Do you ever look at Apple, Telsa, Facebook or Google and wish you had the money to buy them? What if you only have $50 or $100 every month to invest? Fractional shares solve this problem. Did you know that you can own some of the biggest companies out there in the world for only $5? This blog gives you a Schwab stock slices review and some other great options for fractional shares.
Are Schwab Slices Worth It?
Charles Schwab is a well known broker. In fact, they recently bought out TD Ameritrade. So when it comes to the Schwab stock slices review, are they worth it?
You can, in fact, trust this broker. So yes, their stock slices can be worth it. It also depends on your trading style. Do you invest? Or are you a trader?
If you prefer to invest but you don’t have a lot of money, then fractional shares can help you out quite a bit. Especially if you’re new.
Some people look for the best penny stocks to buy because they hear they’re great. What they don’t know is that liquidity isn’t always the greatest in the penny stock sector.
As a result, they turn into a bag holder.
What Is A Fractional Share?
Think back to grade school when you learned fractions. At their core, a fraction is part of a whole. Similarly, a fractional share is a position in a stock equal to less than a whole share. Fractional shares are especially important for investors who don’t have the money to buy individual stocks. So what companies offer those shares?
From Acorns to Stash, a lot of great apps have addressed the lack of money problem. After using your credit card, both will put fractional amounts of money away and into shares. Even the heavy hitters like Robinhood and M1 Finance allow you to buy a small amount of a companies stock. With Robinhood, fractional shares can be purchased commission-free with as little as $1.
Schwab stock slices has joined the party! Well, Charles Schwab has come out with the same thing, and they’re calling it Schwab Stock Slices. Schwab Stock Slices allow beginners to start investing for only $5!
How Do Schwab Stock Slices Work?
Schwab Stock Slices cost $5 a slice, and you can invest up to ten slices at a time. For those of you who’ve been shopping around, you’d notice that this is a little bit different than other fractional share providers like M1 Finance. M1 Finance allows you to build a pie consisting of about 100 different stocks. With Schwab Stock Slices, you’re more or less restricted to the S&P 500.
Schwab Stock Slices Review of the Pros
- Affordable: Get started with as little as $5.
- Accessible: Any S&P 500 stock is now within reach.
- Have the freedom to choose up to 30 stocks each time.
Schwab Stock Slices Cons
- Only available for stocks of S&P 500 companies
- Too restrictive with the ways that they’re allowing their stocks to be sliced
Charles Schwab’s’ biggest claim to fame is that they enable the average Joe to own some of the biggest companies for only $5. You can buy a slice for as little as $5, giving you ownership up to 1, 2 or 3% of that particular company.
For example, if a stock costs $100 a share, and you buy a $10 slice, you’d own 10% of a share. Or, you can pick ten different stocks, “slices,” and put $5 in per stock equaling a big pie. Or, you can buy up to 10 slices at a time.
Schwab Is Removing Barriers to Entry
By choosing the fractional share method, you don’t need to spend thousands as you would have to when buying whole shares. But instead, by allowing you to buy all these tiny percentages, Schwab opens up the market to everyone. From the person working minimum wage to the college student, anyone can start investing and building their wealth over time. Fundamentally, that’s the message Charles Schwab is trying to get out there.
Furthermore, you can be cut up your stock portfolio into slices tailored to your risk tolerance. And really, it’s as simple as that. Even someone in college, can open an account, fund it and start buying fractional shares and building their wealth.
Can You Make Money on Stock Slices?
To be honest, Schwab Stock Slices has missed the mark by only offering the S&P 500 companies. Some people would say it doesn’t matter because they’re focusing on blue-chip stocks in the S&P 500. But, this is kind of a big deal for most people. But you can make money with them.
Take, for example, Tesla. Tesla isn’t in the S&P 500, so users of Schwab Stock Slices won’t be able to purchase it. Similar brokers like Fidelity and Interactive Brokers don’t have such restrictions on their fractional share offerings.
Let’s Talk About M1 Finance
When you take a step back and take a look at M1 Finance, they allow you to purchase a slice from a wide breadth of stocks at the price you want. And, it’s not just limited to $5. Depending on your situation, it can even be smaller than that or greater than that.
M1 Finance allows you to use a pie and fractions of the pie. Translated into action, you can pick 10 or 100 different stocks and the amount of money you want to allocate in each. So if I want to buy fractions of five stocks, I can put 10% in one, 20% in the other and split the remaining 70% between the last three. It just depends on what I feel should be weighted the most.
Schwab Stock Slices are too restrictive with the ways that they’re allowing their stocks to be sliced. So that’s one of the biggest differences that Charles Schwab has missed out on, and I think M1 Finance does a great job at doing.
My Thoughts On Charles Schwab
Charles Schwab caters to investors from all walks of life. As you may or may not know, it’s a $0 account minimum which I think beginner investors will appreciate. Of course, the $0 commission for stock, options and exchange-traded funds will certainly appeal to active traders. Furthermore, Schwab offers over 4,000 funds and charges no annual or inactivity fees.