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02/20/92

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Americans like shopping for stocks, Charles Schwab tells business students

STANFORD -- Charles Schwab is bullish on American investors.

"Individual investors are coming back to the stock market because they've seen an unraveling of traditional financial safe havens - banks, savings and loans, and even insurance companies - and they're looking for a place to put their savings," Schwab told a Stanford Business School audience Thursday, Feb. 13.

The man who pioneered discount brokerage services, Schwab told business students that 95 percent of his firm's customers are individual American investors. The firm has a few international customers and a handful of offices overseas, but Schwab said he believes the market for individual investors in the United States has barely been tapped.

Since the founding of Charles Schwab Corp. in 1971, the firm has built a clientele of people between 45 and 64 years old who either invest in mutual funds or make their own stock decisions after poring over newspapers and business magazines for the kind of information they once paid a stock broker to provide. The number of Americans in this age group will increase by 50 percent in the 1990s, Schwab said, and those people will begin to inherit trillions of dollars from their parents' generation.

Schwab, who earned his MBA degree from the Stanford Business School in 1961, also cited the success of the NASDAQ (National Association of Securities Dealers Automated Quotations) in the over-the-counter stock market, and the shift from debt to equity on corporate balance sheets as two other reasons for his optimistic long-term outlook for stock investing.

In 1991, the value of NASDAQ securities increased 55 percent while the Standard & Poor 500 average was up 30.5 percent and the Schwab 1000 Index of large companies rose 34 percent. Last year, 360 firms had initial public offerings, raising $16 billion. In the past, many firms issued stock on the over-the-counter market first and moved to the New York Stock Exchange as they grew. That is not necessarily the case today, Schwab said, citing Sun Microsystems that he said has resisted overtures from the New York exchange.

Today, the highly automated NASDAQ is the fourth largest stock market in the world and second only to NYSE domestically.

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