial resources. Fractional shares provide an accessible entry point into the stock market with low barriers. Selling fractional shares is no longer just a passive response to holding stocks; it is gradually evolving into a flexible investment strategy. Compared to traditional full-share trading, which often requires thousands of dollars to start, fractional shares can be traded with as little as 1 share, making it particularly attractive for regular, dollar-cost averaging investors.

The minimum unit for full-share trading is 1 lot (1000 shares), but during the trading process, partial shares often result from incomplete transactions—these are fractional shares. The minimum trading unit for fractional shares is 1 share, with a maximum of 999 shares. After the Taiwan Stock Exchange officially opened intraday fractional share trading on October 26, 2020, investors’ trading options greatly increased, no longer limited to specific trading hours.

The Best Time to Sell Fractional Shares: Master Two Major Trading Sessions

Understanding trading hours is the first step to successfully selling fractional shares. Currently, fractional share trading is divided into two periods: during market hours and after hours, each with its own characteristics:

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

Intraday fractional share trading coincides completely with full-share trading. Investors can submit orders starting at 9:00 AM, with the first matching occurring at 9:10 AM. After that, every minute, a batch auction matches trades. Market hours trading is limited to electronic orders (via broker trading platforms), and transactions follow the principles of “price priority, then time priority” when prices are the same.

Note that unfilled orders during market hours are not automatically carried over to after-hours. If orders are not fully executed on the day, investors need to re-enter orders during the after-hours session.

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

After-hours trading offers more flexibility. Investors can place orders via electronic means or by phone with their broker. The exchange conducts a single batch auction at 14:30. It also follows the “price priority” rule, but when prices are the same, the order is randomly assigned by computer rather than by submission time. Unfilled orders are automatically canceled at the end of the day and are not carried over to the next day.

Cost Considerations for Selling Fractional Shares: Understanding Commission Structures

Commission Calculation

The commission for buying and selling fractional shares is the same as for full shares, at 0.1425% of the transaction amount. For example, purchasing 200 shares of TSMC (2330.TW, assuming a closing price of 1065 TWD):

200 shares × 1065 TWD × 0.1425% = 303.53 TWD

If the broker offers a 50% discount on electronic orders, the actual commission would be 151.77 TWD.

Different Broker Promotions

Various brokers offer different fee discounts. Here is an overview of major brokers:

Cost Control Tips

To effectively spread out transaction costs, it’s recommended to make single purchases of at least NT$10,000. Smaller amounts result in a higher proportion of fees, which can lead to losses. Also, pay attention to each broker’s minimum commission fee, usually around NT$20-30, which is especially important for small transactions.

Selling Fractional Shares Is Not Difficult: Master Three Practical Tips

Tip 1: Convert Fractions into Whole Shares to Improve Efficiency

When selling fractional shares of less popular stocks, low trading volume can make it difficult to execute trades. A strategy is to “convert fractions into whole shares”—first buy enough shares to round up to 1 lot (1000 shares), then sell the full lot through the more liquid full-share trading channel.

For example, to sell 700 shares of Shin-Kong (1582.TW), if intraday fractional trading is difficult, buy 300 shares to make a total of 1000 shares, then sell the full lot quickly. This approach greatly improves trading efficiency compared to selling fractional shares alone.

Tip 2: Use Extreme Prices Strategically During After-Hours Trading

Since after-hours trading involves only one batch auction, following the “maximum trading volume” principle, investors can strategically set extreme prices. To ensure a purchase at the highest price, place a buy order at the limit-up price; to accelerate selling, place a sell order at the limit-down price, maximizing the chance of execution.

Tip 3: Choose Appropriate Investment Targets

Popular stocks have sufficient fractional trading volume, allowing quick transactions. Less popular stocks have lower liquidity and may require more time to find buyers. Before investing, evaluate the stock’s average daily trading volume and prioritize popular stocks for fractional trading.

The Pros and Cons of Selling Fractional Shares

Main Advantages

Fractional share trading significantly lowers the investment barrier, allowing investors to participate in the stock market with minimal capital. Additionally, fractional shares can pay dividends and participate in rights issues, enjoying the same shareholder rights as full shares. For small investors, dollar-cost averaging into fractional shares is a low-risk way to “test the waters” of the stock market, gradually gaining experience without large capital commitments.

Main Disadvantages

Liquidity is noticeably lower than full shares, often requiring more time to complete transactions. There are minimum commission fees, making small trades relatively costly. Moreover, selling fractional shares is subject to time restrictions; if the order expires, it is automatically canceled, limiting trading flexibility.

Beyond Fractional Shares: Other Investment Options for Small Investors

If concerned about high transaction costs and liquidity risks of fractional shares, Contracts for Difference (CFDs) offer an alternative. CFDs allow investors to leverage larger positions with minimal margin, without owning the actual stock, focusing only on price movements. For example, buying 5 shares of Google at $400 requires $2000, but with CFDs at a 5% margin, only $100 is needed.

However, fractional shares are suitable for long-term holding, while CFDs are more appropriate for short-term trading due to daily settlement and overnight interest costs. Investors should choose tools based on their investment horizon and risk appetite.

Conclusion

With technological advances and market system improvements, selling fractional shares has become a mainstream option for small investors in Taiwan. Mastering trading hours, understanding fee structures, and applying practical techniques enable investors to navigate the fractional share market with ease. Successful fractional share investing requires continuous learning, rational risk assessment, and disciplined operations. With systematic knowledge and disciplined actions, even small amounts can grow steadily in the stock market.