With fractional share trading, anyone can buy any stock at any time.
Well, during hours when the stock market is open. Beyond that qualification, fractional stock trading is a democratizing force in investing. Investors with $10, $20 or however much can buy a slice of stocks such as Apple Inc. (AAPL-Q), Shopify Inc. (SHOP-T) and exchange-traded funds such as the Vanguard Growth ETF Portfolio (VGRO-T).
Fractional shares rewrite the rules of stock market investing. Instead of figuring out how many shares you can afford, you simply direct the amount of money into the stock or stocks you want to buy. Only a few brokers offer fractional trading in the Canadian market, but others will follow. The more established a broker, ie it’s bank owned, the longer it will take for “legacy computer systems” to be updated.
Here’s a look at three brokers now offering factional trades, with notes for each.
Wealthsimple:
Through Wealthsimple’s trading app or website, you can buy shares by specifying the dollar amount you have available. As with all trades, there are no commissions charged. Orders are not executed in real time – they’re batched and executed periodically through the trading day. Fractional shares pay fractional dividends, which clients can use to buy more fractional shares using a dividend reinvestment plan. Wealthsimple says fractional trading accounts for more than 10 per cent of orders filled. More than 10,000 Canadian- and U.S.-listed shares are available for fractional trading, and the minimum order is 0.0001 shares.
TD Direct Investing:
TD offers fractional trades through Direct Investing and the TD Easy Trade app, which is aimed at younger investors. TD Direct charges $1.99 for trades of less than one share, compared to its regular stock-trading charge of $9.99. TD Easy Trade offers 50 free trades each year and these can be fractional or for full shares. About 3,400 TSX- and U.S.-listed stocks are available for fractional trading, and the minimum order is $1 or 0.00001 shares. TD’s fractional share trades are executed in real time during regular market hours; fractional DRIPs are not yet available. The bank says fractional trading adoption has been strongest among younger clients and those using TD EasyTrade.
Interactive Brokers:
IB offers 2,785 Canadian and 10,410 U.S. stocks on a fractional basis, and European stocks as well. Minimum purchases are $1 or 0.0001 share. Commissions are:
Canadian-listed stocks (in C$): 1 cent per share with a minimum of $1 and a maximum of 0.5 per cent of trade value.
U.S.-listed stocks (in $US): Half a cent per share, with a minimum of $1 and a maximum of 1 per cent of trade valueIB executes fractional trades in real time and offers fractional DRIPs.