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SEPTEMBER 17, 2020   |   VIEW AS WEBPAGE
 
 
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Sliced Shares Growing  Trend Among Younger Investors

BY STEVE DINNEN 

Unable to resist the lure of a bad pun, might I suggest that sliced shares could be the best thing going for young investors since sliced bread?

Proper investing calls for a well-diversified portfolio, and doing that as a fresh and relatively penniless college graduate might be a challenge. Robinhood, the online trading platform, was among the first to roll out a solution for this problem facing eager young investors with what is called fractional share ownership. This allows you to buy less than a single share – just a slice – of stock if you care to. While it might be hard to afford one whole share of Amazon, at $3,142 per share, without tying up an outsized percentage of your entire start-up investing budget, you can now buy just half a share, or a tenth, or whatever fraction that pleases you. That will leave enough money to buy a fraction of Alphabet Inc. (Google), at $1,544 per whole share.

Robinhood has been joined in this by big trading firms such as Fidelity and Charles Schwab. The people at Schwab told me that the sliced shares program is aimed at younger or new investors, and older, more affluent investors who want to give stock to children or grandchildren as a gift. At accounts they have opened so far, they have seen that 13% are custodial accounts. Normally, just 3% of Schwab accounts are custodial.

The most popular investment choices at Schwab have been companies that younger people would find attractive – Amazon, Apple, Microsoft, Netflix and Facebook have been the top five selections. Buying even one share of each of those stocks would cost about $4,200. Schwab reports the average order to be $378, so clearly there’s a lot of slicing going on.

Investment choices are currently limited to stocks that are part of the S&P 500 Index. That would include Berkshire Hathaway B Class shares, which sell for around $221 each, but not its A Class shares; at $338,000 per share, they would be an excellent candidate for a partial share buy-in for even deep-pocketed investors.

Technically you’re not buying a physical partial share, but a trust-like instrument that the broker has arranged that will buy a share, or two, or 2,000 of a company, and then parcel it out among program participants.

One broker I spoke with said sliced share programs might attract investors who are not properly informed about the risks and rewards of the stock market. That’s a possibility, but with proper guidance from a seasoned grandparent, it’s a good way to dip a toe into the water before leaping headlong.
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Legacy Bridge
Market Continues to Modernize

BY STEVE DINNEN 


Investors in recent years have witnessed an impressive modernization of the market, not only in terms of product offerings – aren’t exchange-traded funds great? – but just the nuts and bolts of how investment dollars have been handled. Sliced shares are just the latest in a string of enhancements, and to prove it, let’s go back to 1990, for instance, to see how easy you have it today.

Back then, round lot purchases increments of 100 shares – were the norm. If you bought an odd lot – say, 50 shares you got whacked with an extra fee, or commission. And yes, you had to pay commissions (wrap fees were rare). I once bought a small stake in a company and was charged commissions to buy, and then to sell, that totaled 10% of my entire purchase. So just to break even I had to notch a double-digit return.

It was common to encounter pricing spreads of 1/8 of a dollar or more, meaning someone was collecting that buy-sell spread over and above the commission. And yes, prices were quoted in fractions instead of decimals, until the SEC stepped in, in 2001. By then, you could spot prices of, say $15 and 13/256. Huh?

Now, you can still lose money. You’ll just do so more efficiently.

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Worldwide Travel Destinations Easing COVID Restrictions
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"A majority of destinations around the world (53%) have now started easing travel restrictions introduced in response to the COVID-19 pandemic,” concludes an extensive, country-by-country report by the United Nations specialized agency for tourism, UNWTO.  

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'We Need to Talk: A Memoir About Wealth'

BY PAUL SULLIVAN FOR THE NEW YORK TIMES

Jennifer Risher took a job in campus recruiting at Microsoft in 1991. She was 25 and given stock options worth several hundred thousand dollars. While working there, she met her husband, David, who had more stock options than she did. He later left to work for Amazon when it was still just selling books and got even more valuable options there.

In a few years, they were worth tens of millions of dollars and on their way to a comfortable life. When Risher looks back, was it luck or good decisions that helped her land that Microsoft job? She poses that question and others in her book, “We Need to Talk: A Memoir About Wealth,” which is out next week. They are an effort to prompt critical thinking about money and the status and power that are accrued from it.

“Wealth doesn’t look anything like what Hollywood is selling us,” Risher said. “I want to demystify wealth — an experience millions of people have but can’t talk about. There’s a normalcy to it when all your friends are similarly wealthy.”

In a country that is politically, economically and racially divided, Risher is asking her readers for a level of introspection that can be difficult. The timing of her book could end up making her a target of anti-rich opprobrium, several wealth advisers told me.
>>READ MORE

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