Schwab Stock Slices Review: Fractional sharesLAST UPDATED: March 29, 2023 | By Conrad Golly
You don’t have a lot of money to invest. Check. You want to buy shares in big established companies with out-of-reach price tags. Check. You want to have a diversified portfolio. Check. Fractional shares are obviously for you and since Schwab (which calls them stock slices) offers them, you may wonder if they are worth it.
Schwab Stock Slices Review: This service is designed to make investing more accessible to a wider range of people by allowing them to invest in stocks that they might not have been able to afford otherwise. With Schwab Stock Slices, investors can purchase as little as $5 worth of a stock. This service is also commission-free, which means that investors can buy and sell shares without having to pay any additional fees.
So, is Schwab Stock Slices a good option for investors? Well, that’s what we’re here to find out! In this article, we’ll be taking a closer look at Schwab Stock Slices and sharing our thoughts on this service. We’ll be discussing the pros and cons of using this service, as well as providing some tips on how to get started. So, let’s dive in!
Table of Contents
What is Schwab Stock Slices?
Schwab Stock Slices is a new fractional investing feature introduced by Charles Schwab in June. It allows investors to buy or sell fractional shares of any S&P 500 company for as little as $5 each. This means that investors can own a small piece of a company’s stock without having to buy a full share.
With Schwab Stock Slices, investing in the stock market has never been more accessible. It is a simple, low-cost way to invest in any S&P 500 stock. Anytime you buy fractional shares through Schwab Stock Slices, you can buy a single slice or up to 30 slices for as little as $5 per slice.
For example, for just $25, an investor could own pieces of Apple, Amazon, Facebook, Google, and Netflix when purchasing one full share of each would otherwise cost a total of approximately $4,500. This makes it easier for investors to diversify their portfolios and reduce risk.
How Does Schwab Stock Slices Work?
Schwab Stock Slices is a new investment feature that allows investors to purchase fractional shares of stocks in the S&P 500, making it easy to invest in a diversified portfolio of stocks without having to buy whole shares. Here’s how it works:
1. Choose your stocks: With Schwab Stock Slices, you can select up to 10 stocks from the S&P 500 to invest in. You can either choose stocks by name or use pre-sorted lists by industry.
2. Decide on your investment amount: You can invest as little as $5 in each stock slice, or up to $10,000 in total. This makes it easy to start small and gradually build up your investment over time.
3. Buy your stock slices: Once you’ve selected your stocks and investment amount, you can buy your stock slices with just a few clicks. Schwab will automatically calculate the number of fractional shares you’ll receive based on the current market price of each stock.
4. Manage your portfolio: You can track your investment performance and manage your portfolio online, just like you would with any other Schwab account. You can also add or remove stocks from your portfolio at any time.
Pros of Schwab Stock Slices
Low Minimum Investment
One of the biggest advantages of Schwab Stock Slices is the low minimum investment required. With a minimum investment of just $5, it’s easy for investors to get started and build a diversified portfolio without breaking the bank. This low minimum investment also makes it a great option for beginner investors who are just starting out and want to dip their toes in the market.
Another advantage of Schwab Stock Slices is the low fees. The company charges no commission fees on stock slices, which means investors can buy and sell fractional shares without incurring additional costs. This can help investors save money in the long run and make it easier to build a diversified portfolio.
Schwab Stock Slices also offers fractional shares, which means investors can buy a small piece of a stock rather than having to purchase a full share. This can be especially helpful for expensive stocks, such as Amazon or Google, which can cost thousands of dollars per share. With fractional shares, investors can still invest in these companies without having to spend a lot of money upfront.
Additionally, fractional shares allow investors to diversify their portfolio more easily. Rather than having to invest a large sum of money in a single company, investors can spread their money across multiple companies and industries, reducing their risk and increasing their chances of success.
Cons of Schwab Stock Slices
Limited Stock Selection
One of the biggest drawbacks of Schwab Stock Slices is the limited selection of stocks available for purchase. While the S&P 500 is a diverse index, it may not include all the companies an investor is interested in. Additionally, the selection of stocks available may change over time, meaning investors may not be able to invest in their preferred companies.
No Mutual Funds or ETFs
Another downside of Schwab Stock Slices is that they do not offer mutual funds or ETFs. This may be a dealbreaker for some investors who prefer to diversify their portfolio with these types of investments. Without these options, investors may have to look elsewhere to achieve a well-rounded portfolio.
No Automatic Rebalancing
Finally, Schwab Stock Slices do not offer automatic rebalancing. This means that investors will need to manually adjust their portfolio to maintain their desired asset allocation. While this may not be a concern for experienced investors, it can be a daunting task for beginners.
Schwab Stock Slices vs Competitors
Schwab vs M1 Finance Pie Slices
When it comes to fractional trading, Schwab Stock Slices and M1 Finance Pie Slices are two of the most popular options.
Both platforms offer access to fractional shares, allowing investors to purchase small slices of stocks instead of paying the full share price. However, there are some key differences between the two. One of the main differences is the minimum investment amount.
Schwab Stock Slices requires a minimum investment of $5 per stock, while M1 Finance Pie Slices has no minimum investment requirement. This makes M1 Finance a more flexible option for investors who want to start with a smaller amount.
Another difference is the selection of stocks available for fractional trading. Schwab Stock Slices only offers fractional trading for stocks in the S&P 500, while M1 Finance Pie Slices allows fractional trading for thousands of stocks and ETFs.
In terms of fees, both platforms offer commission-free trading for fractional shares. However, M1 Finance charges a $125 annual fee for their premium service, which includes additional features such as a checking account and a second trading window.
Schwab Stock Slices is a good choice for investors who want to focus on stocks in the S&P 500, while M1 Finance Pie Slices offers more flexibility in terms of investment amount and selection of stocks available for fractional trading.
Are Schwab Stock Slices Worth It?
Schwab stock slices provide an easy way to diversify your portfolio with a trusted broker. However, Schwab does not offer stock slices for companies outside the S&P 500. Furthermore, Schwab does not offer stock slices worth less than $5.
Why Schwab Stock Slices may not be worth it
The S&P 500 is an index that measures 500 US large-cap companies that best represent the US market.
If the companies you’re looking to buy fractional shares from aren’t in that index, you’re simply out of luck. Charles Schwab won’t offer fractional shares of stocks outside the S&P 500.
It logically follows that if you got an eye for a certain ETF, you won’t be able to own Schwab stock slices of it through this broker.
How to Get Started with Schwab Stock Slices
Investing in fractional shares with Schwab Stock Slices is a simple and straightforward process. Here’s how to get started:
- Open a Schwab brokerage account if you don’t already have one.
- Make sure you have enough funds in your account to cover the cost of the stock slices you want to buy.
- Log in to your Schwab account and navigate to the Stock Slices page.
- Select the company or companies you want to invest in.
- Enter the amount you want to invest in each company.
- Review your order and submit it.
Once your order is submitted, Schwab will purchase the fractional shares on your behalf. You can monitor your investments and make changes to your portfolio at any time through your Schwab account.
It’s important to note that Schwab charges a $0 commission fee for online equity trades of U.S.-listed stocks and ETFs, including stock slices. However, there may be other fees associated with your account, such as account maintenance fees or transaction fees for certain types of trades. Be sure to read and understand all of the fees and charges associated with your account before investing.
Verdict: Schwab stock slices review
All in all, for such an established broker with a resource-rich platform, Schwab stock slices are definitely worth it if you don’t want to have multiple brokerage accounts. But you must be OK with:
- Having access to only the 500 biggest US companies and
- Being limited to buy at least $5 of worth per stock slice
If you’re not, consider the alternative I proposed and you won’t regret it.
Now, thanks for reading my article and I hope you found it useful. If so, please share it with others who may be interested.
Take care for now and talk to you the next time…