6 Things to Know About Investing With Charles Schwab

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The investment world is all about low fees and, increasingly, even no fees. Leading the way on both fronts is Charles Schwab.

Investing With Charles Schwab: What You Need to Know

Charles Schwab was low-fee before low-fee was cool. Founded in 1971, the San Francisco-based financial investment management company has long prided itself on putting customers first by radically slashing the cost to invest.

Here’s what you need to know about investing with Charles Schwab, the discount investment pioneer.

Table of Contents

  1. Investment Minimums
  2. Schwab Security Guarantee
  3. Commission-Free Trades
  4. Idle Cash Sweep
  5. Recent Acquisition of USAA Investment Arm
  6. Office Locations

1. Investment Minimums

There are no investment minimums to open a brokerage account at Charles Schwab. That means you can start a Roth IRA — one of money expert Clark Howard‘s favorite investments — and get going with as little as $0.

The “no account minimums” rule also applies to traditional IRA, rollovers, Roth conversion accounts, SEP-IRAs and more. You can see a full disclosure of pricing in the Charles Schwab pricing guide for individual investors here.

2. Schwab Security Guarantee

When you open a Schwab account, you automatically get account protection from the Schwab Security Guarantee.

This guarantee says that Schwab will cover 100% of any losses in any of your Schwab accounts due to unauthorized activity.

Of course, it’s still incumbent on you to take normal precautions to safeguard your account access info. But provided you do that, you can operate with complete peace of mind as an investor.

The Schwab Security Guarantee applies to both individual investors and those who may have an employer plan with Schwab. However, it does not apply to 529 plans or annuities at Schwab, which are typically maintained or held by third parties.

3. Commission-Free Trades

The investment world is making a steady move toward being free of commissions. Beginning October 7, 2019, Charles Schwab will stop charging a $4.95 commission to trade stocks, exchange traded funds (ETFs) and options.

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Schwab ETF OneSource is the company’s own commission-free ETF program. It offers more than 500 commission-free ETFs across a range of asset classes.

In case you’re not familiar with ETFs, you buy them exactly like you would a stock and you can sell them at any time — unlike index funds which typically are bought and sold at the close of trading each day. ETFs are also set up so they’re very favorable tax-wise.

4. Idle Cash Sweep 

Investing with Charles Schwab has benefits even if you let your cash sit idle. That’s because Schwab will pay you a competitive market rate on your uninvested money you have with them.

But you do have to take a special step or you won’t get the higher rate…

That special step involves requesting that idle money be put into investor shares of the Schwab Value Advantage Money Fund (SWVXX), which pays 2.00% APY as of August 2019. You can do that here.

This is all part of what’s called a “cash sweep,” where investment houses move uninvested funds into an interest bearing account on the behalf of investors.

If you don’t specifically request that your money go into SWVXX, your idle money will default into a much lower interest account that only earns about a tenth as much interest.

5. Recent Acquisition of USAA Investment Arm

Two of money expert Clark Howard‘s favorite companies are getting married…sort of. In July 2019, Charles Schwab announced that it had been selected to become the exclusive wealth management and brokerage provider for USAA members.

As part of the agreement, Schwab will acquire assets of USAA’s Investment Management Company, including brokerage and managed portfolio accounts, for $1.8 billion in cash.

Schwab and USAA will close the deal in 2020. USAA members do not to take any action at this time.

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6. Office Locations

Charles Schwab distinguishes itself from other low-cost competitors like Vanguard Group and Fidelity Investments with an unparalleled network of local offices.

In fact, Vanguard has no customer-facing office locations and is strictly online. Fidelity, meanwhile, has a network of some 200 regional offices and financial planning offices combined.

While that’s nothing to sneeze at, Schwab has a retail branch network of more than 300 locations. You can see a complete list of branch locations here.

Final Thought

Charles Schwab can be a great place to invest, whether you’re just getting started or already have a sizeable portfolio.

While all the big players pretty much offer low fees, Schwab distinguishes itself by offering the largest network of local branches in the discount investment world. If you’re somebody who likes to sit down face-to-face when you have the occasional investing question, this can be really helpful.

Meanwhile, speaking of investing questions, you may also want to consider calling our Consumer Action Center the next time you have one.

Contact Clark’s Consumer Action Center — a FREE help line open Monday-Thursday from 10 a.m. – 7 p.m. and Friday from 10 a.m. – 4 p.m. EST. We have volunteers available to answer YOUR concerns! Call Team Clark @ 404-892-8227.

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