Are you someone who spends $5 every morning on a coffee, and thinks, “I’m here so often I should own a part of this business!”
Well now with partial shares from TD Direct Investing, high-priced stocks are no longer out of reach. Every investor now has the opportunity to invest in their favourite companies, no matter the share price.
In August, TD Direct Investing introduced partial shares, also commonly referred to as fractional shares. Partial shares allow investors to buy and sell fractions of stocks or exchange-traded funds (ETFs). TD Direct Investing is the only Canadian bank-owned brokerage that offers real-time fractional trading.
"Investing should be straightforward and within reach for Canadians,” said Scott Ignall, Senior Vice President, TD Direct Investing and Delivery at TD Bank Group.
“With partial shares, Canadians can invest in the companies they want, regardless of the share price or how much they have to invest."
So how do partial shares work and what can this type of investment mean for your portfolio? Here are some things to know:
What are partial shares and how do partial shares work?
Partial shares are fractions of a company’s stock or ETF. This means instead of buying a whole share, you’re only buying a part, or a fraction, of a share.
Say, for example, you want to invest in Starbucks (which was trading between USD $72 and USD $79 in July 2024 ) but can’t afford to purchase a full share of the company. With partial shares, you can buy a piece of a share for a fraction of the cost. TD Direct Investing will enable you to buy as little as 1/100,000 of a share. Which means you can invest how much you want, down to the cent.
If you’re a TD client who wishes to buy or sell partial shares, you can do so through TD Easy Trade™, WebBroker, Advanced Dashboard or the TD mobile app.
What are some of the benefits of partial shares?
Partial shares can make investing in high-priced stocks and ETFs more affordable, without needing deep pockets.
Partial shares opens doors for all investors, regardless of how much they have to invest, letting them start investing with as little as $5. It gives clients the option to own a small part of a stock or ETF based on a dollar amount they want to invest, rather than needing the resources to pony up the full amount of a share. This includes the ability to place dollar-based buy orders for stocks and ETFs, removing limitations of trading in whole share quantities, so you can invest exactly what you want.
"We want to offer Canadians more opportunities to invest in companies they believe in, without being held back by the price of a full share and equip them with the tools they need to invest confidently and work toward their goals,” Ignall said.
With partial shares, you can also engage in real-time trading. This means you have immediate access to execute trades at the current market price for both full shares and partial shares.
Diversification, an important aspect of any investment strategy, is another benefit of fractional investing. With partial shares, you can build a diversified portfolio without needing a large amount of capital. It allows clients to spread their investments across different assets and sectors, which can help manage risk.
Plus, you can start small, meaning you can increase your exposure to a stock or ETF over time.
Do partial shares pay dividends?
Yes, so long as the stock pays dividends to shareholders, owners of partial shares will receive cash dividend payments as well.
Dividend payments are proportional to the percentage of a share you own. So, if you own 3/4 of a share, your dividend payment will be 3/4 the dividend paid to owners of a full share.
What are some things to consider when buying partial shares?
Partial shares offer less investment or dividend income than full shares. And, as with any stock or ETF, there’s never any guarantee that the investment will be profitable.
No matter what you’re investing in, it’s important to do your homework first. You can limit your risk by thoroughly researching the costs and potential benefits of a fractional share before deciding to buy it.