Must-Read for Small Investors | Full Analysis of Fractional Share Fees and Trading Hours, Master Winning Strategies

Why Are Small Investors Turning to Fractional Share Investing?

In recent years, investing and wealth management are no longer exclusive to big investors. More and more salaried workers with limited funds are choosing fractional share trading as their entry ticket. Compared to traditional full shares that require an investment of tens of thousands of dollars at once, fractional trading allows a minimum of just 1 share, significantly lowering the barrier to participate in the stock market.

Fractional shares are stocks less than 1,000 shares, with the minimum trading unit being 1 share. These stocks often originate from unfilled orders or leftover shares generated during dividend distributions. In fact, trading fractional shares is not a new concept, but it wasn’t until October 26, 2020, that exchanges officially opened intraday fractional share trading, truly meeting the diverse needs of small investors.

Master Trading Hours and Rules for Greater Efficiency

Fractional share trading is now divided into two periods: during market hours and after hours. Investors need to adapt flexibly based on the characteristics of each period:

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

• Only electronic orders are accepted (placing orders via broker apps)
• Every 1 minute, a call auction matches orders
• Priority is given to price, and at the same price, orders are sorted by submission time
• Unfilled orders during this period are not automatically carried over to after-hours

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

• Orders can be placed electronically or via phone with a broker
• A single call auction occurs at 14:30
• Priority is given to price; at the same price, orders are randomly ordered
• Unfilled orders are automatically canceled and do not carry over to the next day

This system means that if your order during market hours is unfilled or partially filled (e.g., your bid is too high), you need to resubmit your order during after-hours to have a chance to execute.

How High Are the Fees for Fractional Shares? A Cost Breakdown

Many beginners are deterred by fractional share fees, but the calculation method is exactly the same as for full shares.

Basic fee rate: 0.1425%

For example, purchasing 200 shares of TSMC (stock code 2330.TW, with the latest closing price of NT$1065):

• Transaction amount: 200 × 1065 = NT$213,000
• Fee: NT$213,000 × 0.1425% = NT$303.53

However, different brokers set minimum fee thresholds for fractional shares, usually NT$1, and electronic orders often have discounts. If a broker offers a 50% discount, the actual fee would be NT$151.77.

Comparison of major brokers’ discount plans:

Key to reducing fees: a single purchase amount should be over NT$10,000. If you frequently invest with only a few thousand dollars, the fee proportion can be significant, even eroding your returns.

Low Success Rate? Practical Tips for Quick Exit

Less popular stocks tend to have lower liquidity in fractional shares, making it difficult to fill orders. In such cases, strategic operations are needed:

Strategy 1: Convert fractional to full shares If the market shows a buildup of sell orders for fractional shares, consider buying enough to make a full share position (e.g., holding 700 shares of XINJIN 1582.TW and buying 300 more to reach 1000 shares). Then, sell the full shares in a more liquid market, greatly increasing the chance of successful sale.

Strategy 2: Use the after-hours call auction feature Since after-hours trading involves only one matching process, following the “maximum transaction principle” can help. If you want to buy quickly, place a bid at the limit-up price; if selling, place a bid at the limit-down price. This prioritizes your order during the single matching opportunity.

Strategy 3: Rationally split orders Observe real-time fractional share market data and choose periods with higher trading volume to place orders, increasing the likelihood of immediate execution.

Pros and Cons of Buying Fractional Shares

Advantages:

• Very low capital requirement, participation starting at NT$1,000
• Suitable for dollar-cost averaging, no need for large sums
• Good for “testing the waters” and understanding individual stocks
• Holding fractional shares entitles you to dividends and dividend rights

Disadvantages:

• Longer transaction times; liquidity is lower than full shares
• If the investment amount per trade is too small, fees can take a large proportion, reducing actual returns
• Fractional shares can only be sold, not bought; operation flexibility is limited
• The process is constrained by minimum fee rules and other costs, which are often hidden

Other Small-Amount Trading Options

If concerned about fee burdens and liquidity issues with fractional shares, Contracts for Difference (CFDs) offer an alternative. CFDs require only a small margin deposit to trade the price movements of underlying assets, usually with no commission, only spreads, and high liquidity.

For example, buying 5 shares of Google normally costs around USD 2,000, but via CFDs, only a 5% margin (USD 100) is needed, making entry 20 times cheaper. However, note that fractional shares are more suitable for long-term holding, while CFDs are better for short-term trading, with daily settlement and overnight interest costs.

Conclusion

Fractional share trading has become a mainstream choice for small investors in Taiwan. By understanding the structure of fractional share fees, mastering trading hours, and employing effective trading strategies, investors can reduce costs and improve efficiency. The key is to assess your own capital scale and investment horizon, choose the most suitable approach, and make rational decisions to steadily accumulate wealth.