Essential for small investors: Complete guide to selling fractional shares, 3 tips to increase transaction success rate

To earn profits from fractional shares, the biggest challenge isn’t “buying” but “selling.” Many novice investors believe they can easily unload fractional shares after purchasing, but in reality, selling fractional shares involves multiple steps such as trading times, transaction fees, and market liquidity. Understanding these details is essential to truly improve the success rate of selling fractional shares. Today, we’ll delve into comprehensive knowledge about selling fractional shares.

Basics of Fractional Shares: Understand What Fractional Shares Are in 1 Minute

In Taiwan’s stock market, the minimum purchase unit is “1 lot” (which is 1,000 shares), but investors sometimes hold smaller, scattered stocks—these are fractional shares. The minimum trading unit for fractional shares is 1 share, usually arising from:

• Unfilled portions of original orders, resulting in fractional holdings
• Rapid stock price fluctuations preventing full execution
• Small leftover shares from stock rights issues

Trading fractional shares involves buying and selling these small portions. Each order cannot exceed 999 shares. For small investors, fractional shares lower the investment barrier, allowing participation in large listed companies with just a few thousand NT dollars.

Timing and Rules for Selling Fractional Shares: Intraday vs. After Hours

Since October 26, 2020, Taiwan Stock Exchange has introduced a more flexible fractional share trading mechanism, no longer limited to after-hours. Now, fractional shares can be traded during regular trading hours, which is great for investors wanting quick sales.

Intraday Fractional Share Trading Hours

Intraday trading hours overlap completely with regular stock trading hours. Investors can submit sell orders from 9 a.m., but must do so through their broker’s electronic trading platform. If orders are not filled during the day, they will not be automatically retained; they need to be resubmitted after hours.

After-Hours Fractional Share Trading Hours

The key feature of after-hours trading is that only one matching opportunity exists. Unfilled orders are automatically canceled and do not carry over to the next trading day. Investors wanting to sell fractional shares can place orders between 1:40 p.m. and 2:30 p.m.

How to choose between intraday and after-hours?

• Urgent to sell: Choose intraday, as multiple matches occur (every minute), increasing chances of execution
• Want precise pricing: Choose after-hours, since only one match, making it easier to target a specific price

How Are Transaction Fees for Fractional Shares Calculated? Comparing 5 Brokers

Many think fractional share fees are exorbitant, but the calculation method is the same as for full shares—0.1425% of the transaction amount.

Fee Calculation Example

Suppose you sell 200 shares of a stock priced around NT$1,000:

• Transaction amount: 200 × 1,000 = NT$200,000
• Fee rate: NT$200,000 × 0.1425% = NT$285
• Minimum fee: Most brokers set a NT$1 minimum

However, a key point is that different brokers offer varying discounts for electronic orders. Here’s a comparison:

Using a discount of 18% (1.8折) on NT$285 results in about NT$51.3, significantly reducing costs.

Tip: When trading small amounts, the fee percentage is higher. It’s recommended to trade at least NT$10,000 per transaction to keep fees reasonable.

How to Effectively Sell Fractional Shares? 3 Practical Tips for Success

Not all fractional shares are easy to sell. Popular stocks like TSMC sell quickly, but less mainstream stocks may have low liquidity, requiring patience or strategy adjustments. Here are three tips to improve your chances of successful sales.

Tip 1: “Convert Fractions to Whole” for Faster Sales

This is the most straightforward method. If you hold, say, 700 shares of a less popular stock like Xinjin, it’s hard to sell quickly during trading hours. Instead:

Steps:

1. Buy an additional 300 shares during intraday or after-hours to reach 1,000 shares (one lot)
2. Then, sell the full lot as a whole stock, which has higher liquidity

Though you need to spend extra to buy the fractional shares, selling a whole lot is much faster. This approach is especially useful if you’re trapped in a position or need to exit quickly.

Tip 2: Use “Limit Orders at Limit Up or Limit Down Prices”

This technique is especially effective during after-hours trading, where only one call auction occurs at 14:30. To maximize the chance of execution:

For selling:

• Place a sell order at the limit down price (跌停價).
• The call auction prioritizes the maximum number of shares traded at that price.
• The selling price is lower, but it ensures a higher probability of sale, avoiding holding overnight.

For buying:

• Place a buy order at the limit up price (漲停價).
• This increases the chance of quick execution if the stock hits your target price.

Tip 3: Choose the Right Trading Time

Different times have different liquidity and investor psychology:

Intraday trading (9:00-13:30):

• Advantages: Multiple matching opportunities (first at 9:10, then every minute)
• Suitable for: Investors willing to wait and try multiple times
• Disadvantages: Need to monitor the market continuously; if missed, must re-enter orders

After-hours trading (13:40-14:30):

• Advantages: Ample time to decide; usually higher volume
• Suitable for: Investors with clear target prices who want a single decisive trade
• Disadvantages: Only one matching opportunity; no second chances if missed

Pros and Cons of Fractional Shares: Should Small Investors Invest?

Advantages:

Low capital barrier, suitable for dollar-cost averaging

• Previously, NT$5,000 was needed for one lot of TSMC; now, NT$2,000 suffices
• Ideal for salary earners with NT$30,000/month to diversify small amounts
• Allows learning and practicing without large upfront investment

High flexibility, low risk to test waters

• Can buy small amounts first, observe the market
• Good for beginners to develop stock-picking skills and market sensitivity

Disadvantages:

1) Lower liquidity, harder to sell quickly

• Compared to full shares, fractional shares have smaller volumes and slower trades
• Non-hot stocks may take 1-2 days or longer to sell

2) Higher transaction costs relative to small amounts

• Minimum fee of NT$1, which can be a large percentage for small trades
• For example, NT$500 worth of fractional shares might incur NT$8-10 fee (~2%), requiring a 2% price increase just to break even

3) Limited trading process and rules

• Only sell orders are allowed; you cannot place buy orders directly (must go through broker system)
• Unfilled intraday orders are canceled; they do not carry over
• Expired orders are automatically canceled; need manual re-entry

Other Small Investment Options for Small Investors: CFDs vs. Fractional Shares

If you’re hesitant about fractional shares, consider alternative small-investment tools like Contracts for Difference (CFDs).

CFD features:

• Require only 5%-20% margin (leverage)
• Low trading costs—mainly spreads, no extra commissions
• High liquidity, easy to enter and exit positions

Example comparison:

To invest in 5 shares of Google (approx. $400/share):

• Fractional shares: $400 × 5 = $2,000 cash outlay
• CFD: With a 5% margin, only $100 needed

CFDs seem more cost-effective, but note:

• Fractional shares are suitable for long-term holding and dividends
• CFDs are more appropriate for short-term trading; overnight positions incur interest charges

Summary: Be a Smart Seller of Fractional Shares

Selling fractional shares may seem simple, but it involves timing, price strategies, and fee management. To be a savvy seller:

1. Choose the right timing: Use after-hours for quick sales at lower prices, intraday for multiple chances
2. Manage fees carefully: For small amounts, keep transaction size above NT$10,000 when possible
3. Convert fractions to whole shares when needed: For illiquid stocks, assembling a full lot can speed up sales
4. Keep learning: Understand market liquidity and investor psychology to improve success rates

As fractional share trading becomes more popular, small investors have more options. Whether through fractional shares or other tools, the key is to find methods aligned with your risk tolerance and investment horizon to achieve long-term gains.