Let me tell you: My first job on Wall Street was with the Chicago Board Options Exchange (CBOE) in the early 1980s – just before the start of the Great Bull Market.
So I've been doing this for a very long time.
And I've never been more excited about stocks, never been more excited about the growing number of opportunities I see each and every day, and never been more excited about the shot regular investors have at life-changing wealth.
Much of this is due to mobile investing and the "Fractional Shares Revolution." They’re both fueling a huge change right now that’s making it easier than ever to own the best performing companies on the market.
I’m going to show you what’s happening and, of course, name some stocks to get you started on your way for just five bucks or so…
Old Market Barriers Have Been Blown Away
The seeds of this revolution were sown long ago – even before I started out as an investor and trader.
Back then, regular investors faced a lot of obstacles that made it difficult and expensive to buy individual stocks.
If you wanted to buy a stock, you were almost compelled to buy a "round lot" – typically 100 shares, 500 shares, or 1,000 shares.
Transaction fees were high to start with, and folks who bought less than that round lot of a hundred, five hundred, or a thousand shares additionally got slapped with an "odd-lot fee."
Those barriers began to fall – albeit slowly.
Congress first paved the way for millions of Americans to tap into the stock market when it passed the Employee Retirement and Income Security Act of 1974. ERISA created Individual Retirement Accounts – IRAs – so retirement money could be invested in stock funds on a tax-free basis.
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Over time, individual investors increasingly opened IRA accounts in brokerage houses, with the most-savvy investors choosing to open "self-directed" IRAs that had them picking specific stocks, bonds, ETFs, real estate, and other investments they buy and sell in their accounts.
From a base of essentially zero in 1974, assets held in IRAs zoomed to $1.1 trillion in 1994. And they've increased about 10% a year ever since. By March of this year, IRA assets had reached $9.5 trillion – about a third of the $28.7 trillion held in retirement plans of all types, says the Investment Company Institute (ICI).
Fortunately, and most importantly, on the path to equal stock market access, in 1975, the U.S. Securities and Exchange Commission abolished "fixed commissions" – the essentially illegal price-fixing scheme the American brokerage industry established to enrich its snooty cadre of market-access gatekeepers.
Known as "May Day" because the new rules went into effect on May 1, 1975, this act of regulatory insurrection did exactly what the SEC, the investing public, and Charles Schwab, who championed May Day, wanted: It gave rise to the discount-brokerage business.
Today there are dozens of discount brokerages. And the Charles Schwab Corp. (NYSE: SCHW) just happens to be the largest, boasting more than $4 trillion in client assets and more than 12.5 million active accounts.
The battle front in that discount-brokerage slice of the Revolution is suddenly heating up.
Schwab recently announced an all-stock, $26 billion bid for rival discounter TD Ameritrade Holding Corp. (NASDAQ: AMTD), which has more than 11 million accounts and over $1 trillion in client assets.
Meanwhile, Morgan Stanley (NYSE: MS), one of the country's largest wealth managers, is spending a cool $13 billion to grab another top-tier discount brokerage: E*TRADE Financial Corp. (NASDAQ: ETFC), which has 5.2 million accounts and nearly $1 trillion in client assets.
What was the catalyst for this staccato bout of dealmaking?
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At last count, Robinhood had 13 million accounts, holding an average of $2,500 each. It saw 4.3 million daily average (DART) trades in June – more than Schwab and E*TRADE combined, and more than any other single publicly traded brokerage, says a report released this past summer.
So when Robinhood cut commissions, pretty much every other discount had to follow suit.
Now anyone can trade for free.
That's not just great – it's empowering.
It means each of us has more types of trading vehicles than ever before – 401(k) plans, mutual funds, ETFs, and more. The five specific companies that could be the destination for a $353 billion “capital wave” over 18 months, for instance.
And now, even individual stockss, or better, fractional pieces of individual stocks.
Having shattered virtually every "barrier to entry" for purchasing individual stocks, only one barrier remained… until it didn't.
Stock prices have been rising, especially the most popular and most profitable stocks – meaning that even the purchase of a single share could be prohibitively expensive, if not downright impossible.
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And Berkshire Hathaway Inc. (NYSE: BRK.A) – the investment vehicle of Warren Buffett and one of the best-performing stocks of all-time – that will set you back $318,000 per share, about the cost of a house in some places.
Or, you could buy a "slice" – or fraction – of a share of any of those stocks, for any amount you want to invest: Maybe $50, $100, or $1,000 – or even a mere $5, if that's how you want to roll.
Fractional shares are now mainstream thanks to almost every brokerage offering them – most at zero commission, by the way.
They're not new ("DRIP" plans have done this for years). But they are newly popular.
That's the "Fractional Shares Revolution."
Now brokerages offer fractional shares, because they can, because buying fractional shares is affordable, because a lot of new accounts are being opened by investors and traders who want to plunk down a set amount of money to buy whatever amount of shares (or fractions of shares) they can – for whatever amount they apply.
Now there's no excuse for not opening a brokerage account and getting started in the stock market; you don't even have to buy a single share of stock to get into the game.
It doesn't matter that you own a fraction of a share – if the stock price goes up 2%, 50%, 100%, or more, the value of your fractional shares goes up just as much.
And, yes, if you own a fractional share of a company that pays a dividend, you get paid a fraction of that dividend – which, of course, you could use to buy more fractional shares.
Now You Have the Edge on Wall Street
The knock on Main Street investors has always been that they don't know what they're doing – that they buy too late and sell too early – presumably because they lack the knowledge, experience, and inside-track insights that the investment pros seem to possess.
In short, retail investors are followers and not leaders.
But that's not true anymore.
For the first time in my 40-year career as an institutional player, I've watched as professional investors had to chase the retail investors whose buying drove stocks higher.
It was retail investors – including a lot of mobile app users, discount-brokerage clients paying zero commissions, and new-to-the-game investors and traders buying fractional shares – who bought stocks during the market's nadir back in March, lifted it from its coronavirus lows, and continue to drive it higher and higher.
And they keep buying. Retail buying has been the driving force behind the Nasdaq Composite's ascent to new all-time highs, with retail's incessant buying of Apple, Amazon, Tesla, and other "tech" stocks, including millions of orders to buy fractional shares.
Has the "democratization" of the market changed what moves markets? Are retail accounts and fractional-share buyers the tail wagging the dog?
The jury's out on all that, on account of the new playing field still being marked off and there being no rules.
But that really doesn't matter.
The true power of the "Fractional Shares Revolution" is the long-term, wealth-creating potential it has placed in the palms of your hands.
And there's no reason – no excuse – not to stake your claim. Even with as little as $5.
Open an account.
Start with whatever you have. Add money to that account whenever you have some to spare.
And keep buying, no matter where the stock market goes – up, down, or sideways. My team and I have put together a presentation on the very best stocks to buy for the year ahead and, critically, I’ve named nearly 20 stocks to avoid at all costs.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.