Fidelity announced today that it is offering fractional shares trading for stocks and ETFs to its 23 million customers.
Fractional trading, or what Fidelity calls "dollar based investing," allows customers to buy and sell as little as 0.001 of a share using Fidelity’s mobile app for iOS and Android. Fidelity is among the first of the major online brokers to offer fractional shares, which comes on the heels of a move by Fidelity and its competitors to offer zero trading commissions on stocks and ETFs.
According to the firm, Fidelity will make it possible to offer all fractional trades in real-time during market hours, which will provide its customers the ability to know the share price of the security they are trading, rather than having to wait until the end of the day for multiple orders to add up to full shares. Fractional share trades must be market or limit order types and are only good for the day they are traded.
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Mark Rieder serves as Head of Innovation at NFP, where he has spent over 15 years driving strategic technology and benefits administration solutions. With three decades of experience in the insurance and employee benefits industry, Mark's expertise spans the full lifecycle of insurance and benefits delivery, positioning him as a trusted advisor in navigating the evolving landscape of insurance advisory and benefits administration. He helped launch NFP's Innovation efforts, authored multiple articles and white papers, regularly speaks at industry events, and sits on a number of HRTech/Insurtech advisory boards.
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Though all transactions of fractional shares must be placed on mobile devices, the fractional shares will be displayed on a client's Positions page on the website and in its downloadable platform, Active Trader Pro.
Scott Ignall, Fidelity's head of the retail brokerage business, said in a statement, "... customers can now own a piece of their favorite companies and ETFs based on how much they want to invest, independent of the share price." Fidelity is offering fractional share trading in customer accounts including brokerage, HSAs, IRAs, and self-directed brokerage accounts via a workplace retirement plan like a 401(k).
Offering fractional shares allows Fidelity to bring account minimums down for customers who either can't or don't want to buy entire shares of high-priced stocks like Amazon or Google, but want exposure to those securities in their portfolio.
Fidelity's move into offering fractional shares lines up with investor interest in high market cap stocks. According to Investopedia's analysis of search trends on Google, investors have shown a high level of interest in searching for the share price of the most popular and highest market cap stocks in the S&P 500, including Amazon, Apple, Google and TSLA.
Steady gains made in equity markets last year were "clearly a tailwind,” an expert says.
Other brokers, like Schwab, are planning to offer fractional share trading in 2020, according to Shana Weber, head of strategy and asset management. Interactive Brokers has been offering fractional shares since November and Robinhood started rolling out fractional share trading in December. E-Trade and TD Ameritrade offer fractional shares on their robo-advisor platforms.
