A full year of offering fractional shares

 with Schwab Stock Slices™

Article

June 30, 2021

By Zack Gipson, Managing Director, Digital Investor Solutions

When we introduced Schwab Stock Slices about a year ago, our goal was to make stock ownership accessible to as many people as possible, from a new investor just getting started to someone more experienced who may find the share price of certain companies out of reach. Schwab Stock Slices gives our clients the ability to own fractional shares of any of America's leading companies in the S&P 500® for as little as $5, even if their shares cost more.

Here’s how it works: let's say you want to invest in a company, but its stock price may be out of reach. Instead of buying a whole share of stock, you can buy a fraction of a share for as little as $5. For example, if a company's stock is selling at $1,000 a share and you were buying $200 worth of it, you would own 0.2 (20%) of a share.

Fast-forward a year since we introduced Schwab Stock Slices and we’ve seen tremendous client engagement – nearly two million Schwab Stock Slices orders and 300,000 accounts using the service. Over that time, we’ve also seen some interesting trends emerge:

  • Wide range of investors using Schwab Stock Slices – When we first made fractional shares available in June 2020, the stock market was experiencing quite a bit of volatility and uncertainty in the earlier stages of the pandemic. But as a wave of first-time investors entered the market, the ability to own partial shares of stocks made the process of getting started easier and more engaging. At the same time, even for a more experienced or affluent investor, stocks that are the most relevant and appealing are often priced out of reach. For example, the most popular Schwab Stock Slices so far have been companies consumers know well but have higher share prices – stocks like Amazon, Apple, Tesla, Google, and Microsoft.

    And while clients of all types are using Schwab Stock Slices, the average investor is younger and has fewer assets with us compared to our average retail client overall – mid-40s compared to early 50s for age and around $150,000 net worth at Schwab compared to just over $350,000. When we look at Schwab Stock Slices clients who are new to Schwab, the average net worth they have at Schwab is lower – around $5,000, reinforcing the accessibility of Schwab Stock Slices for those starting out.

  • Client use of Schwab Stock Slices in retirement accounts – Around 30 percent of all Schwab Stock Slices trades have been placed in IRAs since our June 2020 launch, giving retirement investors added flexibility in the types of investments they can have in their retirement portfolios. The average Schwab Stock Slices order amount in IRAs is slightly higher than the average order in taxable brokerage accounts, although the most popular Schwab Stock Slices are generally the same across account types.

  • Popularity of giving the gift of ownership to minors – We developed Schwab Stock Slices to meet two important needs we heard from clients. The first was clearly for investors who want the ability to buy expensive stocks in smaller dollar amounts, but the other significant need we heard was from older investors who wanted the ability to help teach younger generations about stock ownership. Roughly 15 percent of Schwab Stock Slices trades have been in custodial accounts, and that ticked up slightly during the 2020 holiday season, reinforcing the interest we’re seeing in Schwab Stock Slices.
     
  • Importance of creating a multichannel experience – We see this with general retail investor behavior as well, but the way our clients interact with Schwab Stock Slices is an indicator of the growing significance of mobile – nearly 40 percent of Schwab Stock Slices trades happen on the Schwab mobile app.*

Zack quote

"Schwab was founded on the principle that the benefits of stock ownership should be accessible to as many people as possible, and the introduction of Schwab Stock Slices is a continuation of that commitment."

Zack Gipson, Managing Director, Digital Investor Solutions

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Whether it’s a new investor looking to get started, an experienced investor who now doesn’t need thousands of dollars to become an owner in a company like Amazon or Google, or a parent or grandparent giving the gift of stock ownership to a child, Schwab Stock Slices makes the process easier and more engaging. Combined with significant industry developments like the elimination of online equity trade commissions and many firms’ account minimums now at zero, the ability to trade slices of stocks is an important next step in improving people’s investing experience.

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Disclosures:

Schwab Stock Slices is not intended to be investment advice or a recommendation of any stock. Investing in stocks can be volatile and involves risk, including loss of principal. Consider your individual circumstances prior to investing.

The "S&P 500® Index" is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI"), and has been licensed for use by Charles Schwab & Co., Inc. ("CS&Co."). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P”"; Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). Schwab Stock Slices is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of using Schwab Stock Slices or investing in any security available through Schwab Stock Slices, nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

All corporate names are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.

*Requires a wireless signal or mobile connection. System availability and response times are subject to market conditions and your mobile connection limitations. Functionality may vary by operating system and/or device. System availability and response times are subject to market conditions and mobile connection limitations.