Hello Finimize-ers. Welcome to another Finimize live. It's our first one of the year. My name is Russell, global analyst here at Finimize, and I'm happy to host today's event on your 2026 investment playbook with our partner Charles Schwab.
Okay, so let's get started. Today's session is brought to you in partnership with Charles Schwab. If you're not familiar with Charles Schwab, the firm believes in the power of investing to help individuals create a better tomorrow. It has a history of challenging the status quo, innovating in ways that benefit investors and the advisors and employees who serve them, and championing their clients' goals with passion and integrity. You can find out more in the link in the chat.
Now, of course, no finance event is complete without a quick disclaimer. Your capital is at risk. This isn't financial advice. Tax treatment depends on your individual circumstances and may be subject to change.
With that out of the way, I'm really pleased to introduce today's guests. We are joined by not one, but two members of the Charles Schwab team: Kevin Gordon, who's head of macro research and strategy, and Richard Flynn, managing director, Charles Schwab UK.
Kevin is the research associate for Schwab's chief investment strategist, Liz Ann Sonders. In addition to analyzing the US economy and stock market for Schwab's clients, he helps develop deep dive projects, awareness content for Schwab's public website, internal business partners, and social media outlets.
Richard is an experienced financial professional with over 20 years of experience in the equity markets, specializing in US investing and the delivery of financial advice. He's been with Charles Schwab for over 14 years and for the last 6 years has served as chief executive of its UK retail business, Charles Schwab UK.
It's a real pleasure to have you both here today. How are you doing? Oh, we've even got Richard live, even better.
Hey Russell, thanks for having us.
Cool. You'll see a poll on the screen. What's most important to you when choosing a firm for US investing? There's a rank from one to six, with one being most important and six being least important. Please let us know what is most important to you.
Okay Finimize-ers, so let's dive in. First up, Richard, why should investors use Charles Schwab to invest and trade in US stocks?
Yeah, well, I mean, there are countless options out there in the market these days and you know, it's something that we welcome. I think our business was founded in 1973 and we've been through 50 years of markets. We have a lot of experience in handling the typical issues that retail investors and traders have.
And when I speak to people who are looking to access the markets, they're looking for predominantly low fees because the impact on their returns is significant over time. They're looking for quality service. I think that's something that's really important, the ability to speak to somebody if you have an issue, if you have a question about a trade that you want to place or a strategy that you want to embark upon. Having access to professionals who you can talk to is a really important thing, particularly in the modern world where there are a lot of FinTechs that work through chatbots.
And then lastly, research. I think the ability to help you make investment decisions is a really important part of what being a brokerage is about and all of those things are really central to Schwab's business model. So, in summary really, you know, low fees, great service and great research. That's what I would guide when telling people who to choose to trade through.
Great reasons, thanks. Okay Kevin, what are some of the most important reasons to invest in the US?
Hey Russell, and thanks for having us again. So, I think when it comes to investing in the US, clearly there is a little bit of a bias when you look at US market indexes like the S&P 500 in terms of the tech and the tech-like parts of the market, whether it's tech itself as a sector or communication services and to some extent consumer discretionary.
I mean, I know this was a theme that we touched on last year and you look at the dominance of those sectors over the past year, they have remained quite dominant and they've grown increasingly powerful in terms of how much they sway the index, but we also know how much that can work in the opposite direction. We're certainly learning that on a day like today.
So, I think that the one benefit that we've seen is not only how much those have become really powerful drivers of the market over the past several years, not just the past year, but in terms of what I think is the most dominant theme still today, everything related to artificial intelligence, there really has been more of a spreading out across multiple sectors. I would argue every single sector in the S&P 500.
And that's where we find, you know, there's still a lot of benefit in the United States in terms of how many companies and industries are becoming more in that AI adopter category as opposed to just having to rely on the hyperscalers and the large mega caps that have been driving a considerable portion of not just the returns, but also just the overall investment.
So, there has been a little bit more of a leveling of the playing field and we're very much learning quickly this year so far, just in the short time that we've been in 2026, we're learning that other parts of the equity market in the US can work well, evidenced by the move that you've seen in small caps, evidenced by the move you've seen in some of the deeper cyclicals, even the energy sector which was sort of left for dead in 2025.
So, I think that that leveling of the playing field has shown that the US has remained a relatively solid place to invest for investors.
Okay, thanks for that, yeah. Okay Richard, as commissions and trading fees on Charles Schwab are actually zero, investors can choose as many stocks as they like to build a portfolio. How many stocks do you recommend an investor should have?
Well, you know, every investor is different. That's a really important consideration and you have to factor in how much time that you have. We work with a lot of very, very busy professionals and I equate having an investment portfolio to having a garden. You know, you have to look after it. You have to make sure you take out the weeds and you plant in time in the right way.
And if you consider that, obviously there is a risk or a tendency that with zero dollar trading commissions, people can buy nearly too many positions to be able to monitor and effectively manage. Modern portfolio theory would dictate that you typically don't have more than 5% in any one holding.
So, on that basis, you'd certainly look to have no fewer than kind of 20 positions typically. And anywhere between 20 and 40 is a relatively manageable number. When you go above that, you begin holding very, very small percentages of your portfolio in individual stocks and you really wonder, well, is the benefit really there for me from this investment? And can I manage and monitor the stocks effectively given the level of time or effort that you're able to put into managing your portfolio.
So, for a typical investor to be able to diversify across sectors and to manage their portfolio, I'd say anywhere between 20 and 40, Russell.
Okay, great answer, thanks. So Kevin, what are the biggest risks for investing in US stocks and are they different from investing in other countries?
Sure. So, you know, when we run our outlook for 2026, one of the big themes and really the central theme was around this notion of instability. You know, everybody's been using the alphabet to try to characterize the US economy. You often hear, you know, K thrown out there, you hear U, you know, a U-shaped recovery, where it takes a lot longer for us to get back to what is thought of as normal.
And we kind of threw out the letter I, which stands for instability, and there's an important, I think, distinction between instability and uncertainty. You often hear about the economy and the market facing a lot of uncertainty. Instability doesn't necessarily imply that you can't see things because I think, you know, we could argue that we certainly see a lot of what's going on in the world and certainly within US policy, especially that coming from Washington and from the White House.
So, for us, it's figuring out how to manage through and get through, I think, this more secular era of more geopolitical instability and particular market activity and economic activity that's driven more by just policy coming from the White House. And I think a way to think about that is, even if you just look at US GDP as an example, last year in the first half of 2025, you had a record share of US activity and economic growth being driven just by the trade component.
So, when we look at imports relative to exports, that's how much was being driven by just activity related to tariffs and then of course, we knew what the market impacts were in April and then the significant bounce after. So, our theme from 25 in terms of us being an unstable environment hasn't really changed going into 26, but you know, as Richard was talking about, in terms of diversification, it often sounds like a boring answer and a boring thing to talk about, but it really is the best tool to sort of navigate through that instability and to kind of hedge against it, lowercase h hedge against it.
And we think that that continues to be a relatively solid way for investors to deal with this. And when you think about international markets in particular, you know, the weakness in the dollar last year was a significant contributor to gains around the world outside the US. We really haven't seen any signs of material pick up in the dollar this year.
So, as long as that stays the case, and you still have growth prospects looking up in certain parts of the world, especially parts of Europe, then you can continue to see that diversification working in your favor, especially if you're just looking within the equity markets. So, I think that's something that's important to remember, especially because again, in the short year so far in 2026, we've seen quite a fair amount of instability when it comes to everything related to Venezuela and then now, of course, everything that's going on with Greenland.
Okay, thanks. And then with all of that in mind, which stocks and sectors do you think look attractive for 2026 and why?
Yeah, so our formal sector ratings, we still have outperform on communication services and in health care. Those rank, I mean, you know, at the top. The important one that always gets a lot of attention is tech, which we brought back to just market perform or neutral. You can think about it that way.
Where, you know, we just thought that a lot of that exhaustion in the AI trade, especially within the hyperscalers, got a little bit stretched to the upside and, you know, for the most part, I'll have to knock on whatever I can, but that's worked relatively well in terms of tech broadly being unchanged over the past 5 to 6 months. So, it's been more about this rotation in leadership.
Number one, to areas of the market that just haven't done as well over the past year. I think that's a little bit more driven by sentiment being pretty pessimistic, pretty dour on those areas. But number two, I think again to what I was speaking of at the beginning in the first answer, more of this broadening out in terms of AI beneficiaries now starting to see a little bit more impacts in a positive way to their bottom lines.
And I think that the clearest way to see that is within the small cap space within the US where you're finally starting to see earnings estimates for those companies turn a little bit higher. But there's also sector biases that are working in favor there. You know, health care is a huge component of the Russell 2000. That's the proxy for small caps in the US.
So, if you think about those sectors continuing to do well, it would accrue to the benefit more of small caps relative to large caps. So, that's just an example of how some of those sector dynamics impact one particular asset class disproportionately relative to another.
Okay, great. Thanks, yeah. Richard, what do you think are the best ways for investors to find winning stocks? And maybe it could tie in with screening tools that, you know, Charles Schwab have?
Yeah, well, I mean, the amount of information out there, Russell, is just incredible. You know, you'll be able to find out all of the publicly available information about any company immediately using our platform or most platforms, frankly. It's a relatively homogeneous access of information. If you go on, you know, Yahoo Finance, you can get the updated financials for any listed company.
One of the things that we have to help people make investment decisions is a tool called the Schwab Equity Ratings Tool. And you can run filters, obviously, through different sectors or looking at different criteria depending on the size of the company. If you're looking for large cap or mega cap, etc. If you're looking for companies with strong cash flows or good PE ratios, for example, you can screen for those very easily.
So all of a sudden, you know, if you consider you want to make a decision about energy and you want to look for a strong stock within the energy sector, well, you can use what you feel is an indicator of a good company or a good stock. And then you can filter in that screening the Schwab Equity Ratings filter. And that is something which we have run since 2002.
It's a methodology that uses data to create a rating. So, it's not sentiment driven as an analyst's view might be. It's very methodological. And one of the things that it provides is a bell curve rating of A to F, with A being a strong buy, F being a strong sell. A lot of sell-side analysts, for example, have very few sell ratings, but our methodology allows for a bell curve.
So, you can identify the A and B rated stocks, which would be buys or strong buys in that particular sector. And all of a sudden, let's say you're looking at energy, you might start with 300 companies, but using selective filters, you're then able to actually make a decision out of three or four that meet your criteria.
So, the difficulty with investing, with how many stocks there are in the world in the universe available to investors, is that there are too many for it to make a valid decision knowing everything about every company. So, for an investor to be able to make a rational decision about which stock is likely to fit in their portfolio and offer them a chance of success, you have to use those filters and screening tools very carefully.
Excellent. Sounds like a great tool. I may have a go at it myself later. Or tomorrow. Okay, one more before we move on to the general Q&A. So, please sort of remember to put your questions in there, yeah.
In the UK, there's the Financial Services Compensation Scheme and that provides protection for individuals up to 120,000 pounds. What protection exists for clients holding funds with Charles Schwab in the US?
Yeah, it's a very, very common question. You know, the best way to think about this in terms of the protections for investors, you know, not just in the US, but globally using Schwab's platform, is that there are a number of safety nets which sit underneath your assets.
First and most importantly are the broker-dealer segregation rules. So, Charles Schwab, as a broker-dealer, has to keep client assets separate and segregated from the business assets. So, if the business, for whatever reason, ever finds itself in difficulty, those assets are ring-fenced and returned to clients and they effectively cannot commingle at all with the assets of the company. So, you know, that's a very, very important thing.
If you look at the institutions that failed historically, they were typically proprietary trading firms that were trading off their own book and the assets weren't commingled or sorry, were commingled. They were separate. They weren't segregated from the assets of the company, which is why when the company failed, people lost their money.
We do have SIPC insurance. That's a very, very important level of cover, the Securities Investor Protection Corporation. So, Schwab is a member firm of SIPC, which protects clients for up to $500,000 of securities or $250,000 of cash in the event of any fraudulent activity that leads to the liquidation of the firm.
However, that's probably the third or fourth safety net in terms of the protections that the US market provides for UK retail US retail investors and UK or indeed global retail investors. But the broker-dealer segregation rules by far are the most important level of protection that applies to investors accessing the US market.
And indeed, you know, the US one with the amount that's mentioned, 120,000 in FSCS, you know, that is an important element. But again, the reality is that there are protections in place prior to the activation of those FSCS schemes as well in the UK.
Okay, great. So, okay, please, the questions, I see some coming in for Kevin and Richard. Have a look and please don't forget to upvote the questions you're interested in hearing just so they'll get answered first. Okay, can we have a quick look at the poll result? Can you do that, Seb? Cool. Okay.
Low fees and commissions. Well, zero kind of wins the game there, doesn't it, yeah? So, yeah, you're at the top of the list on that and you can read through the others.
Okay. Let's take it from the top because that's it. I suppose this is more for like, how do I say, how do I get involved?
Top question there, yeah.
