Industry Updates

Trade Republic launches fractional investing for ETFs

The first online broker to offer the service in the European Union

Theo Andrew

graphical user interface, application

Online broker Trade Republic has launched a fractional trading function for investors of ETFs as it looks to “democratise wealth” across Europe.

Customers of the Berlin-based firm will now be able to buy a slice of an ETF or stock for any amount, allowing “broader diversification and access to all assets”.

Traditionally, the minimum investment in full stock trading is one share meaning retail investors could end up with a higher risk portfolio.

Fractional trading, which offers the identical spread as the underlying full share, as well as the same pricing model, means investors can own any increment of an ETF, diversifying their portfolio.

Christian Hecker, co-founder of Trade Republic, said: “High stock prices are one of the main reasons why a lot of people have the perception that they do not have enough capital to invest.

“With fractional investing, we are going to change that and make investing more accessible to everyone. Our customers can now buy any stock at any budget.”

According to Trade Republic, it is the first to offer fractional trading within the European Union and will be available to investors in Germany, France, Italy and Spain.

Marsel Nikaj, director of product at Trade Republic, added: “We combine the advantage of fractional shares with the known quality and reliability of the stock markets. Trade Republic’s customers still own the true underlying stock with all privileges.

“The trading comes with the identical spread as the full stock. Enabling real-time fractional trading is a broad technological challenge, one we have heavily invested in to solve for our customers.”

The ability to buy a portion of an ETF will likely spark the interest of retail investors across Europe.

The lack of fractional dealing in the UK has been thought of as one of the main challenges to retail uptake in the market.

Wealth manager platforms currently lack the capability to accurately replicate their holdings at a fraction while online brokers such as AJ Bell believe the demand is not yet there.

Despite this, the emergence of single stock exchange-traded products enables investors to own blue-chip stocks for a fraction of the price.

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