How does fractional investing work?

How does fractional investing work?

On the 5paisa Vested platform, fractional investing allows you to invest in full and fractional shares. Here’s how it works:

1. Investment Types:

  • Full Shares: When you invest in full shares, your orders are routed to market centres through our broker partner, DriveWealth, on an agency basis.
  • Fractional Shares: When you choose to invest in fractional shares, DriveWealth handles these orders on a principal basis. This means that DriveWealth fulfils these orders from its own account.

2. Order Execution:

  • Agency Basis for Full Shares: Orders for full shares are routed through various market centres. DriveWealth acts as an agent, executing your trades at the best available market prices.
  • Principal Basis for Fractional Shares: For fractional shares, DriveWealth will fulfil the order from its inventory at the National Best Bid or Offer (NBBO). This ensures that the price is competitive and that no margin is added to the market price.

3. Example:

  • Buying Fractional Shares: Suppose the market price of 1 share of Amazon is $1,000. If you decide to purchase 0.1 shares, you will pay $100 for that 0.1 share. This transaction is handled at the NBBO price, with no additional margin added.

4. Execution Methods:

  • Mixed Execution: Orders for both full and fractional shares are executed using agency and principal methods. This ensures you get the best possible execution and pricing for your trades.

By leveraging these methods, the 5paisa Vested platform aims to provide efficient and cost-effective fractional investing, allowing you to invest in shares with smaller amounts of capital while benefiting from competitive pricing.


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