A Must-Read for Small-Share Investment Beginners: Complete Trading Guide in One Go

Why Are Small Investors Playing with Fractional Shares?

In Taiwan’s stock market, fractional share trading has become the mainstream choice for small-scale investors. Unlike traditional full shares (1 lot = 1000 shares), fractional shares allow investors with limited funds to enter the market flexibly, with a minimum of just 1 share to buy the stock they like. Since the exchange opened intraday fractional share trading on October 26, 2020, this investment tool has become increasingly practical.

What Are Fractional Shares? How Do They Occur?

Fractional shares refer to scattered stocks less than 1000 shares, with the minimum trading unit being 1 share. They are usually generated in the following situations:

• When investors place buy orders and the price fluctuates too quickly, resulting in unfilled portions
• During dividend or stock distribution processes, leftover amounts are created
• Investors actively purchase fractional shares during after-hours trading

Simply put, fractional shares are “stock leftovers” trading, with each order not exceeding 999 shares.

Trading Hours and Rules for Fractional Shares

Fractional share trading is divided into two sessions, and investors should choose the appropriate trading window based on their investment rhythm.

Intraday fractional share trading (9:00-13:30)

The intraday trading period overlaps completely with full share trading hours. Investors can submit fractional share orders starting at 9:00 AM, but only through electronic orders (broker trading platforms); manual orders are not accepted. The exchange conducts the first matching at 9:10, followed by a collection of bids every minute via auction, with transaction priority based on price first, then submission time if prices are equal.

Important Reminder: Unfilled or partially filled orders during the day will not be automatically carried over to after-hours; investors need to re-enter orders.

After-hours fractional share trading (13:40-14:30)

The after-hours session offers more flexibility. Investors can place manual orders via electronic platforms or call broker customer service. The exchange conducts a single collection of bids at 14:30, and all unfilled orders are automatically canceled and not carried over to the next day.

The 14:30 bell ringing marks the critical moment for many investors to seize the last chance to transact.

Five Key Rules for Buying and Selling Fractional Shares

1. Eligible for dividends and stock splits
Fractional share holders enjoy shareholder rights. During dividend payouts, profits are proportionally distributed or fractional shares are converted into cash.

2. Dividends can be received
Fractional shares less than one share can be converted into cash dividends or sold collectively by the issuer for distribution.

3. Minimum trading unit is 1 share
Investors can buy as little as 1 share, but it’s recommended to invest over NT$10,000 at a time to effectively control transaction fees.

4. Fractional shares can be bought and sold
Taiwan Stock Exchange recognizes fractional share trading. Holders can sell during intraday or after-hours trading, with liquidity improving year by year.

5. Order quantity restrictions
Each fractional share order must be in multiples of 1 share and cannot exceed 999 shares.

How Are Transaction Fees for Fractional Shares Calculated?

The fee structure for fractional shares is identical to full shares, calculated at 0.1425% of the transaction amount. However, each broker sets a minimum fee, usually starting at NT$20.

Fee Calculation Example

For example, buying 200 shares of TSMC (2330.TW) at a closing price of NT$1065:

• Basic fee = 200 × 1065 × 0.1425% = NT$303.53

If the broker offers a 50% discount:

• Actual fee = NT$303.53 × 50% = NT$151.77

Major Broker Fee Comparisons

To open an account, prepare your national ID card, a second ID (health insurance card or driver’s license), and your bank account.

Is It Easy to Sell Fractional Shares? Three Key Tips

Although fractional share trading is becoming more convenient, trading in less popular stocks still faces limited liquidity, making transactions more challenging. Mastering the following tips can significantly improve your chances of completing trades.

Tip 1: Convert Fractions into Whole Shares

When a stock has excessive fractional sell orders with no takers, use the “convert fractions into whole shares” strategy. For example, if you want to sell 700 shares of a less popular stock, first buy 300 shares to make a total of 1000 shares (1 lot), then quickly sell the full lot in the more active full-share market. This speeds up the transaction process.

Tip 2: Buy at Limit Up Price, Sell at Limit Down Price

Since after-hours trading involves only one auction, the exchange adopts a maximum transaction principle. To ensure a buy, place a limit order at the limit-up price; to sell quickly, set a limit order at the limit-down price. This greatly increases the chance of your order being matched.

Tip 3: Choose the Best Trading Time

Intraday trading matches every minute, suitable for those needing immediate execution; after-hours trading only matches once but lasts longer (13:40-14:30, a total of 50 minutes), giving investors more time to think and adjust strategies.

Pros and Cons of Fractional Share Investment

Advantages

Low Capital Barrier — No need to buy full shares, suitable for investors with limited funds. You can keep sufficient liquidity for daily needs or other investments.

Risk Diversification — Fractional shares allow investors to “test the waters” in the stock market without large upfront investments, ideal for long-term dollar-cost averaging strategies.

Increased Participation Opportunities — Small investors can participate in popular stocks previously unaffordable.

Disadvantages

Lower Liquidity — Compared to full shares, fractional shares have fewer buy/sell orders, requiring longer matching times and higher difficulty in completing transactions.

Relatively Higher Fees — Minimum fees often start at NT$20. For small purchase amounts, fees can constitute a large proportion, increasing the risk of loss. It’s recommended to buy at least NT$10,000 worth per transaction.

Additional Costs — Besides brokerage commissions, fractional share trading may incur other service fees, making the overall cost higher than full share trading.

Time Limitations — Converting fractional shares into full shares has a deadline; exceeding it results in invalidation. Also, fractional shares can only be sold, not bought, through orders.

Unstable Volume — When brokers lack sufficient fractional share inventory, they may be unable to fulfill investor demands promptly, possibly preventing you from acquiring the desired amount.

Who Is Fractional Share Trading Suitable For?

Fractional share investing is most suitable for:

• Small investors with limited funds wanting to enter the stock market
• Investors pursuing long-term, dollar-cost averaging strategies
• Beginners wanting to test popular stocks with small amounts
• Investors with idle funds who don’t want to leave money unused

However, if you are concerned about high transaction fees, liquidity issues, or prefer short-term trading, consider other financial instruments. Be aware of the risk and cost differences among various tools.

Summary

Fractional share trading has become the standard for small-scale investing in Taiwan. Compared to traditional full shares, fractional shares require less capital, offer more flexibility, and meet diverse investment needs. However, investors must understand trading rules, fee structures, and market liquidity to profit steadily from the fractional share market.

Remember: Successful fractional share investing requires sufficient knowledge, rational risk assessment, and avoiding herd mentality. With the right timing and techniques, fractional shares can be a powerful tool on your path to financial freedom.