Buying high-priced stocks – Schwab Stock Slices

Not too long ago Schwab introduced a service called Stock Slices that allows you to buy fractional shares of certain US listed stocks. This is in response to the high dollar value – not valuation but simply where the stock is trading – of some of the more popular stock names. Take for example the FANG stocks and their current trading prices:

Facebook = $259

Amazon = $3,162

Netflix = $475

Alphabet = $1,506

To buy 1 share of each stock would set you back almost $5,500 which is impractical for most investors not to mention the difficulty of achieving proper diversification. Schwab Stock Slices aims to fix that problem by allowing you to invest a small amount and buy a fraction of a share.

Since I have a Schwab account – I have accounts all over the place as I try different services before my clients – I thought I would give it a test run to see how it works. I decided to invest $2,000 and directly from the home screen of my Schwab brokerage account I clicked on ‘Stock Slices’. From there I searched for the stocks that I wanted to buy. You can do this by stock symbol or name and it is pretty easy to do. Not all stocks are eligible for this service but you will see most of the more popular names.

Once I had chosen the stocks I was prompted to enter the dollar amount that I wanted to purchase. I entered $2,000 and that was split evenly among the four stocks I had chosen so, for example, I ended up owning .33 shares of Alphabet.

I clicked on ‘Confirm’ and I was done and the trades were executed.

The minimum amount you can allocate to one stock is $5 so for a very low initial investment you can become a participant in that company’s success. You participate in dividends if they are distributed and if you own at least a whole share you have voting rights equal to your ownership. There are no commissions to place the trades but when you sell there will be a small fee.

Overall, pretty easy and I was impressed with the service.

Now for the caveats. Owning individual stocks is problematic for a lot of reasons and investors would be better off owning a diversified portfolio of low-cost ETFs, but this does have a place. If you have kids and you would like them to begin to learn about investing and the stock market I have found that them owning a small amount of a stock they are familiar with – Apple for example – tends to engage them more. You are not going to get that same interest with a broad-based index. A little birthday money put into well-known company stock and held for 20 years is probably better than a gift card or a pair of shoes.

If you have questions about this, you can reach me here. 

Disclaimer: I do not have any affiliation with Charles Schwab and I do not custody assets there for my clients. The account I was referencing is a personal account that is available to any US investor