Let’s say you wanted to invest $100 into Apple every month. Apple currently trades at $178 a share. In a world without fractional trading, you might have to wait two months to get 1 share of Apple by paying whatever is the current price on the day of purchase.
Enter Fractional Trading. Want to invest $100 into Apple today? No sweat. Pay $100 and get whatever fraction of a share of Apple you can get for $100 today.
It is more like paying for a slice of pizza than the whole pizza itself.
Is Fractional Trading available in Canada?
Up until fall of 2021, Canada didn’t have an app that allowed investors like you and me to do fractional trading. Everything changed once Wealthsimple Trade introduced Fractional Trading.
With Wealthsimple Trade app, you can buy fraction of a share for as low as $1.
Do you want to invest in Tesla? Start with just $1 or $10 or $100 depending on your budgets.
Are you impressed by the massive Amazon Empire? Own a piece of the magnus opus stock trading at $3400 USD for as low as $1
Wealthsimple Trade makes it easier for retail investors like you and me to invest in big companies like Tesla, Google, Microsoft, Amazon etc.
How many companies on Wealthsimple Trade offer Fractional Trading?
As of Dec 2021, there are 249 stocks that are available on Fractional Trading, Pretty impressive. It is now way easier to diversify your portfolio depending on your interests and convictions.
This list will grow bigger and bigger in the days to come.
What’s more? There are many ETFs like Vanguard S&P 500 Index ETF, ARK Investment Management LLC Innovation ETF, Vanguard Total Stock Market ETF that offer fractional trading on Wealthsimple Trade too.
So, if you are more of an ETF person, you are covered too. You can invest as low as $1 into any of the stocks and ETFs listed under Fractional Trading on Wealthsimple Trade.
How to buy Fractional Shares on Wealthsimple Trade?
Step 1: Sign in to your Wealthsimple Trade App
Step 2: Press ‘Discover’ at the bottom
Step 3: Press “View All” to check all the stocks that are available under Fractional Trading. You will be taken to this view.
Step 4: Let’s say you would like to buy $50 worth of Apple shares. Click ‘Apple’
Check the small fractional pie symbol right next to Apple Inc. That signifies that this stock can be fractionally traded.
So, any stock with this symbol next to it can be fractionally traded. Let’s get back to business.
Step 5: Enter $50 and press submit.
You will be able to see the estimated quantity of shares that you can get for $50. As the screen says, your $50 would get 0.29 shares of Apple Inc.
Press ‘Continue’ and ‘Confirm Order’ on the next screen and you are now a proud owner of a fraction of an Apple share.
Five Advantages of Fractional Trading
- Dollar Cost Averaging
Let’s say you set aside $250 for investing on your biweekly paycheck and you want to invest in Tesla, you would have to wait for more than 2 months to accumulate $1000 to buy 1 share of Tesla. This is assuming that Tesla’s shares trade at $1000 a piece.
What if it goes to $1500? (Thanks to a tweet by you-know-who)
With fractional trading, you can buy $250 worth of Tesla stock every 2 weeks as per your plan. If the price of the stock goes up or down, your costs are averaged due to dollar cost averaging.
2. Same Ownership Benefits
Even though you own a fraction of a share, you have the same ownership rights as someone who has a whole share (like 1 or 2 or 100 shares). You can sell at your convenience. And if the stock pays dividends, you will get your dividend too.
The $ value of the dividend will be proportional to the fraction of the stock that you own. Stock split / Reverse split – everything will be applied proportionately. That’s the beauty of fractional trading.
3. Time in the Market
Seasoned investors will always vouch for time in the market vs timing the market. You can never accurately time the market. Consider yourself lucky if you were able to time the market once or twice.
Fractional trading allows you to accumulate a sizeable portfolio of great stocks over time irrespective of how much they trade for.
4. Diversification
This is one of biggest advantages. You have heard it before. “Never put all your eggs in one basket”. Fractional trading allows you to invest in market leaders in every sector.
Electronics – Apple
Electric Vehicles – Tesla
Software – Microsoft
Social Networking – Facebook
E-Commerce – Amazon
Entertainment – Netflix
If you would like to invest $100 every month into each of these companies, it is possible.
If not for fractional trading, you will have to set aside thousands of dollars in order to be able to own 1 full share of some of these companies. I am not saying that’s hard.
It’s definitely possible and we will get there but until then, fractional trading is a great way to start.
5. Democratizing the Stock Market
Ever since the origin of stock trading apps that made investing paperless to start and required just a few clicks to buy and sell stocks, millions of millennials started their investing journey.
Fractional trading made it even easier for the newest class of retail investors to get their share of their pie in the stock market.
Disadvantages of Fractional Trading
Transaction Fees
When it comes to Wealthsimple Trade, all trades are free. So, no matter how many trades you make per month, it is free.
Of course, there is an exchange fee when CAD is converted to USD, but that might change when they launch Plus plans in January 2022. It comes with USD accounts so exchange CAD to USD once and you can buy US stocks with your US account.
So technically if you are in Canada, Wealthsimple Trade is your only option for fractional trading and since there is no transaction fees, this disadvantage doesn’t apply. Currently Questrade does not offer fractional trading.
Are you new to stock investing? Here’s why Wealthsimple Trade is the perfect app to get started. Hope this article on buying fractional shares on Wealthsimple Trade was useful. Drop your questions in the comments and see you there.