I used to think of investing in the stock market as something only rich people do. It seemed like I’d need a ton of cash and a degree in economics to get started.
But options like Charles Schwab fractional shares make it easy to start building your portfolio in the leading S&P 500 stocks. Through their service called Schwab Stock Slices™, you can buy portions of a stock share rather than having to shell out big money for a whole share.
For example, if you want to buy full shares in Amazon, Target, or Apple, you’ll need to spend hundreds of dollars. If you only have $20 to invest, that $20 will buy you a portion of a share. And these smaller portions earn money, too. That’s the concept of fractional shares.
Who & What Is Charles Schwab
In the early 1970s, a man named Charles Schwab started a brokerage firm, and today we know this firm simply by his name. The company built its reputation on making investing accessible to people with modest budgets.
They offer trading with no fees, $0 account minimums, and fractional shares — all perks for beginners and those with only a few dollars to invest each month. They also provide an all-you-can-eat buffet of classes, webinars, and articles to help you educate yourself on investing.
Be aware that Charles Schwab and TD Ameritrade are in the process of a merger, so you may see information from both companies on Schwab’s website or app.
Charles Schwab’s Fractional Shares Option
Schwab sells fractional shares through a service called Schwab Stock Slices™. You can buy a “slice” of a stock share for as little as $5 in any of the S&P 500 stocks you prefer. You can also buy full shares; it’s not an either/or scenario. You simply create an account with Schwab and then choose how you want to buy.
Pros & Cons of Charles Schwab Fractional Shares
Buying fractional shares is like going to the bulk bins of candy and buying just the amount you can afford, rather than a whole bag. The S&P 500 index ranks America’s top-performing companies, and Schwab gives you the opportunity to buy partial shares in these companies. Think Apple, Microsoft, Amazon, Johnson & Johnson, and Tesla, just to name a few. This approach has a handful of drawbacks to consider, too.
Pros
Cons
How To Get Started with Schwab Fractional Shares
With Schwab, you can start your account from your computer or phone and take full advantage of their mobile app for trading. You’ll need to have your address and Social Security number handy, as well as your bank’s routing number and your account number.
To start buying, you first need money in your Schwab account, so you’ll do an electronic transfer from your bank account to your Schwab account. It only takes a few clicks, but it can take a day or two to process. Once the money is there, you log in and navigate straight to Schwab Stock Slices™ to begin buying.
Alternatives to Charles Schwab Fractional Shares
You don’t have to sign up with Charles Schwab to buy fractional shares. Many brokerages provide this option, whether they have a fun name like Stock Slices™ or not. Here are a few worth checking out:
Robinhood
With free trades, no account minimum, and a sign-up offer of a free share, Robinhood gives micro-investors an accessible and user-friendly entry into fractional shares. To their credit, they pioneered commission-free trading and they are constantly innovating to encourage new investors to get into the market.
Read more in our full Robinhood Review.
M1 Finance
M1 Finance offers fractional shares as well as other financial products, and they also have $0 commissions, trading fees, or advisory fees. Their auto-invest and automatic rebalancing options save time and may keep your portfolio healthier than you could without a lot of extra management.
Read more in our full M1 Finance Review.
SoFi
You may think of student loan refinancing when you think of SoFi. They’re known for that but they offer much more. In addition to offering fractional shares, SoFi gives their investors access to certified financial planners via phone and chat.
Read more in our SoFi vs. Acorns Comparison.
Acorns
Acorns invests your money in micro shares of Exchange Traded Funds (ETFs), and they automate most of the investment process for you, from recommending the ideal portfolio for your financial goals to a feature called Round-Ups that automatically pulls money from your bank account to invest. Acorns is a robo-advisor, so if you want active decision-making over your portfolio, you may prefer Schwab.
Read more in our full Acorns Review.
Final Word on Charles Schwab Fractional Shares
If you’ve been putting off investing, fractional shares may be your VIP pass. Charles Schwab’s Stock Slices™ let you start building your portfolio in small increments with the budget you have right now.
The biggest risk of all is doing nothing the modern day equivalent of hiding your money under the mattress like my Grandma. To build a solid financial path, consider giving every spare dollar a job by investing consistently.
FAQs
The S&P 500 index tells you which 500 companies are performing the best in the market at a point in time. But it does not guarantee those companies’ stocks will gain value. You still need to do your homework and research the companies you are considering. Schwab puts dozens of resources at your fingertips to help you learn what to look for, including the option for a complimentary financial plan to help guide you.
About Millennial Money Man
Bobby Hoyt is a former band director who paid off $40,000 of student loan debt in 18 months on his teaching salary and then left his job to run Millennial Money Man full-time. He helps other Millennials earn more through side hustles, save more through budgeting tools and apps, and pay off debt. He is a personal finance expert who has been seen on Forbes, Reuters, MarketWatch, CNBC, International Business Times, Business Insider, US News, Yahoo Finance, and many other personal finance and entrepreneurship media outlets.
