Interactive Brokers the US-based online broker with operations across Europe and Asia is bringing fractional share trading to the Canadian markets.
What new service is Interactive Brokers introducing?
Interactive Brokers has introduced fractional share trading and clients of the firm can now trade fractionally in all stocks and ETFs listed on the Toronto Stock Exchange (TSE) and on CBOE Canada.
Fractional share trading provides investors with a practical way to build a balanced portfolio and to invest in shares and ETFs, whatever the size of their account, and whatever the share prices of the securities they are interested in.
Using fractional share trading investors can spread their asset allocation among a variety of stocks allowing them to diversify their exposure regardless of portfolio size.
In the ordinary course of events, a portfolio of $2000 would be pretty difficult to allocate among say the US mega-cap tech shares.
For example, buying 10 shares of Apple at a price of $190 each would eat up some $1900 of that investment.
However, buying 1.50 shares of Apple, at that price, would only require an investment of $285.
Alternatively Booking.com stock trades at around $2800 per share, that price is too rich for many investors. However, through the use of fractional shares the stock becomes far more accessible with people able to invest in say, 1/20th of a share.
Fractional share trading also allows investors to put small residual cash balances to work in the market.
Interactive Brokers also offer fractional share trading in eligible US, UK and European stocks.
Clients that buy fractional shares will still receive dividends from the companies that they have fractional share holdings in and they will also participate in corporate actions.
Interactive brokers also hope to introduce a dividend reinvestment program or drip for fractional shareholders in future.
The minimum investment for a fractional shares order at Interactive Brokers is just $1.00 and what’s more fractional shares can be used in conjunction with the broker’s basket trading functions which opens up the possibility of dynamic asset allocation strategies for even the smallest of investors.
The democratisation of the financial markets is something that’s important to us at the Good Money Guide and fractional share trading done properly can help with that process.