How to sell fractional shares easily? A beginner's guide to buying and selling fractional stocks for small investors

Fragmented stock investing is becoming a new favorite among small investors in Taiwan. However, many people discover after opening an account that selling fragmented stocks is more complicated than expected, especially for less popular stocks that often face trading difficulties. This article provides a comprehensive guide from beginner to expert, including trading rules, cost calculations, and practical tips.

What are fragmented stocks? Why do they appear?

In Taiwan’s stock market, the minimum trading unit for whole shares is one lot (1000 shares), but you may only hold a few hundred or dozens of shares. These stocks that are less than 1000 shares are called fragmented stocks, with a minimum trading unit of 1 share.

How do fragmented stocks usually occur? There are mainly two situations:

First, incomplete transactions: When you place an order to buy or sell whole shares, the order may not be fully executed. For example, you want to buy 1000 shares of a stock at NT$98, but only 500 shares are willing to trade at NT$98 in the market. The remaining 500 shares will become fragmented stocks remaining in your account.

Second, rights issues and dividends: When a company issues additional shares or distributes dividends, fractional shares may be generated that cannot form a whole lot.

Therefore, buying and selling fragmented stocks specifically refers to transactions involving these fractional shares, with each order limited to 999 shares. Simply put, it is a trading mechanism for “stock leftovers.”

When can you trade fragmented stocks? Full schedule analysis

In the past, fragmented stocks could only be traded after market hours, which was limited for small investors. Since October 26, 2020, the Taiwan Stock Exchange has opened up intraday trading of odd-lot stocks, greatly improving trading convenience.

Intraday trading hours (9:00-13:30):

• Orders can only be placed via broker apps or online (electronic orders)
• First matching occurs at 9:10, then automatically every minute
• Follows the “price priority, time priority at the same price” matching principle
• Unfilled orders during the day will automatically expire and will not carry over to after-hours

After-hours trading (13:40-14:30):

• Orders can be placed electronically or via phone with brokers
• A single closing auction matching occurs at 14:30
• Follows the “price priority, random order at the same price” matching principle
• Unfilled orders after hours expire the next day

What rights do you have when trading fragmented stocks? Three important regulations you should know

1. Fragmented stocks can receive dividends

Fragmented stockholders are still shareholders. When the company distributes profits, your holdings of fragmented stocks are entitled to dividends, though the amount received is relatively small due to the limited number of shares.

2. Fragmented stocks can receive stock dividends

During stock or cash dividends, the fractional part less than one share will be converted into cash or sold collectively by the stock exchange, and the proceeds will be distributed to fragmented stockholders.

3. Fragmented stocks can be bought and sold

Many investors mistakenly think fragmented stocks can only passively wait for dividends. In fact, the Taiwan Stock Exchange recognizes trading of fragmented stocks. You can actively buy fragmented stocks on dips or sell your holdings at any time.

How to sell fragmented stocks more easily? Three practical tips

Although both intraday and after-hours trading of fragmented stocks are possible, trading volume for many non-mainstream stocks remains low, leading to difficulties in execution. If your orders remain unfilled for several days, try the following three methods:

Tip 1: Readjust the order price

The main reason for difficulty in selling less popular stocks’ fragmented shares is the lack of buyers. If your first order doesn’t execute, try relisting the next day after market hours, and moderately lower the price to significantly increase the chances of a match.

Tip 2: Combine into whole lots and sell via whole share trading

This is the fastest solution. Suppose you hold 700 shares of a stock as fragmented stock. You can buy 300 shares during intraday trading to make a total of 1000 shares (one lot), then sell directly through the more active whole share trading. Since whole share trading volume is much larger than fragmented trading, execution is much faster.

Tip 3: Use extreme prices for after-hours orders

After-hours trading only matches once at 14:30, following the “maximum trading volume” principle. If you need to sell quickly, place a sell order at the limit down price; if buying, place an order at the limit up price. This greatly increases the likelihood of a match.

How to buy fragmented stocks? Account opening and cost analysis

Opening an account is super simple

No special account is needed to buy or sell fragmented stocks; you can operate within your existing stock account. Switch to “fragmented stock trading mode” on your broker app, and input a quantity between 0 and 999 shares to place an order.

How are handling fees calculated?

Handling fees for fragmented stocks are the same as for whole shares, at 0.1425% of the transaction amount. Different brokers set minimum handling fee thresholds (usually NT$1) and offer online order discounts.

For example, buying 200 shares at NT$1065 of TSMC:

• Handling fee: 200 × 1065 × 0.1425% = NT$303.53
• With a 50% discount: NT$303.53 × 50% = NT$151.77

Below is a summary of major broker discounts:

Key reminder: For single transactions, it’s best to buy over NT$10,000 worth to avoid the handling fee eating into profits. Buying NT$200 worth of fragmented stocks with NT$150 handling fee is not cost-effective.

Pros and cons of buying fragmented stocks? A must-read before investing

Advantages:

1. Low capital entry barrier

Fragmented stocks allow you to buy a fraction of a full lot with NT$1000, making it ideal for beginners wanting to participate in large-cap stocks with limited funds. You can invest gradually while maintaining liquidity for daily expenses, and implement “dollar-cost averaging” for long-term investment.

2. Diversification opportunities

Trading fragmented stocks enables small investors to try multiple stocks without committing large sums at once, spreading risk across different holdings.

Disadvantages:

1. Poor liquidity

Fragmented stocks have much lower daily trading volume than whole shares, especially for less popular stocks, making it difficult to execute trades. You might need to wait a week or more, or adjust prices and strategies.

2. Hidden costs

Although the minimum handling fee is NT$1, buying NT$1000 worth of fragmented stocks incurs a fee of NT$1.4 (0.14%), and for NT$5000, NT$7. Additional broker fees may apply, making the overall cost higher than expected.

3. Time restrictions on buying and selling

Unfilled orders on the same day will expire, requiring daily monitoring and reordering. The intraday matching and single after-hours matching limit often mean multiple attempts are needed to complete a trade.

Quick summary for lazy traders: buying and selling fragmented stocks

While fragmented stock trading breaks the traditional capital barrier of whole share trading, issues like high fees, low liquidity, and time constraints should not be overlooked. The most suitable scenarios are:

• Long-term investors: Use dollar-cost averaging to buy quality stocks and hold long-term, spreading out costs
• Partial position clearing: If holding too many fragmented stocks, use combination or extreme price orders to exit quickly
• High-priced stocks: For stocks priced over NT$1000, such as large caps, fragmented stocks are the only low-cost entry method

Remember, the key to selling fragmented stocks is proactive planning, adjusting strategies, and patience—there’s no such thing as an “absolutely easy to sell” stock, only smart decisions based on market conditions.