Fractional shares

Futures are financial contracts that require a buyer to purchase an asset or a seller to sell an asset at a predetermined future date and price. These contracts are standardised and traded on exchanges. Futures are used for hedging or speculation, and they can include commodities - like oil, gold and coffee - financial instruments, or other assets. For example, a corn farmer might use futures to lock in a specific price for selling their corn, while a bread manufacturer might use them to secure a specific price for buying wheat.

A fractional share is part of a full share of a company's stock, or exchange traded fund (ETF). Fractional investing means investors can buy portions of shares instead of buying whole shares - which can cost more than US$600,000. Fractional shares don't come with some full share shareholder benefits, such as voting rights, but investors may receive dividends. Learn more about fractional shares.

For IPOs in the US, the S-1, also known as a registration statement, must by law include any material information about the company. This is so potential investors can understand what the company does, why it is issuing shares through an IPO, the state of the company's finances - including revenue, profit and debt -and what type of ownership structure is being offered. This document must be filed with the US Securities and Exchange Commission (SEC) before a company can list shares for sale on the US share markets. There are other ‘S’ versions as well, depending on the type of company going public. In other countries, this might be called a prospectus. The company must provide financial statements as part of these documents.

There are special tax rules for Kiwi investors who have invested more than $50,000 NZD in Foreign Investment Funds (FIF), including shares in companies listed on foreign share markets, a foreign unit trust such as foreign mutual funds, overseas superannuation schemes, and life insurance policies through an overseas provider. FIFs use a specific tax calculation to determine taxable income. FIF tax rules only apply if your initial investment cost goes above $50,000 NZD at any point in the tax year. Spouses with joint holdings have a $100,000 NZD threshold. Understand the FIF tax rules here.

Financial instruments, or instruments, are assets that are traded, like securities, commodities, or indexes. Essentially, an instrument is the building block for a derivative. Stocks, bonds, and options are all examples of financial instruments. Instruments are investments that can help individuals, businesses, and governments to raise capital, manage risk, and transfer assets.

A faster identification number, or FIN, is a 4-digit number somewhat similar to a PIN on a bank card. It’s automatically assigned and issued by the NZX, sent by post, and identifies each shareholder as the holder of specific shares. A FIN is generated when an investor buys shares using their CSN or HN. A broker will ask for an investor’s FIN when they buy or sell shares on their behalf; it gives them authority to access their holdings. A broker doesn't keep a FIN after each transaction is settled. Learn more about holder numbers (HN) on MoneyHub.