Yes they will
This is great news! While my original reason for wanting this functionality was for the crazy US per share prices, it’s an excellent point about being able to reinvest dividends. Combined with Freetrade’s fee structure, this will allow people to create genuinely diverse portfolios with any level of capital. Game changing IMO.
Not sure about other brokers but Halifax offers dividend reinvestment that results in fractional shares via the ShareBuilder option.
A few questions that came to mind…
Will we pay stamp duty on fractions?
Can you buy fractions in an ISA?
Could Fractional US shares could be sold in £, avoiding the 0.45% FX fee on buying and selling we’ve all come to love?
Buying and selling fractions works the same was as ordering whole shares, when it comes to the FX conversion (which is not a fee).
Double the stock, half the price. (Assuming 2:1 split) What else could it possibly be? I don’t see how it is relevant that it’s fractions.
If it was to be done that way, most likely you will get whatever it is rounded down to a single penny. Probably if it was a $436.75 stock of which you own 33% [$145.58], a 3:1 split will get you three shares worth $48.52 or $48.53. Would be prudent to assume it will be the former.
Fractional shares now in active development/ testing!
Can’t wait for this, will completely change how I invest on a monthly basis.
Absolutely. Really opens up some options.
Is this currently only going to be for the US markets, I am looking for this mainly for my ETFs.
The Trello implies that it’s for US stocks first.
LOL yup, just looked…should of looked there first!
Hopefully UK stocks and ETFs will be fractional too, it would make rebalancing so much easier.
Yes please! Make grabbing those larger stocks easier, and also just grabbing £-sized lumps of things…
Fractional shares will certainly benefit many investors, however, will there be a “cost” to FreeTrade to implement this? For example, if I am the only person who places a £1 fractional purchase for a Google share at, say £1,000. Does this mean FreeTrade has to outlay the original £1,000 to purchase one share while it records I hold 1/1000 of that share? Potentially, FreeTrade has a cash liability equal to the cost of one of each share for which Fractional ownership is being offered, or, are the Fractions held at a higher level than the “local” nominee? Suspect the answer will not make any difference to the actual investors but am curious how the underlying mechanics would work.
I assume the counterparty risk (if that’s the way freetrade goes) is maximally the sum of 0->n (share_n - smallest fractional unit).
I suppose on average you will own half a share in everything that has a fractional holding ? It will grow with number of share line items being traded but not with assets under management /volume of shares traded
There is a great thread here with lots of information about how they will work: Administering fractional shares