Fintechs and brokerages are vying for a smaller piece of your investing wallet.
As the value of hot stocks soars beyond what some investors can pay—Amazon is $2,442 per share, Berkshire Hathaway is $278,640 per share—brokerages are attracting new customers by giving investors the ability to buy a fraction of a share.
Fidelity Investments began offering partial stock trades to clients in late January after rival Robinhood announced its fractional trading plans in December. And today Charles Schwab will launch Stock Slices, giving investors the ability to invest in a portion of an S&P 500 stock starting at $5. According to the company, Slices was built in response to burgeoning demand for the so-called FAANG stocks—Facebook, Amazon, Apple, Netflix, Google—the lowest of which, Facebook, currently trades at $225 per share.
“We started hearing about investors who are interested in getting into the market and maybe wanted to participate in the FAANG stocks and tech companies, but saw these prices and felt sticker shock,” said Neesha Hathi, chief digital officer at Charles Schwab.
For brokerages, fractional shares could be a significant way to attract new, younger investors that see the high returns tech companies can bring but are wary of dipping a $200 toe into the water. Anthony Noto, CEO of fintech SoFi, told CNBC recently that 40% of trades via its brokerage platform came from fractional shares.