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Complete Guide to Webull Fractional Shares
At a Glance
- Fractional shares allow ownership of a portion of a high-priced share by pooling money with other investors.
- It enables buying fractions of shares in valuable listed companies.
- To trade fractional shares on Webull, select the stock or ETF, check availability, choose a market order, and enter the desired dollar amount representing the fraction.
- Webull fractional shares trading is available on the mobile app during regular trading hours, with a minimum transaction value of $5 and no trading fees.
Until recently, stock market trading was an activity only open to wealthy people or investment companies. The only way for ordinary people to interact with the stock market was through a stockbroker who would buy and sell shares on their behalf for a hefty fee. With the rise of zero-fee online brokerage, this situation is beginning to change. Webull fractional shares are a new way of investing in stocks. Read on to learn about this innovation.
What Are Fractional Shares?
A share is a legal record of the ownership of a company. Anyone who owns shares in a company gets part of the profits the company makes. In other words, shares are pieces of a company.
Shares are valuable because they allow you to get the benefit of a profitable company, while only having limited liability for the company’s losses. The maximum amount you can ever lose from owning shares is all the money you paid to buy the shares. Shareholders are not responsible for paying the company’s debts.
Companies can fall into two main categories: publicly held and privately held. The main difference between them is how shares in each kind of company are held and transferred.
It is illegal to offer shares in a private company for sale to the public, except through a regulated procedure called an initial public offering (IPO). Shares in a publicly held company can be sold to the general public at any time. The kinds of shares are usually bought and sold in an open market called a stock market. A company whose shares are available to buy on a stock market is called a listed company.
Many different factors affect share prices on the open market. For example:
- the industry the company is in,
- how much profit it makes,
- how valuable the things it owns are, and
- how many shares its ownership has been divided into.
All these things and many others can affect how investors value a company.
Consider two identical companies with $1 million in assets—Company A and Company B. A potential investor might estimate the value of a share by dividing the value of the company’s holdings by the number of shares issued. Let’s say Company A has issued 1,000 shares, and B has issued 1 million shares. Then, the share prices would be very different; $1,000 per share for Company A and $1 per share for Company B, even though the companies themselves have the same value.
If you somehow figured out that Company A’s management team is very good and you expected it to do well in the future, you would need at least $1,000 to invest in that management team’s skill.
Fractional shares are a way of solving this problem, by combining your money with other investors to buy and own the share together.
If you gathered 100 people who also believed in Company A’s future success, you could all add $10 to a pool. Then, you could create your own company—Fractional Ownership Inc, which would invest that money in Company A. The share would then belong to Fractional Ownership. As a shareholder of Fractional Ownership, you would, in turn, own a share of that asset—the $1,000 share in Company A.
Each share of Fractional Ownership Inc would then be a fractional share in Company A.
In reality, you do not need to gather a large group of people. Also, the legal machinery of fractional share ownership is a lot more complicated than the example. However, the result is the same. Fractional share ownership combines small amounts of money from a lot of people. Those people then buy high-priced shares together.
Webull fractional shares are one way to invest in valuable listed companies.
How to Trade Webull Fractional Shares
Listed below are the steps to follow to buy a fractional share using Webull:
- In the Webull app, select the stock or ETF you are interested in
- Check the details page. If there is a green diamond logo, fractional shares are available. If not, you can only buy whole shares
- Under ‘Order Type’ select ‘Market’
- Change the purchase option from ‘Whole’ to ‘Fractional Share’
- Enter a dollar amount that represents the fraction you want.
Once you submit the order, you will not be able to change it. If you want to purchase a whole number plus a fraction of shares, such as 4.75 shares, you need to do it in two separate transactions. Buy 4 whole shares using the normal procedure, then buy 0.75 of a share using the procedure shown above.
Trading Rules for Webull Fractional Shares
If you want to invest in or trade fractional shares using the Webull service, there are a few rules and restrictions you should be aware of:
- Mobile-only – At the moment, Webull fractional shares trading is only available when you use the Webull smartphone app.
- Limited availability – Fractional shares are not available for all the financial products that Webull offers. For now, you can only buy fractional shares in selected ETFs (exchange-traded funds) and stocks. You can check whether a stock or ETF you are interested in is available for fractional trading by looking at its details page. If there is a green diamond on the details page, then you can buy fractional shares of it. Otherwise, you have to buy whole shares. Also, the list of products available for fractional trading is subject to change without notice.
- Market orders only – A market order indicates your willingness to buy at the current market price. This is in contrast to, for example, a limit order which indicates a desire to buy only when the price suits you. Currently, you can only purchase fractional shares using a market order. In practice, this means if the price changes in the time between when you submit the order and when it is filled, you will receive a smaller or larger fraction of a share.
- No shorts – Short selling (betting on a price decrease) is currently not allowed on the Webull fractional shares service. You can only hold a long position in fractional shares (betting on a price increase).
- Minimum position – There is a minimum position (value of the transaction) to use Webull fractional shares trading. You must buy $5 or more. However, you can sell in any increment you want, even cents, as long as the amount you are selling represents more than 0.0001 of a whole share.
- Regular trading hours – You can currently only use Webull fractional shares trading during regular trading hours. Regular trading is from 9.30 am to 4.00 pm Eastern Standard Time (EST).
Webull Fractional Shares FAQ
Below are a few FAQs about Webull and its fractional shares service.
Can I Trade Webull Fractional Shares During Extended Hours?
No. Currently, the Webull fractional shares trading service is only available during regular stock trading hours: 9.30 am to 4.00 pm EST.
Is Webull Fractional Share Trading Free?
Webull is a zero-commission brokerage. That means Webull does not charge users directly for making trades and instead profits from the process of fulfilling a trade. Therefore, Webull does not charge any trading fees.
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Webull is an online stock brokerage firm that offers fractional share trading. Fractional shares are like shares of a share. Fractional share ownership is useful when the price of a single share of a listed company is very high. You can buy Webull fractional shares of select ETFs and stocks for as little as $5, but there are some restrictions to the service.
Frequently Asked Questions (FAQ)
What are fractional shares?
Fractional shares are a type of investment where you can own a fraction or portion of a whole share of a stock. This allows investors to purchase smaller or more affordable amounts of stocks.
How can I buy fractional shares on Webull?
To buy fractional shares on Webull, you can place a fractional order by specifying the dollar amount you want to invest in a particular stock. Webull will then execute the order and allocate the corresponding fraction of a share to your account.
Are there any limitations on buying fractional shares?
Yes, there may be limitations on buying fractional shares depending on the stock and market conditions. Some stocks may not be available for fractional trading, and fractional shares may not be available for certain types of orders, such as limit orders.
Can I sell fractional shares on Webull?
Yes, you can sell fractional shares on Webull. When you sell your fractional shares, Webull will execute the order and convert the fractional shares back into cash based on the current market value.
Are fractional shares safe to invest in?
Fractional shares are generally considered safe to invest in, just like whole shares. However, it’s important to remember that all investments come with inherent risks, and the value of the fractional shares can fluctuate based on market conditions.
Can I receive dividends on fractional shares?
Yes, you can receive dividends on fractional shares. The dividends will be calculated based on the fraction of the share that you own, and you will receive the corresponding portion of the dividend payment.
Are there any additional fees for trading fractional shares on Webull?
Webull does not charge any additional fees specifically for trading fractional shares. However, it’s important to review Webull’s fee schedule for any other applicable fees related to your overall trading activity.
Can I transfer fractional shares to another brokerage?
The ability to transfer fractional shares to another brokerage may depend on the policies and capabilities of the receiving brokerage. It’s recommended to check with the receiving brokerage to determine if they accept fractional share transfers.
Can I use fractional shares for short selling or margin trading?
Fractional shares may not be eligible for short selling or margin trading. These activities often require whole shares and are subject to specific rules and regulations set by the brokerage and the market.
How are fractional shares treated in a stock split or corporate action?
In the event of a stock split or corporate action, the fractional shares may be adjusted or cashed out, depending on the specific terms of the action. It’s important to review the details of the stock split or corporate action to understand how fractional shares are handled.