Fractional trading widens options for investors amid volatile markets

SINGAPORE –

Tensions in Iran

have pushed up market volatility over the past week, with the CBOE Volatility Index, or VIX – Wall Street’s so-called fear gauge – rising to a six-month high of 29.49 on March 6.

The VIX is up around 25 per cent from Feb 27, before the United States and Israel launched strikes on Iran on Feb 28.

Amid the heightened volatility, Mr James Ooi, market strategist at Tiger Brokers, said fractional trading of US shares allows investors to deploy capital more flexibly.

Instead of buying a full share of a company or exchange-traded fund (ETF), investors can buy a fraction of it with as little as US$1 (S$1.30), allowing them to gradually build up positions and buy the dip, he said.

Buying small amounts of shares over time can be useful for those with limited funds or who are hesitant to invest a large sum at once, said Mr Alvin Chow, assistant director of investment advisory at financial advisory firm iFAST Global Markets.

Such investors are effectively dollar-cost averaging into the market – meaning they are investing a fixed sum of money regularly regardless of whether prices are rising or falling – which spreads out their investments and reduces the impact of market swings on their portfolios.

Fractional investing also allows some investors to own a wider variety of stocks with a small budget. 

Mr Alfred Chia, chief executive of advisory firm SingCapital, said investors can diversify across several stocks or sectors, reducing exposure to any single company when funds are limited.

Mr Ian Leong, chief executive of Tiger Brokers Singapore, said the platform has recorded strong growth in the adoption of fractional investing among its users.

This suggests that investors are increasingly incorporating the option into their regular investment activities.

Between 2024 and 2025, the number of Tiger accounts that transacted in fractional shares increased by 18 per cent. Fractional trading volume also grew by around 60 per cent over the same period.

There is, however, a pitfall to fractional investing, which is the tendency to over-diversify. 

Mr Chia said investors may behave like fund managers and spread themselves too thin across many stocks. This dilutes their portfolio, leaving them without sufficient significant holdings in key stocks.

Mr Chow of iFAST Global Markets added that investors should look for brokers with low or zero commissions, as frequent transactions can increase trading costs.

Senior lab technician Dallas Goh is among the investors who have been buying gradually into US shares as the Iranian tensions pan out.

“It is hard to time the market, and my investment time horizon is long,” he said. “I am not afraid to buy during this volatile period.”

“My smallest trades are in the hundreds, so a $1 to $2 commission is acceptable,” Mr Goh said.

In Singapore, fractional trading is not available for stocks on the local exchange, where investors currently trade securities in board lots of 100 shares. However, proposals have been made to lower the minimum trade size to 10 shares for stocks priced above $10 and up to $100, and to one share for stocks priced above $100. 

For now, investors here can trade fractions of US shares via two channels. 

They can do so through most online brokerages, including Tiger Brokers, Webull Singapore and POEMS, the online trading platform of Phillip Securities.

There is also the option of trading via bank-linked brokerages. DBS Vickers, the brokerage arm of DBS, has offered access to fractional trading of US shares and ETFs since October 2024.

The Straits Times understands that the other bank-linked brokerages, OCBC Securities, UOB Kay Hian and Maybank Securities, do not offer fractional trading of US shares.

TrustInvest, the retail trading platform of Trust Bank, launched fractional trading of US shares and ETFs on Jan 20.

Mr Dwaipayan Sadhu, chief executive of Trust Bank, said TrustInvest sits in “a sweet spot in the market”, combining the safety and regulation of the bank with the low fees and user-friendly trading experience of an online platform.

He added that many online platforms may not be widely trusted, and investors may be reluctant to use them for large transactions.

Banks, on the other hand, are generally trusted, but the trading experience “leaves a lot to be desired”, and fees are typically higher, Mr Sadhu said.

But Mr Jonathan Man, CEO of online broker Webull Singapore, noted that banks and the broker-dealers who run online trading platforms are all regulated by the Monetary Authority of Singapore, even if they are bound by different licences.

Banks need a banking licence and are regulated under the Banking Act while online trading platforms require a Capital Market Services licence, which is regulated under the Securities and Futures Act (SFA).

“What matters most to investors, such as the safeguarding of customer assets and monies, data protection, market conduct, risk management, are subject to stringent requirements for both banks and broker-dealers,” he added.

Mr Leong from Tiger Brokers said all client assets, such as their investments, are placed in segregated trust accounts with custodian banks. In Singapore, DBS Bank is the custodian bank for Tiger. He added that clients’ assets are separate from the company’s funds, meaning they do not form part of its assets and cannot be used for its operations.

Mr Leong said many clients also choose to leave their cash on the platform so that they can act quickly when investment opportunities arise.

Brokers, including Tiger, offer cash management solutions, which allows the cash to be invested automatically into money market funds when not deployed.

These funds in the cash management accounts are subject to the same regulations under SFA and held in segregated trust accounts. 

This ensures that even if the broker becomes insolvent, the monies are protected and recoverable, Mr Leong added.

The banks have an advantage here when it comes to offering stock broking services.

Mr Ling Seng Chuan, head of financial planning, investment and insurance at DBS, said trade settlement for its brokerage arm, DBS Vickers, is done through a linked DBS Multi Currency Account, which is covered by the Singapore Deposit Insurance Corporation (SDIC).

SDIC insures Singapore dollar deposits, including savings, current and fixed deposit accounts, up to $100,000 per depositor per bank/finance company.

The Multi Currency Account also allows seamless settlement across seven markets – Singapore, the US, Hong Kong, Canada, the United Kingdom, Japan and Australia.

Funds are automatically debited for buys and credited for sells in the traded currency, eliminating manual transfers, he added.

Mr Sadhu noted that Trust customers trade within the banking app. “If you want to transfer money from your savings account to your trading account, it is within the app,” he said. “You never exit the app for anything.”

The retail brokerage space has become more crowded over the past few years. Ultimately, though, competition is healthy when it gives investors more choice. 

Mr Chawla Vikramjit Singh, director and head of securities (retail sales) at Phillip Securities, said “investors will naturally gravitate towards platforms that can build trust and support them consistently across different market conditions”.

Phillip Securities, which is the brokerage arm of PhillipCapital, one of the most established players in the industry, launched POEMS way back in 1996.