The Fidelity Investments online brokerage made an announcement today. The decision was in regards to the new capabilities of fractional shares trading in real-time when it comes to ETFs and stocks.
Splitting Up Bits and Pieces
The investment format is a lot more simplified than conventional options, usually referred to as dollar-based investing. It’s being rolled out to the retail customers of Fidelity starting today and will continue to be available for several weeks onwards. What it allows for is traders allowing to do business with as little as one-thousandth of a share. This can be done through the mobile app Fidelity provides on both Android and iOS.
Catering To Smaller Budgets
Fidelity will execute these fractional trades in real-time, but only during market hours. Customers will always be capable of knowing the share price at that specific time. The process of fractional share trading itself, or rather dollar-based trading, is mandated to be limit or market order types. The orders are only good for the day it was given, and will only be available in Fidelity retail accounts that have proven eligible for it. These include HSAs, brokerage, IRAs, and self-directed brokerage accounts that work through workplace retirement plans.
The brokerage itself expects that the dollar-based trading feature will be used in a variety of different ways. Let’s say a retail customer is only capable of saving up $500 for investment but wants to do it for a variety of high-prices companies. This customer will be capable of buying $100 worth of shares in five different companies. With the enhanced diversification, the investor runs less risk to himself that all of his eggs will fall out of the basket.
Expanding Market Offerings
Back in the fall of last year, the Interactive Brokers’ electronic trading platform enabled their form of fractional share trading. This was done on its TWS platform.
It’s always good to see companies expanding their various offerings to the public, and compete directly with each other to achieve it. As long as there is competition, they will strive to develop a more attractive offer. With more attractive offers, others must respond or suffer lesser revenue. It’s simply the way the world works.
Time will only tell if these new options prove popular or not. It could be a new keystone feature, or it could be removed simply due to a lack of demand.