How to buy ETF fractional shares? Three essential investment methods for small investors

For investors with limited funds, the most common obstacle to buying ETFs is “one share is too expensive.” Take Yuanta Taiwan 50 ETF as an example: purchasing a full lot requires over NT$100,000, which is a significant expense for many working professionals. But don’t worry—ETF fractional shares are designed to solve this problem. This article will detail how to participate in ETF investing easily through fractional trading, dollar-cost averaging, and CFD leverage.

Investment Challenges for Small Investors: Why You Need ETF Fractional Shares

Taiwan’s ETF market has developed rapidly, but its trading mechanism differs fundamentally from the U.S. stock market. Recent statistics show that Taiwan has a total of 227 ETF listings with assets exceeding NT$3.56 trillion, more than doubling since 2020. However, the basic trading unit on the Taiwan stock exchange is “one lot” (1,000 shares), meaning you must buy at least 1,000 units of any ETF.

For example, if Yuanta Taiwan 50 ETF is trading at NT$161.65, buying one lot costs NT$161,650. For salaried workers earning less than NT$100,000 a month or beginners entering the stock market, this amount often exceeds their budget. This limitation is precisely why ETF fractional shares have emerged.

Complete Guide to ETF Fractional Trading: Rules, Timing, and Cost Analysis

What Are ETF Fractional Shares? A 3-Minute Quick Overview

ETF fractional shares refer to purchasing less than 1,000 units (i.e., 1–999 shares) of an ETF. For example, buying 50 or 200 shares of Yuanta Taiwan 50 ETF counts as fractional trading. This method allows investors to enter the ETF market with lower capital requirements.

Compared to full lots, fractional trading differs in trading hours, commission calculations, and execution rules. Understanding these differences is crucial for practical operation.

Trading Hours and Order Restrictions for ETF Fractional Shares

Taiwan’s ETF fractional shares are traded during two periods: intraday and after-hours.

Intraday Fractional Trading (09:00–13:30)

• Orders placed electronically (online or via voice)
• A call auction occurs every minute
• First auction at 09:10
• Only limit orders are accepted, valid for the day (ROD)

After-hours Fractional Trading (13:40–14:30)

• Orders can be placed via phone, counter, or electronic channels
• A single call auction at 14:30
• Only limit orders are accepted
• Price priority applies; at the same price, orders are filled randomly

Note that fractional and full lots are executed in completely separate pools, so the transaction prices may differ, often with larger bid-ask spreads.

How Are ETF Fractional Trading Fees Calculated?

Broker commissions in Taiwan are calculated as: Commission = Share Price × Number of Shares × 0.1425% × Discount Rate

For example, using Fubon Securities with a 35% discount to buy 200 shares of Yuanta Taiwan 50 ETF at NT$161.65: 200 × 161.65 × 0.1425% × 0.65 ≈ NT$29.95

Most brokers set a minimum fee (previously NT$20, now many have lowered to NT$1). This means that for small trades, the fee is capped at the minimum, not calculated strictly by the formula.

For instance, buying 5 shares: 5 × 161.65 × 0.1425% ≈ NT$1.15

Since NT$1.15 exceeds the NT$1 minimum, it is charged as NT$1.15. For 1 share: 1 × 161.65 × 0.1425% ≈ NT$0.23

But since the minimum is NT$1, the fee is NT$1.

Therefore, at current fee levels, purchasing 1,000 shares of fractional ETF and buying a full lot incur nearly the same commission, so fractional trading does not significantly increase costs.

ETF Fractional Shares Selling Fees and Taxes

Besides commissions, selling incurs transaction tax at 0.1%. Selling 200 shares of Yuanta Taiwan 50 ETF at NT$161.65: 200 × 161.65 × (0.1425% + 0.1%) ≈ NT$78.4

This includes both commission and tax, which should be considered when planning to sell.

Practical Tips for ETF Fractional Trading

How to Place Orders via App

After opening an account, investors can directly place fractional orders through the broker’s app:

1. Select trading type: “Intraday fractional” or “After-hours fractional”
2. Confirm order type: limit order only (supported for fractional shares)
3. Choose action: “Buy” or “Sell”
4. Enter parameters: number of shares (1–999) and price

The process is similar to full lots, making it easy for beginners.

Strategies to Improve Order Fill Rates

Since fractional shares have lower liquidity, investors should adopt appropriate order strategies:

• High-liquidity ETFs (e.g., Yuanta Taiwan 50): place buy orders at the limit-up price or sell at the limit-down price; higher prices get priority
• Moderate-liquidity ETFs: place orders near closing prices, avoid setting prices too far from current market
• Less-traded ETFs: try slightly below the closing price, but set reasonable prices

Check the Taiwan Stock Exchange’s after-hours fractional trading statistics to assess liquidity.

Alternative for Small-Scale ETF Investment: CFD Leverage Trading

If liquidity issues or long waiting times bother you, CFD (Contract for Difference) trading is another option.

Comparing ETF Fractional Shares and CFD Trading

Practical CFD Example

On Mitrade, buying iShares Semiconductor ETF:

• Without leverage: NT$223.91
• With 10x leverage: NT$22.39
• Leverage reduces capital requirement and enhances capital efficiency

CFD is suitable for flexible strategies, including short selling and 24-hour trading. But leverage amplifies both gains and losses; beginners should use cautiously.

Dollar-Cost Averaging into ETF Fractional Shares: Complete Guide to Dividends

In recent years, many retail investors adopt “dollar-cost averaging” (DCA) to invest in ETF fractional shares. DCA involves regularly investing a fixed amount at set intervals, ideal for salary earners.

Statistics show that popular DCA targets are high-dividend ETFs like Yuanta High Dividend and Fubon High Yield.

Do Fractional Shares Qualify for Dividends?

Many worry that buying fractional shares affects dividend rights. The answer is no—whether you hold 1,000 shares or just 1 share, you are entitled to dividends. The more shares you hold, the higher your dividend income.

DCA into fractional shares offers:

• Low minimum investment (a few thousand NT$ per month)
• No minimum purchase amount
• Flexible investment amounts
• Same dividend rights as full lots
• Cost averaging reduces risk

Summary: Choose the ETF Fractional Investment Method That Suits You

ETF fractional shares break the “one lot” barrier in Taiwan, allowing small investors to participate. Whether gradually accumulating assets through fractional trading, using dollar-cost averaging, or leveraging CFDs for higher efficiency, investors have multiple options.

Your choice depends on your capital, risk tolerance, and trading preferences. If you prioritize stability and dividends, fractional trading is ideal; for more flexible and efficient trading, CFDs are a good supplement. Regardless, ETF fractional shares have democratized investment opportunities for everyone.