Investing is a great way to build wealth. But if you’ve got your sights set on high-value stocks, you could be looking at hundreds of dollars — or more — per share. For many Canadians, this simply isn’t affordable.
Fortunately, you may still be able to claim a stake in some of these pricey stocks thanks to fractional shares in Canada.
Key Points
- Fractional shares allow you to buy a part of a full share in a company.
- Fractional shares are ideal for investors with minimal capital who want to buy more expensive stocks from bigger companies.
- You can use fractional shares to diversify your investment portfolio with several high-performing companies relatively affordably.
- Two major trading platforms in Canada currently offer fractional shares: Wealthsimple Trade and Interactive Brokers. TD Direct Investing and TD EasyTrade have also started offering fractional shares.
A fractional share allows you to purchase a percentage of a full share in a particular company’s stock. These types of shares are appealing to investors who don’t have the capital needed to purchase whole shares in a company.
If you’re an investor who enjoys trading at a premium, fractional shares can help diversify your portfolio by allowing you to buy into well-performing companies across a variety of sectors. Plus, they’re a more cost-effective option compared to purchasing full shares.
There are a couple of highly-rated investment platforms in Canada where you can buy and trade fractional shares online:
Wealthsimple Trade
Wealthsimple officially became the first Canadian investment brokerage to give clients a way to buy fractional shares of companies in Canada and the United States. Investors can now use the Wealthsimple Trade platform to trade fractional shares of more than 500 Canadian and U.S. stocks and exchange-traded funds (ETFs).
Fractional Shares You Can Buy On Wealthsimple Trade
You can buy fractional shares of the following companies using the Wealthsimple Trade platform:
- Shopify (SHOP)
- Royal Bank of Canada (RY)
- Toronto Dominion Bank (TD)
- Canadian National Railway Co. (CNR)
- Amazon (AMZN)
- Google (GOOGL)
- Apple (APPL)
- Microsoft (MSFT)
- Facebook (FB)
- Netflix (NFLX)
- Tesla (TSLA)
- AirBnB (ABNB)
- Coinbase (COIN)
- Nvidia (NVDA)
You can purchase fractional shares on Wealthsimple Trade using these simple steps:
Step 1: Log Into Wealthsimple Trade
Open or download the Wealthsimple app on your computer or mobile device. If you don’t already have one, make sure to create your account, after which you can log in and click on “Fractional Trading”.
Step 2: Select Your Fractional Share & Dollar Amount
Next, pick the stock you’d like to buy fractional shares of and enter the amount of CAD or USD you want to invest. You’ll then be able to see the approximate number of shares you may get.
Step 3: Receive Your Execution Price
If you’re happy with your order, confirm it. Once it’s sent to market, you’ll get a total share execution price. According to Wealtshimple, orders for fractional shares are traded twice per day.
| How To Sell Fractional Shares On Wealthsimple Start by selecting “fractional sell” rather than the default “market sell” order, and enter the number of shares you’d like to get rid of. These can be divided down to the decimal. Wealthsimple will then display the estimated total value of your shares. It’s your choice whether to sell them or not. |
Interactive Brokers
If you’re an advanced, active, or professional trader, the Interactive Brokers may be the best option for you. They offer a variety of trading tools, as well as low trading fees and two different platforms:
- IBKR Lite for casual investors
- IBKR Pro for experienced traders
You can also use IBKR to trade fractional shares of stocks listed on several U.S. markets.
Fractional Shares You Can Buy On Interactive Brokers
Companies listed on the following exchanges are available for purchase through Interactive Brokers as fractional shares:
- AMEX
- ARCA
- BATS
- NASDAQ
- NYSE
- OTC
At IBKR, you can buy fractional shares with as little as $1 using this easy process:
Step 1: Subscribe To Fractional Share Trading
Log into your client portal account, go to “Settings”, followed by “Account Settings” in your taskbar. Select the gear icon next to “Trading Experience & Permissions”, then expand your stock section and click the checkbox labelled “United States (Trade in Fraction)”.
Step 2: Start Trading
Once fractional shares are enabled on your account, you can invest in multiple US companies and markets with any cash quantity you have in your account. Just enter the amount you’d like to invest and receive an approximate fractional share value, then submit your order if you’re satisfied.
If the price of your chosen stock ever increases, the number of fractional shares you can buy will be reduced. However, you won’t pay more than you originally specified in the quantity field. If you have an IBKR Lite account, your stock commission is $0.
Investing in fractional shares is a beneficial trading practice in a number of ways:
- It’s More Affordable – Fractional shares are far cheaper than full shares. For instance, a full share of Amazon stock now costs just under $200 (as of July 2024). But with fractional shares, you can still buy into the stock for much less.
- You Can Buy Stocks Of Big Companies – The affordability of fractional shares means you may be able to purchase a small slice of multiple popular businesses.
- It’s A Good Way To Begin Investing – If you’re a new investor with little capital, fractional shares allow you to enter different stock markets without having to spend a lot of money.
- It Helps Diversify Your Portfolio – Fractional shares will allow you to purchase different types of stocks, which can help diversify your portfolio and reduce your risk.
- Dollar-Cost Averaging Is Possible – This technique lets you systematically invest equal amounts into different fractional shares, which can lower volatility.
If you buy a fractional share of a stock that gives out dividend payouts, you’ll receive a portion of the dividend payment. The exact amount will be based on the portion of the share you own.
Dividend Reinvestment Plans allow you to reinvest your dividends into more shares.
A dividend is a distribution of profits by a company to its shareholders. Payouts may be made in cash as a stock reinvestment. By investing in dividend-paying stocks, you can use these earnings to reinvest into more shares.
That way, you can gradually increase the number of shares you own. This gives you an opportunity to create wealth via dividend payouts and capital gains. You can also buy blue-chip dividend-paying stocks to make passive income and long-term compounded gains.
If you don’t have enough dividends to purchase a full share, most dividend reinvestment plans allow you to invest fractional shares. You can even add them up to create full shares over time.
A stock split is when a company separates its shares to promote liquidity and create more shares. Although splitting stocks doesn’t add to their value, it can significantly decrease share prices and increase the number of fractional shares you have.
The availability of fractional shares in Canada is limited, but there are alternative investments that can help grow your portfolio without requiring significant capital:
Exchange-Traded Funds (ETFs)
An ETF is basically a basket of different stocks and securities. It works a lot like a mutual fund, where you have access to a diversified fund using a single purchase order. Moreover, like a stock, an ETF can be bought and sold on the stock exchange and has its own ticker symbol.
Mutual Funds
Similar to ETFs, mutual funds allow you to buy a range of stocks and/or bonds from many companies using a single fund. They’re also like fractional shares because you can own small portions of big-name businesses.
On the other hand, mutual funds often have higher fees because some are actively managed. Plus, they can only be traded once a day after the stock market has closed, whereas you can trade ETFs throughout the day like stocks.
Guaranteed Investment Certificates (GICs)
A GIC is a deposit investment product that you can purchase from banks and trust companies. It’s a low-risk investment because the principal is protected, and provides a guaranteed rate of return over a specific term. Because GICs are so predictable and come with minimal risk, they’re a popular investment option for those building a retirement fund.
Bottom Line
Purchasing fractional shares can be a great way to own little pieces of major companies for relatively affordable prices. You can sprinkle your capital across several shares of stocks to minimize your risk and maximize your return, without requiring a ton of capital. So, if you’re interested in buying fractional shares in Canada, there are two trading platforms that you can look into: Wealthsimple Trade and Interactive Brokers.
