Within the trading industry, democratization has been the presented motive behind fractional share trading. Fractional share trading is when an investor is able to buy a portion of a share rather than the whole share. This allows investors with a lower net worth to still invest in popular shares that consistently increase in value.
The rise in fractional share trading comes at a time when brokers have consistently been slashing commissions on trades as apps, such as Robinhood, increase in popularity. These platforms are trying to figure out how to lock in young customers that in the long term can be sold other products.
The target population of fractional share trading opportunities are young individuals who are high earners but not yet rich.
M1 Finance, a fintech company, was an early provider of fractional share trading. It was started three years ago and holds a large market share of individuals who utilize fractional share trading.