Differences between fractional and whole-share orders
When it comes to trading financial products, the traditional method would be to trade whole shares. This means that the broker would expect orders with integers, not fractions of units. For example, if one ETF costs $100, then that would impose that any portfolio including that ETF could only make orders of at least $100. Now, if you have 10 similar ETFs in your portfolio, your minimum account and investment are effectively $1,000. This is a barrier for a lot of people to start investing.
Luckily, innovation has taken place, and many online brokers now support notional or fractional trading. Now, you can place orders in exact dollar amounts. So now, you can buy a slice of that $1,000 portfolio with just $1. The way it works is that your $1 gets split down into fractional units. Instead of owning one unit of each ETF, you only get 0.01 units. This method is what we will be using in this chapter.
