Schwab Will Soon Allow Investors To Buy And Sell Fractions Of Stocks

When the discount brokerage houses announced a few weeks back that one after another they would take their brokerage fees to zero, some - this website included - suggested that this is not merely the latest deflationary side-effect of chasing market share at all costs (even zero costs), but an indication that demand for stock ownership among the retail class was tumbling whether due to loss of faith in capital markets, or simply an inability to participate in a pastime that is increasingly dominated by the 1%.

Today, we received another confirmation that retail investors are getting priced out of the stock market when Schwab announced that it would let investors buy and sell fractions of shares in what, the official explanation goes, is an effort to attract younger clients.

Chairman Charles Schwab told The Wall Street Journal Thursday that "fractional share trading would soon be introduced, along with several other new programs, as the online brokerage looks ahead after it eliminated trading commissions earlier this month."

It would appear that the kneejerk response to the elimination of trading fees did not result in a favorable response among the investing public that was anywhere close to what the company was anticipating, and so it was forced to come up with even more creative ways of suckering in the greatest fool.

 

“I wanted to take commissions out of the formula,” Schwab said. “We’ve been on that path for 40 years,” he said, reflecting back on the company’s start as one of the first discount brokerages. Now, he said, Schwab is focusing on efforts to win business from young people.

While the ability to buy fractions of cryptocurrencies has been available for years, Schwab's move would be the first by a major online brokerage to allow investors to buy and sell fractions of stocks. To be sure, there is some merit to Schwab's argument: shares of Berkshire Class A aside, some of the most popular companies - which refuse to pursue stock splits - have very high price tags, making owning even one share impossible for poorer wannabe investors. One share of Amazon.com, for example, costs $1,792.

 

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