What is fractional trading? In a fractional share trading system, users can invest as little as $1 into some of the largest US-based companies such as Tesla, Apple, & Amazon. An Amazon share today costs above $3000. But with fractional share trading, anyone can invest as little as US$ 1 to own a fraction of each share in these globally known US brands.
Normally you can’t buy or sell a fractional share on the stock market, but a brokerage firm can split up full shares to sell fractional shares to new investors.
Fractional share trading proves to be the game-changer that can level the playing field for individual investors. As such, over 97% of Gotrade’s orders are fractional share trades.
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Gotrade makes it possible for non-US investors to buy fractional shares by acting as an introducing broker to Alpaca Securities LLC – a U.S. stock brokerage regulated by the Financial Industry Regulatory Authority (FINRA). Alpaca Securities serves as an intermediary for Gotrade and splits its stock inventory into fractions.
Gotrade users can decide how many fractions of a share they want to buy, by ordering in dollar value instead of having to buy one full share. Gotrade app applies notional value trading rules to automatically calculate the number of fractional shares a user can buy.
Gotrade is levelling the playing field for investors
Gotrade does not charge the usual fees charged by brokerage firms such as commissions, custody, inactivity or dividend fees. Their monetization strategy is based on collecting the relatively smaller currency exchange fees when users deposit money, and also on the interest generated from uninvested money lying in brokerage accounts. Gotrade supports local deposit methods in over 70 countries with lower currency conversion rates.
How Gotrade Works
Currently available on an invite-only basis, Gotrade works only with fully-funded cash accounts which the founders say is a safeguard to protect users. FINRA and Securities Exchange Commission regulations dictate that users accounts under $25,000 can make a maximum of three-day trades every five trading days.
Gotrade is the brand name of TR8 Securities Inc., a company licensed to trade in the Malaysian free trade zone Federal Territory of Labuan. To protect users, accounts are insured by up to $500,000 by the Securities Investor Protection Corporation (SIPC). Money transfers take place through firms regulated in Singapore, like Rapyd, and the United States, including Alpaca and BMO Harris Bank.
Eliminating barriers to US Stock investing
Rohit Mulani, the company’s CEO, explained that the idea for Gotrade was planted when he became interested in American stocks but discovered many barriers to trading. “When I was 18, I actually looked to get access in Singapore, and banks were charging $30 per trade. Effectively, the market taught me that I could not get into the market. Fast forward ten years, I decided to look into it again, and the banks were still charging $25 a trade,” he said.
“On top of that, their user interfaces were something I didn’t want to look at. So we decided to build a brokerage platform where anyone can get access.” Launched in stealth mode last March 2021, the company has already racked up one hundred thousand users from 145 countries. Gotrade’s users applaud the app for its friendly user interface and its intuitive UX.
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While the idea for an investment app that eliminates the hurdle of high transaction fees was the initial spur, fractional share trading is what the founders think will attract relatively new investors to Gotrade.
Mulani says about 65% of Gotrade’s users have traded stocks before, while the rest are first-time investors. “With demand coming from 145 different countries, it shows there’s a huge demand to start investing in the US market. Moreover, it shows that investing needs to become accessible by tearing down borders and lowering fees as much as possible.” With the power of fractional trading, Gotrade helps bridge this gap by making stocks available to people investing as little as US$ 1.
What’s the context
Fintech platforms launched with a vision of democratising access to global capital markets are riding high in recent months – crypto investment platform eToro recently announced a $10B public merger deal. According to the State of Finance App Marketing report by AppsFlyer, the APAC region has seen a total of 2.7 billion fintech app installations between Q1 2019 and Q1 2021.
With its commission-free and fractional investing, Gotrade is an attractive proposition for retail investors. Given the surge of interest in digital financial services, the startup could be well-positioned to benefit from the rising popularity of consumer investment apps.
Led by London VC LocalGlobe, Delaware-based fintech startup Gotrade has raised $7 million to enable users in 150 countries to invest commission-free in fractional US stocks. Gotrade’s mission is to make investing accessible to literally anyone. Gotrade enables commission-free trading for local investors around the world, who were not able to previously invest in US stocks due to high access fees, and pricing barriers. Want to start trading today? Download and get started from $1, with the code 560115.
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