Fractional shares and ETF investing means your users can purchase partial shares of a company or ETF, irrespective of the size of their order, rather than having to purchase whole shares.
This removes the barrier of people having to start with large pots of money to invest. From an administrative perspective, it lowers costs and our automated order management system removes the hassle from worrying about minimum investment sizes, or making sure all orders are executed the same way depending on when they were placed.
Our system collects orders from various parties, bulks them together and processes them in as few orders as possible. This means users can invest various amount from very small to very large and pay low fees as they are processed as one individual order.
The Happy Investment Company
Imagine the Happy Investment Company has 100 users buying the same asset or investing in the same model portfolio throughout the day. These purchases range from investing £10 to £500.
At the end of the day, our order management system collects all those orders together, calculates what it needs to purchase (in aggregate) and issues orders to our trading system to execute.
We go to the market to buy the required units in the assets specified, and once we've purchased the specified assets, we are able to fractionalise them back to the relevant user based on their investment.
This means everybody’s orders are created equal based on when they invested, and by aggregating orders, fees are kept to a minimum, irrespective of how many users have actually invested.
Why fractionals are vital to portfolio managers and model management
Fractionals are really important for portfolio management because of the minimum sizes they enable. Portfolio managers need to buy assets in a way that, as closely as possible, reflects the model their customers are invested in, but within the constraints of the sizes of the assets they need to buy.
Imagine a user invests £100 in a model portfolio and there are three ETFs, all costing £50 (and you don’t have fractional investing). You can't invest, as you can't buy all three. It’s a pain for portfolio managers who will have to select which to buy.
With fractionals, the user in this example would be able to buy 33.3 of everything, meaning portfolio managers can more closely follow their models. With our Portfolio and Order Management System, you can automate the whole thing.
Simply put, fractionals make your models more accurate and investing more affordable.