How to Buy Fractional Shares on Charles Schwab

Fractional share investing offers accessibility to major companies for any investor, even one with only $50 or $100 to invest. The benefits include portfolio diversification and the access it offers to more people. Both seasoned investors and new investors can benefit from fractional shares, and Charles Schwab makes it easy.

Charles Schwab has long been a leading trading platform. It's known for low fees, excellent resources, and good customer service. Now, Schwab Stock Slices makes it easy to invest in top companies like Apple, Google, or Nvidia for a little money, like $5, regardless of stock prices. Read on to understand how to buy fractional shares on Charles Schwab.

Quick Look at How to Buy Fractional Shares on Charles Schwab:

• 1: Create a Charles Schwab Account
• 2: Fund Your Account
• 3. Choose your Schwab Stock Slices

How to Buy Fractional Shares on Charles Schwab

Here are the steps to buy fractional shares on Charles Schwab. 

Create a Charles Schwab account

The first step is to open a Charles Schwab brokerage account. You can open a standard taxable brokerage account, an IRA, a Roth IRA, or one of many other account types. You'll be asked to provide personal and financial information, including your legal name, Social Security number, or Tax Identification Number, and information on your income, debt, and sources of income. 

Fund your account

After opening your account, you must link your bank account to your Charles Schwab account. You can do this easily on the Charles Schwab website or app, but if you have trouble, Charles Schwab's customer service can help walk you through the process. 

Once the bank account is linked, you can fund the account using a bank transfer or a debit card. Other Charles Schwab funding methods include:

• Online transfer
• Bank transfer
• Wire transfer
• Check deposit
• Schwab Mobile to deposit checks from anywhere
• Auto deposit

Choose your Schwab Stock Slices

Once you have funds in your Charles Schwab account, it's time to buy stocks. In addition to standard investments like index funds tracking the S&P 500, you can also choose Schwab Stock Slices. These fractional shares, referred to as “slices,” of stocks from the S&P 500 give you access to major stocks in $5 increments, regardless of current market price. 

According to Charles Schwab, when 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.” Like other stocks on Charles Schwab, you can trade stock slices commission-free online.

If the stocks you choose pay dividends, the fractional shares will also earn dividends at the fractional rate.

Trading Fractional Shares on Charles Schwab

After buying fractional shares, you can start trading stocks. 

Finding fractional share opportunities

You can start researching opportunities using real-time market data and understanding the settlement period on trades. Carefully look at a company's financial disclosures, leadership, market position, historical performance, and current metrics. 

Placing fractional share trades

Placing fractional share trades on Charles Schwab is easy. You can place orders after logging into your account, and at the top of the page, under the column called “Trade,” scroll down to Schwab Slices. You can place market, limit, and stop orders based on your current trading strategy and market analysis. 

Understanding trading fees and commissions

Schwab doesn't charge trading commissions for stocks, ETFs, or mutual funds. It also doesn't charge a commission for options but charges a $0.65 per contract fee for options. 

Schwab doesn't charge account maintenance, inactivity, or regulatory fees. However, it does charge fees for broker-assisted transactions and U.S. Over-the-Counter (OTC) Market Securities Commissions per Executed Trades. You can see the full Schwab price list here.

Managing your Fractional Share Portfolio

When managing your fractional share portfolio, you'll still want to focus on investment basics. 

Portfolio Diversification

When building any investment portfolio, focus on diversification across asset classes and investment types. In Schwab, you can choose automatic dividend reinvestment to reinvest any dividends in the same stock. 

Another investment fundamental is dollar-cost averaging, which involves investing the same amount at regular intervals rather than trying to time the market. Over time, your investments should average out for a long-term buy-and-hold strategy. 

Fractional Share Ownership

Fractional share ownership may not come with voting rights on corporate actions. However, over time you could purchase full shares, giving you any shareholder voting rights about corporate decisions. 

Benefits of fractional share investing

The top benefits of fractional share investing for an investment portfolio include access to high-value stocks for new investors and small positions in these companies for experienced investors looking to capitalize on micro-fluctuations or who want greater diversification.

Buying fractional shares on Charles Schwab is easy and intuitive. You can do it from the app or online. Additionally, Charles Schwab offers excellent educational resources and stock ratings to help you make an educated decision.   

For experienced investors who want to create customized portfolios within the S&P 500, fractional shares are a great solution. 

Fractional Shares Benefits Summary:

• Increased diversification for the same amount of capital across stocks and industries. 
• Market entry with a reduced amount of funds. 
• Faster investment opportunities
• Increased customization

Other Ways to Buy Fractional Shares

Other ways to buy fractional shares include using other trusted online stock brokers or online trading platforms, such as Fidelity, Robinhood, Interactive Brokers, SoFi, E*Trade, or Webull. You can consider fractional shares if you already have a brokerage account with one of these brokers. 

Some are even offering free stocks when you open a new account. Or, you can learn about other features on Schwab.com with Benzinga's full Charles Schwab review. 

Frequently Asked Questions