Charles Schwab to launch 'Stock Slices' to entice younger investors who may feel overwhelmed when getting started
With the wealth management industry seeing something of a reboot right now, Charles Schwab believes that it has the solution to attracting younger investors who may find getting started challenging.
The firm is to launch ‘Stock Slices’ which enable investors to own a piece of America’s leading companies from the S&P500 for as little as US$5 each, even if the shares cost more.
It means that new investors can build a diversified portfolio with only a modest total investment.
Head of Schwab Investor Services, Jonathan Craig, said that beginning investing can be overwhelming: “We’re leveling the playing field – across all retail channels that clients can trade stocks, they can now buy slices of stock.”
An investor could choose a single stock or a collection of stocks with the total dollar amount invested split evenly across the chosen stocks. For example, a $50 dollar investment in five stocks would mean $10 for each stock with the order showing the number of shares or fraction of shares bought.
It means that an investor who wants to hold shares of the five FAANG companies – Facebook, Apple, Amazon, Netflix, and Google – could do so for just $25 instead of around $4,500 that buying full shares in each might cost.
Although these shares would be small, investors can choose to automatically reinvest cash dividends in additional ‘slices’ of stock.
Interest in investing
The coronavirus pandemic has sparked volatility in the financial markets but this appears to have piqued the interest of younger investors who see an opportunity to buy stocks at lower prices.
“We’re seeing high levels of engagement from many who see this as an opportunity to get into the market, and fractional shares trading through Schwab Stock Slices will provide an easy platform to do that,” said Neesha Hathi, executive vice president and head of Schwab Digital Services.
And parents and grandparents can inspire the next generation of investors by buying slices through custodial accounts.
“We developed Schwab Stock Slices to meet two important needs we heard from clients – newer investors who want the ability to buy multiple stocks in small dollar amounts and older more affluent investors who want to more easily gift stock ownership to younger generations,” said Hathi. “This is our first use of fractional shares, and we’re looking forward to exploring additional ways we can use the functionality to improve how clients invest.”