After months of research, you’ve added Amazon (AMZN:NASDAQ) to your watchlist as you’re bullish about its e-commerce and cloud prospects. Before you hit the buy button, you realise the price of one Amazon share is now around US$2,764 (S$3,819).
Not quite ready to commit almost an entire month’s salary on a single stock? You can still invest by buying a slice of one share instead – a move known as fractional trading.
What is fractional trading?
Most brokers mandate that you purchase shares in whole numbers only. For instance, if Amazon has a stock price of US$3,400, you must invest in increments of US$3,400 to buy more whole shares. So if you only have US$4,000 available, you’re limited to buying just one share.
Fractional trading however, allows you to buy fractions of a share, starting from just US$1. If the price of a stock is US$10 and you submit a buy order of US$1, you’ll essentially own 1/10 or 10% of a share.
Fractional trading is currently only available for US-listed stocks and ETFs.
Why Syfe offers fractional trading
As you can tell, fractional trading allows you to own a slice of your favourite companies, regardless of share price. Here at Syfe, our mission is to make investing accessible and affordable for everyone. Fractional trading fits with our goal to democratise investing. After all, why should certain shares only be available to the investors who can afford their pricey valuations?
With Syfe Trade’s fractional trading feature, no share is out of reach. No matter how much you have, fractional trading lets you put all your money to work at once. Unlike other brokerage platforms, there’s no need to wait until you have enough funds to meet the minimum order size.
Fractional trading can help you diversify and dollar cost average
Fractional trading makes it easier for you to build a diversified stock portfolio. Going back to our first example, a conventional broker would allow you to only buy one single share of Amazon with US$3,400. Syfe Trade however, would provide you with the flexibility to build a portfolio of different shares with the same amount of money. By investing your funds across more stocks, you reduce your risk of being over-exposed to any particular company or sector.
Fractional trading is also a good way to implement dollar-cost averaging. This is a strategy where you invest a fixed amount of money at regular intervals (perhaps monthly) regardless of how the stock market is performing. Ultimately, it can have the effect of evening out market volatility and reducing your risk over time. For example, you can choose to invest $300 every month in a particular stock or ETF, and grow your holdings over time.
Is fractional trading risky?
Some investors worry that fractional trading may affect their dividends or returns. That’s not the case. If you own fractional shares of a company that pays dividends, you’ll still be entitled to the dividend payout, and your dividends will be proportional to the amount of the share you own.
Let’s say you own 25% of a share and the declared dividend is $1 per share. Your dividend payout will simply be $0.25.
There are also no restrictions to selling your fractional shares. You can sell them just like any other listed stock. If you own 25% of a share and the stock price jumps from $2 to $4, you’ll receive equivalent proceeds of $1 when you sell your stock.
Another point to note is that Syfe Trade doesn’t charge additional fees for fractional trading. Whether you choose to buy shares in whole numbers or in fractions, you get to enjoy free trades every month.
Get started with Syfe Trade
Syfe Trade makes owning slices of your favourite companies easier than ever before. From just US$1, you can buy almost any US stock or ETF you want.
Once you’ve signed up for a Syfe Trade account, simply follow the steps below to make your first fractional trade.
- Download the Syfe mobile app and sign up for a Syfe Trade account
- Add funds to your Syfe Trade account using PayNow, FAST/GIRO, or wire transfer
- Determine what US stock or ETF you want to invest in, and how much money you want to invest
- Tap “Buy” and select “Buy in dollars (Market)” as your order type
- Enter the amount you want to invest
- Slide “Buy” to complete your trade