Online Brokerage Giant Fidelity Offers Fractional Share Trading

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Online Brokerage Giant Fidelity Offers Fractional Share Trading

Fidelity, the world’s biggest online brokerage business, stated on January 29, 2020, that it would begin providing fractional share trading for stocks and ETFs to its 23 million users. Customers may purchase and sell as little as 0.001 of a share utilizing Fidelity’s iOS and Android mobile apps for fractional trading, sometimes known as “dollar-based investment.” Fidelity is one of the first large online brokers to sell fractional shares, after an effort by Fidelity and its rivals to eliminate trading costs on stocks and ETFs.

According to a news release, Fidelity will provide all fractional transactions in real-time during market hours, allowing consumers to know the share price of the securities they are trading rather than having to wait until the end of the day for several orders to add up to full shares. Trades in fractional shares must be market or limit orders and are only valid for the day they are executed.

Though all fractional share transactions must be completed on mobile devices, the fractional shares will be visible on a client’s Positions page on the website and in Active Trader Pro, the downloadable platform.

According to Scott Ignall, Fidelity’s head of retail brokerage, “…clients may now own a piece of their favorite businesses and ETFs depending on how much they wish to invest, regardless of the share price.” Fidelity offers fractional share trading in client accounts such as brokerage, HSAs, IRAs, and self-directed brokerage accounts via a workplace retirement plan such as a 401(k) (k).

Offering fractional shares enables Fidelity to lower account minimums for clients who cannot or do not want to purchase complete shares of high-priced equities such as Amazon or Google but still want exposure to such assets in their portfolio.

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Fidelity’s decision to issue fractional shares coincides with investor interest in large-cap equities. According to Investopedia’s monitoring of search patterns, investors have demonstrated a significant degree of interest in looking for the share price of the S&P500’s most popular and largest market cap companies, including Microsoft, Amazon, Apple, and Google.

Google Trends Search Interest in Costly Stocks.

According to Shanna Weber, head of asset management strategy, other brokers, such as Schwab, also provide fractional share trading, known as Stock Slices. Since November of 2019, Interactive Brokers has offered fractional shares, while Robinhood began enabling fractional share trading in December of 2019. On their robo-advisor platforms, E*TRADE and TD Ameritrade offer fractional shares.

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