How to buy fractional stocks? A complete guide to take you from beginner to proficiency

Basic Understanding of Odd-Lot Trading

So-called odd-lots refer to holdings of less than one standard lot (1000 shares) of stock. In the Taiwan stock market, the basic unit for whole lot trading is 1 lot, which equals 1000 shares, but investors may hold less than 1000 shares due to incomplete transactions, stock delivery, or other reasons. Odd-lot trading involves buying and selling activities for these stocks, with each order not exceeding 999 shares.

The emergence of this type of trading mainly stems from market demand. As small investors increasingly participate in the market, many with limited funds hope to enter the stock market at a lower threshold. The odd-lot system was thus created, becoming an ideal tool for regular fixed-amount investing.

How to Buy Stock Odd-Lots: Complete Trading Time Rules

Taiwan’s odd-lot trading is divided into two sessions, providing investors with more flexibility.

Intraday Trading Session runs from 9:00 AM to 1:30 PM. Investors can place electronic orders through brokerage trading platforms. The first matching occurs at 9:10 AM, followed by a call auction every minute thereafter. Transactions follow the “price priority, then time priority” principle when prices are the same.

After-Hours Trading Session runs from 1:40 PM to 2:30 PM. Investors can choose to place orders electronically or call brokerage customer service for manual orders. A single call auction matching occurs at 2:30 PM, and any unfilled orders are automatically canceled and will not carry over to the next day.

It is important to note that unfilled orders during intraday trading are not automatically retained for after-hours trading. Investors wishing to continue trading must place new orders.

How to Buy Stock Odd-Lots: Account Opening and Fee Structure

Simple Account Opening Process

Opening an account for odd-lot trading is exactly the same as for whole lots. Investors only need to prepare their ID, a second ID (health insurance card or driver’s license), and a bank account, then apply for an account with any legitimate brokerage. After opening, switch to the “Odd-Lot Trading” mode in the broker’s app, changing the unit from “lots” to “shares” (within 0-999 shares), and then you can start trading.

Fee Calculation Method

The fees involved in buying odd-lots are the same as for whole lots, at 0.1425% of the transaction amount. However, each broker sets a minimum fee threshold, usually starting at NT$1.

For example, purchasing 200 shares at NT$1065 per share: 200 shares × NT$1065 × 0.1425% = NT$303.53

If the broker offers an electronic order discount (e.g., 50%), the actual fee would be NT$303.53 × 50% = NT$151.77.

Different brokers offer varying discounts, some as low as 18%, others at 60% or more. Investors can choose the broker with the most favorable fee plan according to their needs.

Practical Tips for Buying and Selling Odd-Lots

Strategies to Increase Transaction Success Rate

Since the trading volume of less popular stocks’ odd-lots is relatively low, investors may find it difficult to execute quick transactions. For example, selling 700 shares of a less-traded stock might not be completed during the day. In such cases, a “convert small to whole” approach can be used: first buy 300 shares to make a total of 1000 shares (1 lot), then sell the whole lot through more liquid whole-lot trading.

Using After-Hours Matching Features

Because after-hours trading involves only one call auction, it follows the “maximize transaction volume” principle. If an investor is sure to buy a certain stock, placing a buy order at the limit-up price can increase the chance of execution; similarly, for urgent selling, placing a sell order at the limit-down price can also improve the likelihood of a successful trade.

Advantages and Disadvantages of Odd-Lot Trading

Main Advantages

Odd-lot trading significantly lowers the capital barrier for stock market investment. Traditional whole-lot trading requires several thousand NT dollars to start, while odd-lots can be participated in with less than NT$1000, making it suitable for small investors to “test the waters.” Investors can maintain sufficient liquidity for daily life while participating in the stock market. Odd-lot trading is also a good tool for regular fixed-amount investments.

Points to Watch Out For

First, the trading volume of odd-lots is lower, resulting in poorer liquidity and longer matching times. Second, due to minimum fee restrictions, small transactions have a higher proportion of fees, which may lead to losses. It is recommended that single investments be above NT$10,000 to effectively dilute the fee burden.

Additionally, odd-lot trading has certain limitations. Investors can only place sell orders, not buy orders; when selling, the entire position must be sold at once; and converting odd-lots to whole lots is time-restricted, with expiration if overdue. Due to broker inventory shortages, investors may sometimes be unable to buy the desired number of odd-lots.

Risk Awareness in Odd-Lot Investment

Although odd-lot trading offers a low-threshold way to participate, investors still need basic market knowledge and risk awareness. Before executing any trades, they should assess their risk tolerance, choose suitable investment targets and strategies. Learning fundamental investment analysis methods and avoiding impulsive or herd behavior are essential for achieving long-term gains in the practice of how to buy stock odd-lots.

As Taiwan’s stock market develops, odd-lot trading has become an increasingly popular investment method, providing small investors with flexible asset allocation options.