Recently, I’ve noticed that many small retail investors around me are asking how to buy fractional shares, so I went ahead and compiled a complete guide to fractional share trading. To be honest, fractional share trading really is a good option for investors with limited funds, but if you want to do it well, you still need to master a few techniques.

First, let’s talk about what fractional shares are. The minimum unit for whole shares is 1 lot (1000 shares), but sometimes scattered shares arise due to orders not being fully filled, or because of rights issues, stock dividends, and other distributions—these are fractional shares. The minimum trading unit for fractional shares is 1 share, and each order cannot exceed 999 shares.

When it comes to how to buy fractional shares, trading hours are very important. Before 2020, fractional shares could only be traded after-hours, but now intraday trading has been opened. Intraday trading runs from 9:00 AM to 1:30 PM. Orders can only be placed electronically through a broker app. Matching starts at 9:10 AM, and then a call auction is held once every minute thereafter. After-hours trading is from 1:40 PM to 2:30 PM. You can place electronic orders or place orders by phone, and there is only one call auction at 2:30 PM. The key point is that orders that are not filled during intraday trading are not automatically carried over to after-hours—you need to place the order again.

As for transaction fees, the way fees are calculated for buying and selling fractional shares is the same as for whole shares: 0.1425% of the transaction amount. Different brokers may set a minimum fee (usually starting from 1 yuan). Electronic orders may also come with discounts—for example, some brokers can offer down to 1.8 折 (i.e., 18% of the original price after discount, so you pay about 18% rather than 100%). For example, if you buy 200 shares of TSMC and assume the share price is 1065 yuan, the fee would be about 303.53 yuan; with a 5 折 discount, it would be 151.77 yuan. So the most cost-effective way to buy fractional shares depends on choosing a broker with stronger fee-discount offers.

If you want fractional shares to be easy to sell, here are a few practical tips. The first is “convert fractional to whole.” If a certain stock has poor liquidity and never gets filled during the day, you can first buy enough shares to make up a full lot, and then sell using the whole-share trading method—the deal can go through much faster. Second, during after-hours trading, you can try placing buy orders at the limit-up price or sell orders at the limit-down price. Since after-hours matches only once, and it follows the principle of maximizing the chance of execution, the success rate is generally higher.

To be honest, fractional share trading has both pros and cons. The upside is the low capital requirement—you can start with 1000 yuan. It’s suitable for regular investing and also for testing out a stock with a small amount. But the downsides are obvious too: liquidity is much worse than with whole shares, and the time for trades to execute may drag on longer. Also, although the minimum fee is 1 yuan, if you buy too few shares, the fee can make up a large proportion of your total cost, which ends up not being worth it. Sometimes you may also need to pay additional service fees, so the overall cost can indeed be higher than with whole shares.

If you’re really concerned about liquidity and fees with fractional shares, you can also consider using a financial derivative like a contract for difference (CFD) to trade stocks in small sizes. With CFDs, you only need to pay part of the margin to operate. For example, buying 5 shares of Google might require 2000 US dollars, but using a CFD might only require 100 US dollars. However, CFDs are more suitable for short-term trading: they are settled daily, and holding positions overnight requires paying overnight interest. By comparison, fractional shares are more suitable for long-term holding.

Overall, the most important things when buying fractional shares are choosing the right broker, understanding trading hours, and knowing how to use trading techniques. With technological development, fractional share trading is becoming increasingly convenient, and it really is a good financial tool for small retail investors. But in the end, it’s still worth reminding you: before investing, you should understand your own risk tolerance, learn basic investment analysis methods, and avoid blindly following trends or making impulsive trades.