Can't afford a $1,780 share of Amazon? Charles Schwab will offer fractional share trading in an effort to attract younger investors
- Charles Schwab will soon offer fractional stock trades in an effort to bring in younger clients, the Wall Street Journal reported Thursday.
- Fractional shares allow traders to own slivers of a stock, opening up expensive stocks like Amazon and Berkshire Hathaway Class A to younger and less wealthy investors.
- The new program will arrive soon after the firm slashed commission fees from its stock trades. Peers including E*Trade, TD Ameritrade, and Fidelity quickly followed suit.
- Watch Charles Schwab trade live here.
Charles Schwab will soon offer fractional share trading in a bid to bring in younger clients, the Wall Street Journal reported Thursday.
The purchase and sale of fractions of shares is one of several new investment programs coming to the firm's platform, the firm's founder and chairman Charles Schwab told WSJ.
Fractional shares offer a new way to entice younger traders who can now avoid commission fees at a bevy of trading firms. Those without the capital for pricier stocks like Amazon or Berkshire Hathaway Class A - which closed Thursday at $313,200 per share - would be able to invest in the firms at a feasible buy-in.
The new program comes off the heels of the Schwab's elimination of commission fees. Schwab's decision prompted Interactive Brokers, TD Ameritrade, E*Trade, and Fidelity to cut their commission fees in the following weeks.
"I wanted to take commissions out of the formula. We've been on that path for 40 years," Schwab told WSJ.
Major brokers are pushing for new ways to drive revenue with commission-free trading quickly becoming the industry standard. Some new offerings include commission-free options trading, free financial advice, and high-yield interest accounts.
Though Schwab is poised to be the first major firm to offer fractional share trading, a similar program has been around for years. The firm already sells partial shares to clients to allow them to access dividend reinvestment plans, or DRIPs.
The new fractional share system could allow for a greater variability of ownership options, though the program's parameters aren't yet clear.
Charles Schwab wasn't immediately available for comment.
Several smaller firms already offer fractional trading, including M1 Finance and SoFi. The latter launched after finding investors would purchase shares for their price and not for their belief in a company's financial success, according to SoFi.
Charles Schwab closed at $39.45 per share Thursday, down about 5% year-t0-date.
The firm has 11 "buy" ratings, eight "hold" ratings, and two "sell" ratings from analysts, with a consensus price target of $42.08, according to Bloomberg data.
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