Firstrade, an online brokerage offering commission-free trading, has announced the launch of its Fractional Share Trading service. This new service aims to provide investors greater flexibility and accessibility in the stock market by enabling them to trade fractional shares of over 4,000 stocks and ETFs.

Although the company announced the service as early as October, planning its launch in December, it was delayed by several months. However, clients can ultimately enjoy the new solution.

Firstrade Unveils Fractional Share Trading

Firstrade's Fractional Share Trading service allows investors to begin trading fractional shares with as little as $5 per trade, with no maximum order limit. This development is particularly beneficial for those interested in investing in high-priced stocks with a lower capital outlay, thus broadening access to the stock market for a broader range of investors.

"At Firstrade, every account type is eligible for fractional share trading," according to information on Firstrade's website. "This inclusive approach ensures that all Firstrade clients have the opportunity to diversify their investment portfolios through fractional share trading, regardless of the account type they hold.”

The company has integrated fractional share trading into its web and mobile platforms, positioning Firstrade alongside other American brokers and brokerage houses that have introduced similar services in recent years, such as Interactive Brokers.

"The introduction of Fractional Share Trading is more than just an expansion of our services,” emphasized Don Montanaro, the President of Firstrade. "It's a testament to our dedication to breaking down barriers in the investment world, making it easier and more affordable for individuals to participate in the financial markets." He was appointed as the new helmsman this year and brings over thirty years of experience in finance.

In addition to a low entry amount and access to 4,000 different instruments, the service will offer DRIP, or dividend reinvestment. Users can automatically reinvest dividends from fractional shares, eventually accumulating a company's full share.

This initiative marks another modification in Firstrade's offerings following the announcement of a partnership with Trading Central two months ago, which provided its clients with access to advanced technical analysis tools.

Firstrade initially revealed plans to offer fractional shares in October of the previous year, with a debut set for December. However, the service's launch was delayed by four months. Although the reasons for this postponement were not disclosed, Firstrade clients in the USA and several other countries where the broker operates will eventually have the opportunity to utilize fractional shares.

Popularity of Fractional Shares

Fractional share trading offers two significant advantages that make it an attractive option for many investors: increased accessibility and enhanced portfolio diversification.

More companies and brokers include fractional shares in their offerings, expanding them into new markets. Recently, XTB extended its fractional shares offering to the UK market and the UAE.

Interactive Brokers launched fractional share trading in Canada and a few months earlier, in Europe. Thanks to a collaboration with DriveWealth, Devexpers is considering fractional shares.

Fractional shares enable investors to diversify portfolios, even with smaller investments. Diversification is a key strategy for managing risk in investing, as it involves spreading one's capital across various assets or sectors to minimize the impact of any single investment's performance on the overall portfolio.