What is a fractional share?
A fractional share is “a fraction of a share", i.e. less than one. Lightyear offers the opportunity to buy fractional amounts for a lot of the shares we have on our platform to create more equal access to investing. Not everyone has the capital to invest in companies whose share price is in the hundreds or thousands per share. For example, if a company had a listed share price of 1000 USD and it was available as a fractional share, you would be able to buy 0.1 of that share for 100 USD.
The shares are fractionalised by the way of co-ownership where you become the co-owner of the fractional part of the actual share. We do not offer fractionalised shares that are created as contract for difference (CFD) type of instruments, or any other type of derivatives associated with higher risks, as some other service providers do.
In a co-ownership structure, the shares belong to all investors in fractions, and the value of the fraction is hence proportionally linked to the value of the full share. This also means that any actions that occur in respect of the full share (such as dividend payments and voting rights) are allocated proportionally among the fractions and their owners.
Are all instruments available in fractions?
No, not all stocks are fractional but we’re working on increasing this range. At the moment we don’t offer any fractional ETFs but hope to do so in the future. Right now, instruments on ISAs are not fractional but we are working on offering them on your individual savings account as well.
How to find fractional instruments?
At the top of the instrument tab, there’s a label “fractional” or “non-fractional”. You can also sort your search in the app using the filter “fractional”.
Do you pay dividends for applicable fractional shares?
Yes, we do, rounded to the nearest cent. You’ll receive the relative percentage proportionate to the amount of the share you hold, e.g. if you hold 0.5 of a dividend-paying share you’ll receive 0.5 of the dividend amount. To find out more about what dividends are and when we pay them, see our Do you pay dividends help article.
Risks of investing in fractional shares
Fractional shares constitute a fraction of a single share in a company. This means that fractional shares are subject to the same investment risks as shares. However there are some additional risks specific to fractional shares:
- Fractional shares represent claims on the custodian who has undertaken the fractionalisation of the fractional shares. This may impact how assets are returned to you in the event of Lightyear failing.
- Fractional shares are not transferrable and to realise any value they represent you are obliged to sell them through the Lightyear app.
- Voting rights on fractional shares cannot always be offered. Lightyear does not currently support exercising voting rights arising from fractional shares.
- You can only insert a market order to buy fractional shares.
- Certain ownership rights regarding fractional shares can be subject to a rounding risk.
- To execute a fractional share trade, it may be aggregated with other trades in order to create a whole share that can be executed in the market which may affect the price achieved.
- We charge the same percentage-based fees on fractional share transactions as on non-fractional share transactions.