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With over 200,000 users opening an account each year, it seems like every Canadian with an interest in finance is exploring Questrade. And with its vast array of features and robust offering of financial products, it is easy to see why.
However, you may be wondering whether or not you can buy fractional shares on Questrade?
You cannot currently buy fractional shares on Questrade. While the platform offers a wide selection of stocks and low-cost ETFs, you will have to purchase whole shares when using Questrade.
While this is not great news, users should not be too concerned. Fractional shares, in general, are a relatively new concept in the world of retail investment, with most platforms only adopting fractional share trading within the last couple of years. Therefore, it is not unrealistic to think that Questrade will begin offering fractional shares some time soon.
With that said, I use Wealthsimple Trade for all my fractional share investments. I’ve had a great experience with them so far and as someone who has never bought fractional shares before, it’s the perfect platform for me. If you did want to try them out, the sign-up process only takes a few minutes. (And you’ll get a $50 cash bonus with your sign up).
Can You Buy Fractional Shares on Questrade?
You cannot buy fractional shares on Questrade.
In order to purchase financial instruments on the platform, you will have to purchase whole units.
However, as fractional shares are relatively new to the world of retail investment, it is not unfeasible to think that the platform will commit some time to rolling out this capability in the coming months and years.
What Exactly Are Fractional Shares?
As the name implies, fractional shares are a portion of a share of stock, REIT, ETF, or other security.
Fractional shares are a relatively new concept that has become popular with the arrival of retail trading.
Prior to the retail trading phenomenon, stock trading was relegated to the financial institutions and some wealthy individuals. These entities would use fractional trading, but only as a means of reinvesting their dividends. However, when making standard buy and sell trades, it was no issue for them to buy in whole shares – and buy a lot of them for that matter.
Now that average citizens have begun investing in the financial markets, fractional shares have garnered increased interest. Simply put, a single share of some of the best securities is priced well above what many people can afford. For example, a share of Warren Buffett’s Berkshire Hathaway costs a whopping $427,000 USD!
While not all stocks are so expensive, even stocks that are priced at a couple hundred dollars can fall outside the price range of investors who only have a few extra dollars to invest each month.
Without fractional trading, investors would have to keep their money in cash until they saved enough to buy an entire share.
However, fractional trading makes it possible to buy small portions of a share.
For example, if Company ABC costs $1,000 per share and you really like the stock but only have $200 to invest, you could use that $200 to buy a fractional share of Company ABC. In this case, you would then own .2 shares of Company ABC.
With fractional shares, you will then enjoy a proportional share increase or decrease in the stock price. For example, if Company ABC were to rise to $1,500 per share (a 50% increase), your holding in the company would increase to $300 ($1,500 X .2, which is your share of stock).
In addition, if Company ABC offers a dividend, you get a proportional share of the dividend per share. If it offers a $.50 per share dividend each quarter, you would receive $.10 for your .2 shares of stock in Company ABC.
Pretty straightforward, right?
Are Fractional Shares Allowed in Canada?
Fractional shares are allowed in Canada.
However, as fractional shares are still relatively new to the retail investing sector, few fintech platforms offer the capacity to trade in fractional shares.
Wealthsimple Trade is one of the few fintech platforms that does in fact offer this feature.
If you wanted to sign-up for a Wealthsimple Trade account, my article here walks you through a step-by-step guide on how to do so. If you’d rather just go straight to the sign-up page, you can do so here and you’ll earn yourself a nice little $50 cash bonus.
Is It Even Worth Owning Fractional Shares?
Yes, it is worth it to own fractional shares.
In fact, fractional shares, sometimes referred to as micro-investing, make it possible for people of limited financial means to access the stock market.
By using fractional shares, investors can make slow, steady contributions to companies and funds that would be too expensive for them to purchase on a whole-share basis.
In addition, fractional shares can help small-time investors enjoy the snowball-like nature of investing (assuming they have dividend reinvestment turned on). Take the following scenario:
- Investor makes a small investment in a dividend-paying company in Quarter 1
- At the end of Quarter 1, that dividend, along with another small investment, is used to purchase a little bit more of the same company
- At the end of Quarter 2, a slightly larger dividend, plus another small investment, is used to purchase some more of the company
Using this approach, the dividend keeps getting a little larger each quarter and before long, the investor will hold an entire share of the company. Over many years, that tiny fractional share investment can turn into a major stake!
When Not to Trade in Fractional Shares
While trading in fractional shares is generally a very good idea, there are a couple of points to keep in mind:
- Transaction Fees – if a platform charges a transaction fee per trade, it may be advisable to avoid using fractional shares. For example, if you only have $50 to buy .25 shares of a particular stock but there is a $10 transaction fee, then you will need to clear a 20% yield to even cover this fee – and a 20% return is never something you should count on.
- Possible Liquidity Issues – liquidity refers to the ease of buying and selling a stock. While your fractional share will be affordable, it may be a bit more difficult to find a buyer wanting to take on such a small position. This may lead to you having to accept a worse price than you originally wanted.
What Trading Platforms Allow Fractional Shares in Canada?
As mentioned, fractional shares are a relatively new concept in the world of retail investing. Therefore, few platforms currently offer the ability to trade in fractional shares, with the following companies among the select few:
I actually have a Wealthsimple Trade account and as you can see from the image below, I have the fractional share feature activated here in my account and I am in the process of buying $1 worth of Tesla. Pretty neat, hey!
The Bottom Line: Buying Fractional Shares on Questrade
At this time, you cannot buy fractional shares on Questrade. However, as fractional shares are still a relatively new concept in the world of retail investing, it is not out of the realm of possibility to expect Questrade to do something in this regard in the coming months and years as more retail investors begin demanding this service from their fintech brokers.
If you did want to get started today, I’d recommend doing so with Wealthsimple Trade. If you’d rather get your feet wet with Questrade and wait for them to introduce fractional shares into their platform, then I think that’s a smart idea too.
Okay that’s it for me! As always, thanks for reading!